Case Study – Protecting Profit in a Small Ecommerce Business

Business Operations & Risk Management

Intro

While ecommerce isn’t my primary focus, I’ve worked through enough online sales challenges to know that operational tweaks can make the difference between running at a loss and staying profitable. This case study highlights how applying practical risk management processes helped an online lighting store cut unnecessary losses from a common — and costly — problem: chargebacks.

The Challenge

A small ecommerce store selling LED strips, smart bulbs, and plug-and-play lighting fixtures had seen a sharp increase in chargebacks over several months.

• “Item not received” disputes persisted even with tracking and photo proof.

• A few “unauthorized transaction” claims came from customers who had clearly engaged with the order.

• Margins were already thin, making every lost dispute more damaging.

• Fighting disputes was time-consuming and pulled focus from running the business.

Our Approach

I designed a Chargeback Risk Mitigation Plan that could be implemented with minimal disruption, focusing on prevention, loss recovery, and blocking repeat offenders.

1. Insurance on Every Shipment

   • Added insurance to every order, enabling reimbursement when chargebacks occurred.

   • Over time, insurers began pushing back on certain disputes directly.

2. Signature Confirmation for High-Value Orders

   • Required signatures for orders over $50 to reduce “item not received” credibility.

3. Delivery Photo Proof

   • Leveraged carriers offering photo confirmation at delivery to strengthen dispute evidence.

4. Blacklist Repeat Offenders

   • Flagged and blocked addresses, emails, and names from previous fraudulent orders.

5. Fraud Filter Optimization

   • Fine-tuned payment processor fraud settings and added third-party screening for higher-risk orders.

The Results

• 50% reduction in successful chargeback claims within 90 days.

• $X in product and shipping costs recovered via insurance claims.

• Significant drop in “item not received” disputes for signature-confirmed orders.

• Lower fraud exposure overall due to proactive blocking of bad actors.

Key Takeaway

This wasn’t about ecommerce alone — it was about diagnosing a recurring financial leak, applying a structured solution, and protecting profit margins. The same structured problem-solving process can be applied to operational challenges in any industry.

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