Making Chargebacks Manageable for Your Business | Qi Cao

[EP] - Qi Cao | Making Chargebacks Manageable for Your Business

Matt Edmundson: [00:00:00] Well, hello, our welcome to the E-Commerce podcast with me, your host, Matt Edmundson. Now this is a show all about helping you deliver e-commerce. Wow. And to help us do just that fresh. From his journey to Subs Summit, which we're all gonna get into, I am chalk talking to Qi Cao. So from Charge Blast about the dreaded chargebacks.

Oh yes. I think it's the first time we've talked about this on the e-Commerce podcast, which is bizarre given how many episodes we've actually done. Uh, but we are gonna get into all of that today. So if you struggle with chargebacks. Get your notebooks, get your pens, because you're going to want to listen to this one.

Now, of course, if you are subscribed to the newsletter, all of the notes, all of the links are down below. We'll be coming straight to your [00:01:00] inbox. Uh, but if you're not subscribed, you may as well go ahead and do it because all they're gonna come to you. Uh, so just go to eCommerce podcast.net, sign up and we'll send it to you every week when a new episode is released.

And of course, a very, very warm welcome to you. If this is your first time here with, there's an e-Commerce podcast, or as we , as we affectionately call it on the inside of the office ep, because, you know, we just like to abbreviate everything these days, don't we? But a very, very warm welcome to you. Hope you enjoy the show.

We just like talking about eCommerce, just like you. I am an eCommerce entrepreneur, a preneur, or preneur, yeah, take your pick. I don't mind, but I run my own eCommerce businesses. So I just love this because I get to pick the brains of geniuses. Uh, about all things to do with e commerce. Uh, and Qi is, is a genius.

He is not your average entrepreneur. Oh no. He's a business building wizard who turned his magic into five million [00:02:00] dollars with two ventures in less than a year. From dissecting hedge funds to strategic, uh, corporate moves and even consulting on the side. I don't know what that means but it sounds a bit dodgy.

Sounds really good though. He's done it all with a Yale biology degree. Not your usual qualification for this show, I'm not going to lie. He's got a Yale biology degree in his back pocket because who says you can't mix science with business. Now with an entrepreneurial spirit, he's unique, has his educational path.

He crafts success stories by viewing the world through a microscope. Good to have you on the show, man. How are you doing today, sir?

Qi Cao: I'm doing well, Matt. Thanks for having me on the show. I don't know if I'm quite a genius, but I appreciate, appreciate the kind words.

Matt Edmundson: Yeah, definitely, more than me. I've definitely not got a degree in biology.

Pretty useless degree. Yeah, pretty useless degree. But so why did you do it? Why did you go to Yale to do biology? Were you going to do the doctor thing or was [00:03:00] there something else in mind?

Qi Cao: Yeah, I was going to do the doctor thing. Um, I grew up in this small town called Rochester, Minnesota. No one really knows about that town, except maybe, you know, the fact that the Mayo Clinic, uh, is located there.

So I was surrounded by biology, surrounded by doctors. And I thought, you know, that was kind of all I knew. So, um, got into Yale, studied biology, did research for four years, but it wasn't really my passion. I love doing businesses on the side, had a couple of start ups in college, so really went head first, uh, post grad.

Matt Edmundson: Wow. So, what made you jump from, uh, Yale biology to Chargeback Center? I mean, that's, there's, there's gotta be a, a, a story there, cause that's not your usual, well, that's not your usual journey, is it really? Maybe.

Qi Cao: No, no. I mean, it's quite the journey. I'm going to abbreviate it a little bit, but, um, a lot of my life was really driven around having [00:04:00] more skin in the game.

Matt Edmundson: So

Qi Cao: like, like you mentioned, I started my career in consulting, very little skin in the game. Then I joined a unicorn called Indigo Ag, an agriculture technology company. I had equity. But, um, I'm not part of the C suite, so I couldn't make the decisions.

Matt Edmundson: Right.

Qi Cao: So I have a little bit more skin in the game, but not quite.

Then I joined a hedge fund, which is a lot more skin in the game. I get paid for how much I make. Unfortunately, um, you know, not all of my decisions would end up in the book or all, not all of my pitches would end up in the actual portfolio. So it's not a hundred percent equity. So I ended up going and starting our, uh, a business with one of my good friends, um, and his brother.

So my two other co founders and we started off in the SaaS business, consumer SaaS, and the issue with consumer SaaS is. You get chargebacks because people forget to people forget to cancel their [00:05:00] subscriptions. And we had friends in the comments as well, right? Some drop shippers, uh, where you have supply chain issues, lots of chargebacks.

We realized there wasn't really a good solution that was tech forward and tech first for Chargeback, so here we are.

Matt Edmundson: Here we are indeed, here we are indeed. And we were saying before we hit the record button, actually, that, um, both, although we didn't actually meet in person, both you and I were at the Subsummit event.

Qi Cao: That's right.

Matt Edmundson: How did you, uh, how did you find Subsummit this year? 2024 at the time of recording, by the way, we're in July 2024, so Subsummit was, uh, Gosh, three weeks ago now. Yeah,

Qi Cao: just about.

