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Apparel Reverse Logistics: What Happens After a Return 

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A customer orders a dress in two sizes, keeps one, and ships the other back. For the brand that made the dress, that single decision starts a second supply chain running in reverse. The garment travels to a returns center, gets inspected, and gets sorted into a disposition category. Somewhere in that process, part of the cost lands on the supplier as a return-to-vendor charge, a defective claim, or a deduction on a remittance. 

Most returns coverage is written for retailers and shoppers. This article follows the reverse flow from the supplier’s seat: what drives the volume, where the garment goes, what it costs, and which parts of the process a brand can change. 

Clothing is the category people buy without knowing whether it will fit. That fact sets a floor under apparel return rates, and no amount of operational discipline removes it. 

The scale is documented. NRF and Happy Returns project 

, with 19.3 percent of online sales coming back and retailers estimating that 15.8 percent of all annual sales will be returned. Online return rates across categories run roughly 19 to 20 percent, against 5 to 9 percent for store purchases, and clothing sits at the top of the category list. 

Shopping habits raise the floor further. Roughly six in ten shoppers buy more than one size and send back what does not fit, a practice the industry calls bracketing. Wardrobing is wearing an item once and returning it. NRF also reports that 

, and that shoppers aged 18 to 30 average 7.7 online returns a year. 

Those numbers describe how people shop for clothes at a distance. They do not describe a problem a service team solves once and closes. Planning for a high baseline is a different job from trying to end it, and the brands that plan for it price and forecast better. 

How Does Reverse Logistics in Apparel Work? 

Reverse logistics covers the steps that move a product back up the supply chain after a customer gives it up. In apparel, the flow runs in three stages. 

Reverse Logistics Apparel Stages, From Doorstep to Disposition 

: The customer starts the return through the retailer, then drops the item at a store, a carrier location, or a third-party return point. 

: The item reaches a returns center or a store, where staff check its condition, its tags, and whether it matches what the label and the order say. 

: Someone decides where the garment goes next. The options sit in rough order of value recovered: 

Apparel reverse logistics flowchart: customer return, retailer inspection, then resale, salvage, destruction, or an RTV deduction.

How Does Reverse Logistics in Apparel Work?.png

Most coverage assumes the first option, but many returned items never reach a shelf again. Returns also created an estimated 

, according to returns-technology firm Optoro. 

The destruction branch is narrowing in Europe. The European Commission adopted rules under the Ecodesign for Sustainable Products Regulation that 

. The ban applies to large companies from 19 July 2026, and medium-sized companies follow in 2030. Destruction is allowed only in narrow cases, and it comes with disclosure and record-keeping duties. 

, according to Optoro figures reported by CNBC. That covers handling, before any loss on disposition. A garment restocked at a markdown loses margin twice, once in the processing and again in the price. 

Who Pays for Reverse Logistics in the Apparel Industry? 

The responsibility depends on the vendor agreement. Retailers carry the customer-facing cost of return shipping and processing. Suppliers carry a share that arrives later, and in a different form. It shows up as return-to-vendor charges for goods the retailer ships back, defective allowances set as a percent of sales, and returns-processing fees taken out of payment. 

Terms vary by retailer, so the useful question for a brand is not what a standard agreement looks like. It is which of these charges show up on its own remittances, and at what rate. 

Which Returns Deductions Should Suppliers Audit? 

Returns reach a supplier as money events. They arrive in the same place 

 do, on the remittance, coded and netted out of payment before the brand sees the cash. 

Suppliers with the clearest view of these charges treat them as a category instead of as noise. The work has three parts: finding which 

 relate to returns, sorting them by cause, and checking each one against its paperwork. Most deductions are legitimate. Some come from clerical errors, duplicate claims, or terms applied wrong, and the only way to tell them apart is to look at each one. Brands doing this at volume use deduction-management software rather than spreadsheets. 

 is an SPS Commerce product in that category. 

 data also works as a quality signal. A style that comes back at twice the rate of its neighbors is saying something about its fit, its construction, or the accuracy of its product page, often before the sell-through data does. 

Why Are Retailers Tightening Return Policies? 