Matt Edmundson: Yeah, something like that.

Qi Cao: Yeah, it was quite good. I mean, first off, the ICP is definitely our ideal customer profile, right?

Subscription based businesses, whether it's eCommerce or SaaS, um, or eCommerce turning [00:06:00] into a subscription model. We spoke to a few of those. Uh, really interesting and many of 'em dealt with chargebacks just because of that subscription model. Right. One really interesting company that I spoke to, they, they had a wearable device that they used to sell for, I think like 200 bucks.

Matt Edmundson: Mm-Hmm. .

Qi Cao: Right. And they're moving to a subscription model of $20 a month to lower that hurdle, initial hurdle of payment. Yeah. But ultimately, that's going to result in a higher chargeback rate, most likely. No one really thinks about the 20 a month until it, you know, gets charged six times over, right? And that's 120.

Then you start thinking about it.

Matt Edmundson: Yeah. No, fair play. Well, let's get into this. Let's get into the old chargeback thing. So let's first and foremost, because I think it's important for those, because I think The term chargeback is used differently in different parts of the world, and we have different names to describe the same thing.

So let's, for the [00:07:00] sake of clarity for the listeners listening around the world, what do you mean when you say chargeback?

Qi Cao: A chargeback is when a consumer reaches out, whether it's phone or through an app, to their credit card company. And effectively demands their money back. And the reason for a charge back is typically the product wasn't delivered or the product quality was bad, but there's more and more friendly fraud nowadays where they'll basically say, I never got the product, but they really did get the product, so they basically just want the product for free.

So that is what a charge back in essence is.

Matt Edmundson: Yeah, so this is where, um, I order a product and at some point I contact my credit card company and say, that's not a fair transaction. Either it didn't arrive or I never order it or whatever. Um, and the credit card, then take the money back off you, [00:08:00] and they put it back on my card.

And you really, as a supplier. Well, actually, let me ask you this question, rather than make a statement, does the supplier, because we've all faced this, right? We've all had people do chargebacks, um, some industries, I think, are more prone to it than others. Um, it seems that way to me, uh, you know, they have different chargeback percentages in different industries.

Um, I'm kind of curious, if a chargeback happens. Right. So let's go with your example, the friendly fraud, which I quite like that phrase. There's nothing friendly though, about fraud. Fraud is fraud. Um, and so they've received the product. Um, but then claim that they didn't receive it. Do you as a supplier have any comeback on that chargeback, if that makes sense?

Listening to that, que listening to that question in my head. Uh, do I have any comeback on the chargeback?

Qi Cao: Yeah. So there's an opportunity when a chargeback goes through the card networks and eventually [00:09:00] reaches your processor. So for example, Shopify payments.

Matt Edmundson: Mm-Hmm, ,

Qi Cao: um, the merchant will be notified. Hey.

This customer charged back, can you submit evidence to show whether this is a legitimate or illegitimate

Matt Edmundson: chargeback?

Qi Cao: However, the scale is always tilted towards the consumer.

Matt Edmundson: Yeah.

Qi Cao: So the industry win rate across all industries for a merchant is 10 to 20%. So 80 to 90 percent of the time.

And depending on the like average order value, fighting a chargeback with a 10 percent win rate doesn't make any sense.

Matt Edmundson: Right?

Qi Cao: Let's say you're selling a 30 good, right? And you have a 10 percent chargeback rate. Well, my expected return on fighting it is 3 and on top of that, Shopify hits me with a 15 chargeback fee.[00:10:00]

Every time one reaches Shopify. So now every time I'm fighting a dispute, I'm losing 12. Does that make sense? You're also lowering the health of your payment processing, which is even more important. Um, ultimately, yes, there is an opportunity to fight chargebacks. However, in many cases, it doesn't actually make sense to fight them.

Matt Edmundson: So why would it not? Let's, let's take the example of. Uh, somebody's saying it's not been delivered, but I have, you know, it's a signed delivery. I have their signature on a piece of paper. I have proof that actually it did arrive. Why would it not make sense for me to fight that? Why would it make sense for me just to go, no, that's, that's fine.

Qi Cao: Well, like I said, the win rate is 10 to 20%, even if you have signatures. So we worked with a, an online travel agency before. People charge back [00:11:00] their airplane tickets. All the time. They do the trip. At the end of the trip, they'll be like, that was amazing. And you'll have signatures, you'll have IP address, residential address, your terms of service, refund policy, all signed, docu signed by the person.

And the online travel agency loses 90 percent of the time. And the reason why is because think about it from an incentives perspective. What do credit card companies care about at the end of the day? They care about the consumer swiping their credit card. Now let's say you're a consumer and you use Capital One credit card and you're charging back and you never win these chargebacks.

Even though it's friendly fraud, you're like, oh, this is kind of annoying. But my friend told me American Express, you always win chargebacks. Well, I'm going to just get an American Express card. I can save like 500 bucks a year [00:12:00] or a thousand or 10, 000 in chargebacks, right? So the incentives are not quite there.