The free-returns era is ending, and retailers name cost as the reason. Mail-return fees are now the norm across apparel. 

Fees are just one lever. Retailers are also cutting return windows, setting limits on single accounts, and refunding without a return. 

, fewer than 0.02 percent of its membership. ASOS applied a 

 who keep less than 40 pounds of an order. Amazon 

 on January 31, citing the program’s limited reach and shoppers moving to virtual try-on and size recommendations. 

At the other end, some retailers refund without asking for the item back. A $20 shirt can cost $30 to recover, which makes a 

 cheaper than the alternative. Walmart extended the option to sellers on its marketplace, and Target uses it in a small number of cases. 

For a supplier, these are operational signals rather than consumer news. A fee change moves return volume, timing, and channel mix. Each of those shifts shows up later in the RTV and deduction pattern. 

How Can Suppliers Prevent Avoidable Returns? 

Prevention happens upstream, in data the brand already owns. 

Every lever in that table depends on item data. The data has to be right, and it has to match in every place it lands: the retailer’s item setup, the brand’s own site, and each marketplace listing. Suppliers keep that data lined up with EDI and item-management systems, including 

. Clean item data is needed for this work, but it is not enough on its own. 

Brands that do this well do not report low return rates. They report fewer avoidable returns and a lower cost per return. That is the part of the number a supplier controls. 

Reverse logistics in apparel is the process that moves a garment backward through the supply chain after a customer returns it. It covers initiation, inspection, and the disposition decision that sends the item to resale, liquidation, donation, recycling, or destruction. 

How Much of Apparel Sales Comes Back as Returns? 

NRF projects that 19.3 percent of online sales across retail will be returned in 2025, with clothing among the highest categories. Online rates run roughly two to three times store rates. 

A return to vendor, or RTV, is a charge or a shipment that sends returned or unsellable goods, or their cost, back to the supplier. Terms differ by retailer and are set in the vendor agreement. 

Often, yes. Returns-related charges appear on remittances as deduction codes, netted out of payment. Suppliers that track them separate the returns codes from other chargebacks and check each one against supporting documentation. 

Want to Go Deeper on Returns and Deductions? 

Returns are one of many retailer rules that move money in both directions. 

 has more for apparel brands on scorecards, deductions, and the item data behind them. 

Supplier Connect Caterpillar Requirements for OEM and Aftermarket Channels 

Most suppliers find Caterpillar the same way. It starts with registering a company profile in the Supplier Registration Portal. The profile then goes to procurement and supply chain professionals who review it as needs come up. And once there is a match, someone from Caterpillar reaches out. Caterpillar is direct that 

What registration does not tell you is which Caterpillar you are about to sell into. A company that size does not run one supply chain. It runs a production supply base feeding new machine assembly, and a separate aftermarket and remanufacturing operation feeding parts and service. Those carry different qualification paths, different documentation expectations, and different connectivity work. Suppliers who treat the Original Equipment Manufacturers (OEM) and aftermarket question as a definition to memorize usually find out otherwise at the first rejected shipment notice. 

What Are OEM Caterpillar Parts and Aftermarket Caterpillar Parts? 

An OEM part is made by or for the equipment manufacturer and carries its specification. An aftermarket part is made by a third party to fit the same machine. That is the whole definition, and search engines already are already helpful for an equipment owner deciding what to install at a repair shop. 

That framing is no help to the company making the part. If you manufacture components, OEM versus aftermarket is less a purchase decision you make than a description of which part of your customer's organization buys from you, under which agreement, and with which paperwork. 

Why Does the Aftermarket Carry So Much Weight in Heavy Equipment? 

Parts and service are where the profit concentrates, more than the revenue. Deloitte reports that 

, and expects aftermarket parts and services to keep delivering more than half of manufacturer profit. BCG puts 

, well above what the original machine earns. 

Both figures describe industrial manufacturing broadly rather than heavy equipment specifically, so treat them as directional. The pattern holds regardless: an OEM with that much profit riding on parts and service will build real structure around it, and that structure is what a supplier runs into. 

Caterpillar structures around that. Cat Reman runs remanufacturing on a core return basis: A customer returns an end-of-life component through a dealer for core credit, the core is inspected at a core processing facility, and it is 

. That is a supply chain with its own inputs, its own inspection gates, and its own supplier base, rather than just a footnote to the production line. 

How Does Caterpillar Separate Its OEM and Aftermarket Supply Base? 

Caterpillar draws the line publicly. At the fourth annual Supplier Excellence Recognition event in September 2025, roughly 800 suppliers were recognized in 

. Aftermarket Excellence is its own award track, with winners named by division, including the Product Support and Logistics Division and Cat Reman. 

A recognition program is a visible signal, not proof that two fully separate qualification systems exist behind it. The awards could reflect a real difference in how the two supply bases are sourced and managed, or they could reflect reporting structure. Suppliers should ask rather than assume. 

What Is Supplier Connect and Where Does It Fit? 

 is the portal Caterpillar uses for both potential and existing suppliers. For companies not yet doing business with Caterpillar, it publishes the high-level requirements. For active suppliers, it is the entry point into the Caterpillar systems and processes suppliers are expected to follow, and it is where Caterpillar hosts its 

That is where the OEM and aftermarket question stops being academic. Access to the portal is common ground. What the portal asks of you afterward depends on which relationship you are in. 

What Breaks When Suppliers Treat the Two Channels as Interchangeable? 

Flowchart of Supplier Connect splitting into OE production and aftermarket channels, leading to qualifying each channel separately or one shared mapping

oem-vs-aftermarket-supplier-channel-flowchart.png

The failure mode is rarely dramatic, and nothing announces itself. A supplier maps its transactions once, assumes the mapping covers everything under one customer name, and then hits friction on a specific document or a specific item. 

 (ASN) tells the receiving side what is coming, in what packaging, against which order, before it arrives. Receiving requirements are not uniform across an organization the size of Caterpillar. A production plant receiving line side material and a parts distribution center receiving replenishment stock are solving different problems, and the notice each expects can reflect that. 

 poses another risk. Part numbering, unit of measure, packaging hierarchy, and the identifiers a buyer indexes on can differ between a production program and an aftermarket program. When they do, the mismatch does not surface at setup. It surfaces at receipt as a rejection, and then someone spends a week reconciling it. 

What Caterpillar Parts Suppliers Should Check First 

Before assuming one integration covers both channels, double-check which division owns the relationship, which documents that division requires, and whether item identifiers carry over. Ask during qualification, not after the first purchase order. 

Which Channel Should Your Business Pursue? 

There is no default answer, and plenty of suppliers run both. What separates the two decisions: 

Choosing a channel is closer to choosing an operating model than choosing a customer. 

Is Supplier Connect the same as the Supplier Registration Portal? 

They are related but not identical. Caterpillar directs prospective suppliers to submit a company profile through a registration form, while Supplier Connect is the broader portal covering requirements for potential suppliers and system access for existing ones. 

Can one supplier sell into both the OEM and aftermarket channels? 

Yes, and many do. The point is that doing so may mean maintaining more than one set of requirements under a single customer relationship, rather than one integration that covers everything. 

Does aftermarket business have lower standards than OEM production? 

No, and different is not the same as lower. Aftermarket and remanufacturing programs carry their own qualification, quality, and documentation requirements, and Caterpillar recognizes aftermarket supplier performance in a dedicated award category. 

How long does Caterpillar keep a supplier profile on file? 

Caterpillar archives profiles after 12 months without an invitation to do business and recommends updating the profile if no business has been awarded in that window. 

Ready To Make the Connectivity Question the Easy Part? 

Whichever channel you qualify for, the underlying requirement is the same: accurate, reliable data exchange with a demanding trading partner, in whatever form that partner asks for it. SPS Commerce works with 

 on exactly that layer, so the connectivity work is not what slows down a new program. 

Not ready to talk about integration? The Supply Chain Source has 

 working through requirements like these. 

Reading a Planogram: What Buyers Send You and What They Expect Back

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For many emerging suppliers, there is a specific moment of tension that occurs right after a retailer says yes. The initial excitement of landing the account is often followed by the arrival of the complex, data-heavy planogram. 