For merchants to benefit from submitting evidence.

Matt Edmundson: So even if you submit, uh, cause this is where I start, I get a little bit angry if I'm honest with you, because I, it's that righteous anger, but I go, but that's unfair. I'm the kind of guy that would go, actually, no, they are committing fraud. I'm prepared to submit evidence, even though I'm not as likely to win it.

Um, because I think actually it's unfair. And I think that I can choose to block that customer and never sell to them again, and just go, frankly, you've burnt all your bridges. Um, so will, is it a case of, I get that the credit card companies are going to listen to the people that swipe the most. Um, So is it a case of they just don't care about the evidence, they just, they're not that bothered, you know, it is what it is, just deal with it.

Qi Cao: Yeah, it is what it, I [00:13:00] mean, just generally, consumer protection is prioritized by the card networks, by the credit cards, etc. So, it is what it is, and even though it's not fair, Um, the amount of, let's say you're a merchant, you're a pretty big merchant and you're dealing with a thousand chargebacks a

Matt Edmundson: month.

Qi Cao: We have merchants that deal with 20, 000 chargebacks a month. So even a thousand chargebacks a month. Now imagine submitting evidence for all 1, 000 just to lose 90 percent of it. You get pretty discouraged pretty quick,

Matt Edmundson: and then

Qi Cao: you're starting to wonder to yourself, why am I even doing this? And if you're a merchant with a fundamentally high chargeback rate, like you said, some verticals have higher chargeback rates than others.

If you're in a vertical that has a fundamentally higher chargeback rate above 0. 6 percent, Your problem is not losing the chargeback, your problem is you [00:14:00] might lose your payment processing account. You might lose your Stripe account, you might lose your Shopify payments account, and when you lose those, well, people don't think about it, but not all payment processors are the same.

Stripe has one of the highest payment authorization rates in the industry. The next payment processor you go to, maybe they only let you accept 70 percent of all attempted payments.

Matt Edmundson: Yeah.

Qi Cao: Well, you go from 95 to 70%, that's a 25 percent drop in sales right there. Yeah. Yeah. So it's really critical for merchants in the eCommerce space and in the SaaS space to keep their chargeback rates below that threshold of 0.

6%.

Matt Edmundson: Yeah. That's a really interesting number. So 0. 6%. Now in the UK, right, I mean, talking about mitigating against that. Do you know what I mean, Matt Crew, Diocese, Prayer, Conversation Street, Holcombe, Origins, Liverpool, Frontline Church, Jesus Christ, eCommerce Cohort, Has a [00:15:00] merchant ever bought a civil suit against a consumer for committing fraud?

Um, has to refund a thousand dollar ticket through the, um, you know, because somebody claims they never took the flight. Um, yeah, you've got all the documentation signed. Plus on their social media, they went and post photos of them in Thailand or wherever, you know, and it's just kind of like, right, it's, it's kind of self evident.

I'm wondering whether, um, a merchant has ever got on his high horse here a little bit and gone, I'm not having that and bought a civil suit. I don't know if you know the answer to that question. I'm just genuinely curious.

Qi Cao: I don't have, I'm not aware of any merchant that's done that, but just thinking about it from a merchant perspective, your goal is to generate sales and expand margins.

If you're spending time undergoing a lawsuit with an individual, right? Because it's hard to [00:16:00] aggregate all of the people that charge that, right? They're all in different states, they're, you're really going after individuals. Yeah, then, then you're on a side quest that I don't know if it's worthwhile for a merchant or not.

Matt Edmundson: It's really interesting, isn't it? I, I, I, this is, I think, probably where the differences between the US and the UK might become apparent. Um, in the UK, uh, we have something called 3D Secure. So, this is where For those that don't know, uh, you go to a website, you're putting your credit card details, um, part of the payment process is you then go to your bank, um, in effect what happens is, so you come onto my website, you'll buy something, you're putting your credit card details, whilst on that website a pop up will come up which is in essence the bank that owns a credit card, and ask you to put in a I don't know, a six digit code, which has just been text to you to prove that it is you using the credit card, right?

So we have this [00:17:00] thing, 3D Secure. I don't think it's immutable, but I do think it's pretty good at cutting down the whole charge back thing. Is, is 3D Secure like worldwide? Is it a UK thing? Um, are there equivalents of it that we can use?

Qi Cao: 3DS Secure will certainly help move the liability from the merchant to the consumer because the consumer at the end of the day, they get, like you said, they get that text, there's some verification and some process involved.

However, the chargeback still goes through. The odds of winning with 3DS are higher, but the chargeback still hits your account.

Matt Edmundson: Yeah,

Qi Cao: so if you're a merchant with a fundamentally high charge back, right, you still don't want that. Yeah, and we've actually done a test on this. Some of our merchants were on 3DS and they were complaining like, look, it seems like when we added 3DS, we lost some sales.

Matt Edmundson: Mm hmm.

Qi Cao: These [00:18:00] merchants removed 3DS and saw a 10 to 15 percent lift in sales.