If you are seeing this document for the first time, it is easy to treat it as simply a nice visual representation of where your product sits on a shelf. However, treating a planogram as a one-way document is a mistake that can lead to misplaced products, broken category flow, and lost sales. To a retailer, a planogram is a blueprint for merchandising strategy and a formal specification document. 

Understanding this document is important, but the relationship is a two-way street. Buyers expect you to send back accurate item dimensions, high-quality images, and specific data points to make the reset work. If you treat this exchange as optional you risk your product ending up with the wrong shelf space or facing count before it even hits the store. 

, is a schematic visual tool used to plan and control shelf layouts. It is built from sales data, shopper behavior research, and merchandising principles to ensure that products are arranged in a way to maximize space and profitability. When reviewing the planogram, it is important to look past the product images and focus on the technical instructions it contains. 

A complete planogram typically includes several key views that tell store teams exactly what "done" looks like.  

The fixture view is the foundation of the planogram, detailing the specific equipment required, such as gondolas, pegboards, coolers, or racks. This view specifies shelf heights, depths, and the exact spacing between fixtures to ensure everything physically fits. 

The product view layers in the specific 

 and universal product code (UPC) data for identification. This is where you find the following:  

Finally, the document includes a SKU listing that serves as a checklist for merchandisers. This list includes 

, product descriptions, and units of measure to ensure the right variants are stocked.  

Any gap in this specification creates a decision point for a field team, and improvisation can lead to compliance errors. 

Reading a planogram effectively means turning a digital schematic into a shelf that actually sells. Your goal is to ensure that the physical reality of the store matches the digital intent of the buyer. Some step-by-step best practices are:  

Good planograms also guide category flow, showing how brands and subcategories sit next to each other to help the shopper navigate the aisle. You should verify that your products are grouped according to these brand blocks and that any specified adjacencies, like chips next to dips, are respected. If the planogram includes promotional or seasonal callouts, these must be treated as time-sensitive priorities, with 

 or dump bins set up exactly as indicated. 

The Data Exchange Between You and Your Buyer 

While the buyer provides the layout, the accuracy of that layout depends entirely on the data you provide during the item setup process. Retailers increasingly build resets from automated item master data feeds rather than manual entry. 

The most critical element you owe to the buyer is accurate dimensions. This includes the height, width, and depth of the product in its final packaging. These measurements must match the actual production sample, not an estimate. If you submit inaccurate dimensions, it can throw off the automated space allocation for the entire reset. This might result in your product being given too much space, which wastes the retailer's money, or too little space, which leads to your product being left off the shelf entirely because it physically does not fit. 

Beyond dimensions, buyers expect high-quality product images. These images are not just for aesthetics; they allow store teams to map the correct items to the correct slots visually. Best practices for these images include using a clear white background, cropping out all borders, and ensuring the product is upright and front-facing. When working with systems like DotActiv, these images typically need to be in PNG or JPG format and named by their barcode to ensure they link correctly within the software. 

 have a highly structured process for this data submission.  

Retail data is the lifeblood of a successful planogram. If your unit data is incorrect, it skews critical indicators like 

When DOS is miscalculated, a retailer cannot accurately balance the number of facings your product requires. Your best-selling SKU might fall behind because it wasn't allocated enough space, leading to stockouts and lost revenue. Conversely, inaccurate 

 data could result in a shortage of products like sunscreen during its prime summer season. 

Inaccurate data also grinds the in-store execution process to a halt. If a field team arrives to find that the products do not fit the shelves as planned, they are forced to improvise. This often leads to reset drift, where daily restocking decisions accumulate until the shelf looks nothing like the original strategy. This unauthorized localization breaks the category logic, meaning no two stores share a consistent baseline for performance analysis. 

Planogram compliance means the actual store shelf matches the approved plan. Historically, many teams have overestimated their compliance because they only measured presence rather than accuracy. 

Today, the industry is moving toward more sophisticated verification methods. While manual checks by store staff are still common, many retailers now use photo proofing or mobile-first digital checklists to verify placement. Some are even deploying AI and image recognition tools that compare a shelf photo against the approved planogram in real-time. These systems can detect missing facings or the wrong product in a slot quickly, allowing a rep to fix the issue before they even leave the aisle. 