Matt Edmundson: Yeah.

Qi Cao: You wouldn't, you wouldn't imagine that just that little pop up could actually deter that much sales, but it was really, really shocking actually to see the lift in sales after they removed 3ds. And protecting themselves with charge blasts.

Matt Edmundson: Mm-Hmm.

Qi Cao: right? It that's kind where our ROI comes into play.

Matt Edmundson: Yeah, it is. 'cause you, you've then gotta go, well if I, if my sales go down 10%, but my chargeback rate goes down, is, and you've gotta play with the percentages. Does the increase in conversion cover the cost of the chargeback shifts or no? Um, it's just one of those things I think you have to sit down and work through.

I think the beautiful thing that we have in the UK. is, I would say 98 percent of websites have it, with the exception of Amazon, actually, I think Amazon doesn't use it. But it has become so commonplace that everybody expects, okay, my mobile phone is gonna, you know, go off with a text, or I can actually now what everyone's doing is Apple Pay, because obviously that's got [00:19:00] Face ID.

And so that proves, I suppose it only proves that you did the transaction. What it doesn't prove is you've taken delivery of it, or it wasn't you that the plane, you know, there's And it doesn't differentiate on all four. When the product

Qi Cao: is not the product that, you know, it's damaged, right? You can still charge back with 3DS and it'll hit you.

It's just that only for fraud, the liability will show.

Matt Edmundson: So what are some of the things then, um, that we as merchants can do to mitigate against chargebacks without cutting off our right arm, you know, because there is this There is always this dynamic tension, isn't there, between what we do and everything that we do do, does it cause a drop in conversion?

Am I causing friction in my checkout process or is it seamless? They're some of the big questions, aren't they? So, uh, gee, come on, tell me what are the secrets, man? How do I, how do I help myself here?

Qi Cao: Well, the secret is [00:20:00] ChargeBlast, but I'll get to that point,

Matt Edmundson: I'll

Qi Cao: get to that point in a little

Matt Edmundson: bit. Of course it's ChargeBlast, why would it not be?

Qi Cao: So there's two types of products or solutions. There's pre transaction solutions and there's post transaction solutions. You can imagine these fraud tools to be pre transaction, meaning it screens the customer for risk of Fraud or risk of high chargeback history. And then you can either accept or decline the transaction.

And based on that, right, you're hoping to reduce the number of chargebacks by declining potentially risky transactions.

Matt Edmundson: Now, there's also, sorry, let me just clarify. Let me just clarify what this is here. Um, So, if I'm understanding this right, Shane, correct me if I'm wrong, what I'm doing is I'm sending to you guys or, you know, an equivalent platform, but I'm sending to, say, Charged Blast.[00:21:00]

The customer data. I'm sending the name, the email, and a few other bits and bobs about who this customer is. You have a database of customers who are known offenders, um, and you therefore look at the risk of that person. Like if you sell to this person, the risk factor is high because we know that they've done chargebacks in the past, or the risk factor is low because they've never really done any chargebacks in the past.

You then send that data back to the merchant and say, do you want to carry on with this checkout process? Have I understood that correctly?

Qi Cao: That is correct. That's not what Charge Blast does, but that is what Shopify payments will do. And that's what Stripe will do. Because think about this. They have a huge network of merchants.

So they've seen almost every single credit card there is in the U. S., right? So they know the history of those credit cards. Whether they're risky. And Stripe and Shopify, they have internal tools that merchants can use to basically say, See Give the thumbs up or the [00:22:00] thumbs down when it comes to transactions.

But that's pre transaction, right? Before you actually take the transaction, you make a decision. Now post transaction is what ChargeBlast does, and ChargeBlast protects against actual chargebacks. So when a customer calls or reaches out to their credit card company, That's when we'll know that there's been a chargeback and we'll let the merchant know before the processor knows.

So we front run that process a bit. Right. And the merchant has 48 hours to make the refund to the customer because they're probably going to lose the dispute anyways.

Matt Edmundson: Yeah.

Qi Cao: And if they make that refund, we let the credit card company know, Hey, everything's good. Don't push that chargeback forward. It's been resolved.

Right. And thus the chargeback never reaches Shopify or Stripe.

Matt Edmundson: Right.

Qi Cao: So

Matt Edmundson: this protects your merchant [00:23:00] account, um, it, it protects your, your rating. And I suppose it also, does it stop the extra chargeback fees coming from people like Shopify as well?

Qi Cao: Yep. Correct. You will not be getting that 15 dispute fee.

From Shopify.

Matt Edmundson: Right. So that's really interesting. You intercept that somehow. Is that a US thing or is that a worldwide thing? It's a worldwide thing. Okay. We work with Visa, MasterCard. That's interesting because it's, it's, uh, one of the things that I've noticed. having done eCommerce for many years, is how people use different tools.

For example, we noticed on the review platforms, and it doesn't matter whether you use Trustpiler or FIFA or whether you've got your own review platform, customers get these emails automatically saying, hey, leave a review on the product. Now, if they've got any kind of grievance against you, It is easier for them to go, no, these guys are complete utter [00:24:00] morons on that review than it is to contact customer service, right?

Yes. So it's, it almost becomes like a customer service tool, like my goods never arrived, man, what's going on? I'm just going to tell the world on a review. So, rather than going, Oh, I'll, I'll reach out to the customer service people now, um, I suppose there's a conversation in terms of how we make it easier for people to do that.

And it sounds almost like you've done that with chargebacks, you've sort of, you've interrupted this whole process and you've made it easier for the customer to contact the merchant directly. They've got an issue, you can then resolve the issue because you've got 48 hours to do that. Um, would that be a fair statement?

Qi Cao: That's a fair statement. And most of our merchants will just refund the customer.

Matt Edmundson: Because again, there's such a low win rate. There's such a low

Qi Cao: win rate and then you don't really want to reach out to a thousand customers that charge back, right?

Matt Edmundson: Yeah.

Qi Cao: And they charge back for a reason.

Matt Edmundson: Yeah.

Qi Cao: The, the biggest thing that our [00:25:00] clients love about ChargeBlast versus, Some of these pre transaction tools, like the fraud tools I mentioned, is there's no false positive.

With fraud tools, you can have a risky person purchase, uh, shoes online and they'll actually legitimately make that purchase. But if the fraud tool highlights these, this customer as high risk, you, you might turn them down. That's turning down a good transaction.

Matt Edmundson: Yeah,

Qi Cao: right. So there's false positives with fraud tools, but with ChargeBlast, there's no false positives because it's post transaction.

And we only act when there's a signal that comes through the payment networks that the customer has charged back.

Matt Edmundson: So then, if I'm understanding this right, Qi, the sort of the strategy here as an eCommerce Operators just go chargebacks are inevitable. Some of them will be legitimate. Some of them will [00:26:00] just be people, you know, committing fraud.

Um, and I just have to deal with that. And so I, I understand that in my industry, I have this much percentage charged back. So I have to work that as a costing in my price if I want to maintain profits, right? Um, and therefore using your System. It doesn't necessarily minimize the amount of refunds I give, it minimizes chargebacks.

And, um, it keeps the legitimate chargeback customers happy. Which means they'll stay a customer. Well, possibly. Um, it keeps the fraud customers interesting. What that happens, they kind of go, well, this is kind of easy. I'm going to do that again. And I think, I suppose that's when you have your own internal systems, isn't it?

Which just goes, actually, no, we're not selling to this customer anymore. Exactly. And we're just going to close their account down and they can start up another one, but I'm never selling to that address, you know, and you can, you can,

Qi Cao: or the last four digits of the car number, right? That's an [00:27:00] easy way to do it.

Matt Edmundson: Yeah. Easy win. And so, this is, it's fascinating. So, what, what are some, I mean, other than obviously using ChargeBlast, but what are some of the other things maybe then that we can do which are going to help us minimize people wanting to charge back? I mean, what are some of the strategies there that we can utilize which hopefully bring the numbers down generically anyway?

Some business

Qi Cao: approaches to mitigating against chargebacks is just incredibly clear pricing terms. So sometimes, you know, with eCommerce, you get all these promotions, promotions, discounts. And then before you know it, it's not very clear whether it's actually 9, 90. Hey Europeans, thanks for tuning in to another episode [00:28:00] of European Podcasts.

I'm Matt Edmundson, and I'll see you next time.

Because let's say I'm a customer, I'm upset, I'm not going to charge back, but I'm going to reach out to Matt's store and I wait three minutes on the live chat and no one's getting back to me. Well, I'm just going to charge back. My patience has, you know, my three minutes of patience has now been filled up.

That's, that's like, it's like attention span, right? Like nowadays people don't have any patience. They just want their money back and having good customer support, that's 24 seven is a good way to offer. Redo the charge. So how do you do

Matt Edmundson: that? If you're, I mean, I get how I could do that. Uh, you know, my, my business is a fairly reasonable size [00:29:00] business.

And again, I have to think the costs of doing that versus the benefits of doing that. You know, as in how many charge backs am I saving, but if I'm just starting out, there's no way I'm doing 24, seven support, right.

Qi Cao: Right. 24 seven support is challenging, but there are services out there where if you're starting out, you could actually quite afford it.

So our client support team, if you look at our trust pilot, it's a 4. 8 out of five stars. And we're the only company in the space that has that high of rating. Why? It's because we train our client support team to be incredibly responsive. And technologically like detailed

Matt Edmundson: and savvy

Qi Cao: in the chargebacks industry.

Now there are a lot of services out there that enable you, oh, and our team is in the Philippines. Right. Right. So it's much more affordable than having a team in the

Matt Edmundson: US.

Qi Cao: And there's many services out there. There's one called [00:30:00] Delegate. co. They have whole teams already built out for, uh, for entrepreneurs and.

Just folks getting started where you can tell delegate, for example, Hey, this is what I'm selling. Here are the typically asked questions. Here are the policy for the refund.

Matt Edmundson: Yeah.

Qi Cao: And if you don't know what to do, just refund. And then you have all of a sudden a 24 seven, uh, client customer service team that is quite affordable.

Matt Edmundson: Yeah. That's really interesting. That's very clever. Yeah. Uh, makes a lot of sense. So you can outsource it. Okay. So. We've got clear pricing terms, we've got high quality 24 7 support, um, what else can we do to help ourselves?

Qi Cao: Yeah, at the end of the day, having inventory is really important. And

Matt Edmundson: I know in eCommerce Actually having the product you've sold in stock, that's [00:31:00] revolutionary, Qief.

I

Qi Cao: mean, with dropshipping, right, like that's almost not become a thing. Where the main merchant doesn't hold the inventory, it's held by the manufacturer, fulfilled by a fulfillment company. So, if you're dropshipping, It is incredibly important to be communicative with your customers when there's a supply chain issue.

Your supplier comes to you and says, Hey, that batch of hair products, I spilled it all over the factory floor. Now I need two more weeks to get a new production batch made. Reach out to your customers and say, look, it's going to take two weeks. 50 percent on the next order, or I'm just going to send you this free product that I know I have in inventory.

And like, please remain with us as customers and be patient. You usually have to give the customer something, um, or you just refund them there and [00:32:00] then. But if you're new and you're, you're busy and you're just focused on figuring out the supply chain issues and you're not focused on your customers, You can pretty much guarantee a wave of chargebacks that will put you out of business.

Matt Edmundson: Yeah.

Qi Cao: We've seen that plenty of times with dropshipping where, um, supply chain issue happens, wave of chargeback comes in, chargeback rate spikes to one to two percent, Shopify account shut down.

Matt Edmundson: Yeah.

Qi Cao: All in a matter of like a few weeks.

Matt Edmundson: Yeah. That's crazy.

Qi Cao: And that's the worst case scenario.

Matt Edmundson: Yeah. And I suppose this is, I, you know, I, This is the downside of drop shipping.

There are many advantages, I think, to drop shipping, depending on who you, whose products you drop ship. You've got to, you know, I've seen so many people drop ship products using AliExpress or, you know, um, supplies in Qina, which is fine, but when delivery times are like five to six weeks, you've, you've got a bit of an issue there, right?

And so, [00:33:00] um, I think we did this experiment once actually, was it better to drop ship www. crowd. church. org, www. aurionmedia. com, www. You say, right, well, I'm, I sell 10 of these a week, so I'm going to have two weeks in stock because I know there's a three week lead time on the product. Um, and actually building your business up to a place where you can hold.

Now I know this goes against the rules of dropshipping and this is the reason, very reason why people don't do dropshipping, but I'm convinced actually in the long run you get a better business. Because like you say, you're holding the, the stock, the inventory, um, or inventory, depending on where you are in the world.

Uh, but you're, you're holding that and you can get that out quickly because I think it's still the biggest deal in eCommerce. How quickly can I get the goods that the customer has ordered into their hands, right? And if I can do that, even those, um, [00:34:00] I think there's the only exception I can think of realistically is Kickstarter, where you go and go, right.

Well, I'm going to back this campaign, but the product's going to ship in a week. Six months time. Well, okay. I can cope with that, but I, it's never in six months. It's always in 12. And I'm really frustrated because they're always telling me that there's another shipping delay to the point where I rarely buy stuff off Kickstarter now, because I'm not getting the goods when I want them.

Um, and I think that's becoming, that's still a big deal, right?

Qi Cao: Yeah, it's a big deal. And at the end of the day, like most things, communication is very important. Yeah. And making sure your customers are happy is your number one goal, right? Customers first. Yes. So make sure you give them a future discount or you ship whatever product you do have as like a thank you for your patience so that they'll keep coming back and they know that you care.

Because the worst thing is silence.

Matt Edmundson: Yeah.

Qi Cao: Yeah. Waiting for your [00:35:00] product. You can't get in touch with customer support. You're not hearing from the brand owners. What else are you supposed to do? I'm going to charge back.

Matt Edmundson: Yeah, that's totally true. I think making it, the power of over communication can never, it sounds a bit odd now, the power in my head as I'm hearing what I'm saying, the power of over communication can never be overstated.

Um, and I think it's, Yeah, the communicating more is always better than communicating less. Even if it's bad news, just tell the bad news straight, you know, but tell it in a way that resonates with your customers, which gets them on your side, if you can. Right. Um, and you actually, people have a lot of patience, I think, because everybody kind of goes, well, that's fine.

You've told me, you know, I appreciate things go wrong. Appreciate you telling me. No, that's cool. And then if you're giving them something as a result of, you Whatever has happened, I tend to find, I don't have any specific data, it's more anecdotal, but I tend to find [00:36:00] repeat purchase rates go up when something happened And I'm not, I'm not promoting this as a strategy, by the way, you know, when something happened with the first, with the first order that got, you know, messed up, you responded in a very positive way, you over communicated, you tend to find repeat purchase rates from those customers go up because they see how you have dealt with problems, right?

Now, as I said, I'm not suggesting this as a strategy to screw up every first order because people will find out, but, um, I think you can use it as a, as a positive if you do it right to get those repeat purchases.

Qi Cao: Right. I mean, that was Amazon's strategy from the get go, right? When it comes to even refunds.

Matt Edmundson: Yeah.

Qi Cao: We'll give you your money back. It's very easy. Or if you're a brand, it feels like a company is actually working

Matt Edmundson: with you.

Qi Cao: It feels like, all right, it's kind of like the, it's kind of like your iPhone and the number of apps that [00:37:00] you have on your iPhone. And after it gets to a certain point, you just stop downloading apps.

That's your core group of apps. Now, if you're using a hair brand that you can trust and is communicative and, uh, has worked with you directly, giving you, uh, promotions because they screwed up, that's a hair brand that I can trust or hair product brand I can trust. And I'm going to stick with them because they, they know who I am.

They care about, you know, my time. And they care about me getting the product and communicating with me. There's not many, there are way more companies that do not communicate than do. And when you do communicate well, and you care about the customers, you really stand out.

Matt Edmundson: Yeah, that's such a powerful point.

Such, and I love that. And I just think that's what we should just do generally. It's a way to win, isn't it really? Um, you just have to price it into your model, um, and have to think. And I, I appreciate what we're saying is a lot easier with, Low ticket [00:38:00] items. I mean, if you're selling a $6,000 sweater, that is a unique handcrafted thing.

You might wanna think about, you know, a few of the bits and bobs to go around making sure that gets deliver. But, uh, not screwing that up. But I, I think, you know, with low average order value items, it's just, it's just so much easier. to just be exceptional and build that trust, um, than it is to do anything else.

I, I, I often cite the story, and if you're a regular to the show, forgive me if you've heard this before, I can't remember where I've told this story, where I haven't, but there was a guy who used to work for us called Greg, uh, in customer service, still good friends with Greg, he's an absolute legend. And our, our philosophy has always been give customers the kind of service that they would like, but rarely encounter.

In other words, treat a customer the way that you would want to be treated if you were in the same position. Right, that was always the measure. And I remember this guy called up, he'd ordered some products on a Thursday, no, on a Friday, um, after the cut off time. No, no, [00:39:00] no, let me rewind. He'd ordered the products on a Thursday after the cut off time.

So that order was actually sent out on the Friday, um, because of the way that the delivery system worked here in the UK. And he called up on the Friday just to, In the afternoon, a bit angry because his order hadn't arrived yet. And we're like, yeah, but you, you, you only ordered it at this time on Thursday, so it's only going to get sent today.

Plus, you ordered it with the standard two day delivery. But Greg being Greg, didn't then go, so therefore this is your fault, deal with it. He said, can I ask why, why is this a problem? And he said, this is a birthday present for my wife, and tomorrow's her birthday. Now, Greg had recently got married. Right, so he understood the pain of this fella, uh, when he said it's my wife's birthday and I've not got a present for her now.

Greg's like, totally get that, would not want to be in that position. So Greg re sends out the order late on a Friday, um, he [00:40:00] has everybody in the warehouse sign a birthday card, he gift wraps, you know, all the, all the presents, uh, all the products inside the for free and he even throws in some chocolates and he sends it out to this guy.

on a next day overnight delivery to get there before nine o'clock, right, um, and, uh, On the Monday after this had happened, the guy that got that parcel called me. He wanted to talk to me. He said, I just, I need to talk to the guy at the top. So he ends up on the phone with me. I'm going, how can I help you?

And he said, I want to tell you the story about Greg. And I thought, oh, here we go. This is going to be interesting. And so he just, he relays to me the story that I've just told you. This guy is beside himself at the level of customer service that Greg experienced. As he's talking, I'm writing down the costs of, you know, the costs of, of everything that Greg did.

It cost me like an extra 30 bucks that whole order, you know, assuming he, you know, he, when the second order arrives, he actually ships it back rather than keeps it. But [00:41:00] assuming everything goes well, I'm, I'm out like 30, 30, 40 bucks or whatever it was. But what I can tell you is they never went anywhere else.

And they kept coming back time and time and time again. And they told all of their friends, you know, And, and from a marketing point of view, you can go, yes, well, I lost the 30 bucks. What an investment that was, you know, I, I bought Gregor Pint, I think, as a result of doing that. I thought it was a really clever thing to do.

Give that customer service that you would like yourself if you're in the same position is, is what I hear you saying.

Qi Cao: Yeah, absolutely. And it's the same with us. One of the reasons why we founded Charge Blast was we were using a solutions provider, which And we wouldn't hear back from them for two weeks when we had issues and we were having issues with our Stripe account.

We were about to lose it. Now imagine a business owner about to lose his payment processor and not being able to accept payments while spending 8, 000 or whatever a day on ads. [00:42:00] You're sweating it, right? Yeah. And that's all my ad money going to waste. So like one great example, and you really just got to go out of your way and think outside of the box is one of our clients.

He does, um, he's in the subscription razor space,

Matt Edmundson: um,

Qi Cao: does pretty good volume. And what we noticed is Shopify actually doesn't count chargebacks correctly when they're using a certain. Uh, solution, right? So his chargeback rate in reality was much lower than Shopify was presenting on the dashboard. And he got hit with some, uh, reviews, holds, and even some Stripe capital issues.

And what we did was we drafted a whole report for this client, took all his data, Stripe data, our data, put it together, really succinct, nice notes, and we gave it to him to share with the Shopify team. [00:43:00] He actually, um, shared it with the president of Shopify who responded and said, Oh, you're absolutely right because you're using charge blast.

Your charge back rate is actually 0. 2%, not 0. 8%. Right. And that made all the difference. He got his strike capital back. He got his reserve lifted. And he wasn't at risk of losing his shine. So just going out of the way for your clients and doing bespoke work like that makes a world of difference. And then we have a great review and everyone else sees it and they're like, okay,

Matt Edmundson: Brilliant.

And just one other thing I think, uh, we talked about, um, I mean, you mentioned it then he's a subscription raiser business, I think you said shaving, isn't it? Um, I found with subscriptions, one of the ways that's worked for us to reduce charge backs is to make it easy for customers to manage their subscription.

So [00:44:00] when we started sending out emails to customers who are subscribers saying your subscription is doing seven days. You don't need to do anything, it's going to be automatic, but if you'd like to, you can snooze that subscription for like 7 days or 2 weeks, I can't remember what we put in the email to be fair.

Um, As soon as we gave customers the ability to press a button in an email and snooze that order, the cancellations went down and the chargebacks went down. So again, this is that overcommunication, right? It's making it, if it's easier for a customer to do a chargeback than it is to control their subscription through your website, they're going to do the chargeback.

It's a reality, right? Because they're going to go, they're like water, they're going to go the easiest route. So you've got to make it easier for them, I feel.

Qi Cao: Correct. That's absolutely correct.

Matt Edmundson: Gee, loving the conversation. Uh, I'm aware of time. So this is the stage of the conversation where I say to you, uh, what's your question for me?

Now, this is a [00:45:00] question that I'm going to put on social media and I will answer it on social media. Um, uh, not here in the podcast, but I'm curious to know what the question is.

Qi Cao: Uh, sure. So I've seen a lot of different merchants who have shipped really interesting products. Really weird and things I think no one would buy, but people buy it.

So I guess like, what's the wackiest product that you've seen? Uh, in the eCommerce world, that is, uh, actually much higher sales than you would think. That's such a cool

Matt Edmundson: question. Ah, brilliant. If you want to know the answer to that question, uh, I suggest, ladies and gentlemen, uh, you follow me on social media, just go find me, at Matt Edmundson, I'm on the usual channels and I will put the answer there, um, what's the word?

Was brilliant. Love that. Uh, Qi, listen, uh, great question man. Great conversation. How do people reach you? How do they connect with you? If they want to [00:46:00] do that, maybe they wanna know more about Charge Blast. Maybe they just got some questions for you. What's the best way to do it, bro?

Qi Cao: Sure. My X profile is Q like cheetah, so Qi, like cheetah.

Um, that's a good way to connect with me. And then on LinkedIn, uh, you can find me Qital. I'm one of the founders of Chargeblast.

Matt Edmundson: Fantastic and we will of course link to Qi's info in the show notes which you'll be getting for free along with the transcript at ecommercepodcast. net. Just go hunt out the website and hunt out the episode on the website and you'll see all the links there but of course if you're subscribed to the email just go look in your inbox because they'll be there, they're super easy, making it super, super easy for you.

Qi, listen. Loved it, man. Great to meet you. Great to connect. Are you at Sub Summit next year? Are you going to go back?

Qi Cao: Yeah, we'll definitely be there.

Matt Edmundson: So I'll see you there. I've already been invited back for 2025, which is very exciting. So we'll see you at Sub Summit 2025. [00:47:00] But it's been a huge pleasure, man.

Loved having you on the show. I loved hearing your thoughts and ideas on this and enjoying seeing what you guys are doing at Chargeblast. Thanks for coming on. Yeah, thanks for having me, Matt. No problem. No problem. What a great conversation. Huge thanks again to Qief for joining me today. Now also, be sure to follow the eCommerce Podcast wherever you get your podcasts from, because we've got some more Great conversations lined up and I don't want you to miss any of them and in case no one has told you yet today, let me be the first.

You are awesome. Yes, you are. Created awesome. It's just a burden you have to bear. She's got to bear it. I've got to bear it. You've got to bear it as well. Now the eCommerce Podcast is produced by PodJunction. You can find our entire arQive of episodes on your favorite podcast app. The beautiful and phenomenal team that makes this show possible is Sadaf Beynon and Jonah Prisk.

Our theme song was written by Josh Edmundson, and as I mentioned, transcript, the show [00:48:00] notes, just head to the website. All kind of good stuff is on there at eCommercePodcast. net. But that's it from me. That's it from Qi. Thank you so much for joining us. Have a fantastic week wherever you are in the world.

I'll see you next time.