Ultimately, the planogram is a tool for collaboration. While the retailer makes the final decisions, you have the opportunity to influence those decisions by providing clean data and demonstrating strong performance. In some cases, suppliers act as category leaders, providing insights on consumer behavior that help the buyer refine the category strategy. 

 does not match what is reflected in a planogram, this is a signal to flag the discrepancy back to your buyer or category manager. Asking for clarification on a specific instruction is a normal part of the process and shows that you are committed to the success of the 

By mastering the art of reading the planogram and being disciplined about the data you send back, you move from being a first-time supplier to a sophisticated retail partner. You ensure your products are positioned to win, your inventory is managed effectively, and your relationship with the buyer remains healthy. 

Navigating the complexities of retail execution requires a commitment to data accuracy and community knowledge. 

 is your destination for the expert insights and practical tools you need to lead through change. Join our community of over 60,000 professionals today to sharpen your perspective and master the evolving standards of the modern retail landscape. 

Why the Same Deductions Keep Coming Back (and How To Make Them Stop) 

Every deduction, chargeback, and fine — whether valid or invalid — is an invitation to go beyond the deduction code and investigate your supply chain to determine what really happened. Was it a short shipment in the warehouse? A mislabeled pallet in ops? A missed appointment from a carrier?  Who’s really at fault?  

Bypassing this investigation runs the risk of getting your dispute denied, as the better you understand what happened, the better you can defend your case. But that’s not all you’ll risk losing by skipping this step.  

Unless you take the time to determine a deduction’s root cause, you’ll miss out on invaluable insights into potential gaps in your business. This runs the risk of seeing the same deductions on repeat, as well as harming the brand-retailer relationship by submitting incomplete, incorrect, and repetitive disputes. 

Root cause analysis is thus foundational to both getting paid and getting better. Action should follow understanding.  

At SPS Commerce, we often refer to deductions as “diagnostic signals” pointing to the supply chain health of a brand or supplier. In other words, deductions are more than a financial hassle. They’re a downstream symptom of an underlying issue.  

If you were to visit the doctor for a persistent cough, you’d want to leave the office with more than a simple over-the-counter cough suppressant recommendation. You’d want to know 

 the coughing is happening to begin with (e.g., environmental allergies) so you can treat the cause, not just suppress the visible symptoms. Otherwise, your need for a cough suppressant will likely continue.  

Deductions, chargebacks, and fines are like a persistent cough. Disputing sometimes suppresses these revenue-draining symptoms, but it doesn’t address the larger systemic problems behind them.  

Root Cause Analysis for Retail Deductions 

While it can be tempting to jump straight to disputing or even writing off a deduction, the first order of business is to investigate what really happened. Was the deduction valid? What went wrong? Who was at fault?  

Doctors use testing to diagnose the source of symptoms. Supply chain professionals, on the other hand, employ root cause analysis (RCA) to pinpoint deduction triggers. According to SPS Senior Retail Insights Manager, 

, when “proactively implemented in business contexts, [RCA] aids in identifying and effectively rectifying issues within various processes, products, or systems.”  

Varon points to five common RCA methods and tools that can help brands and suppliers determine the underlying causes of deductions: 

Pareto charts operate off the principle that “20% of sources cause 80% of problems.” An organization’s problems are graphed by frequency or size in descending bars, helping prioritize which problems to address to maximize impact. 

Also called Ishikawa or cause-and-effect diagrams, fishbone diagrams start with naming a problem, listing the major related processes or procedures, and then brainstorming possible problem causes that fit within each process. The end result looks similar to a fish skeleton.  

This method is fairly self-explanatory: Ask a “why” question repeatedly (often five times) until you reach the root cause, the point being that it’s rare to get it right with the first why. 

Scatter plots can help identify relationships between two different variables. They’re often used to measure the strength of relationships identified with a fishbone diagram.  

Failure Modes and Effects Analysis (FMEA) 

FMEA is a tool used in risk analysis that systematically identifies and prioritizes possible design, manufacturing, process, product, or service failures. 

Common Root Causes of Walmart In Full Deductions 

The underlying root cause of a deduction typically sits upstream in 

, item setup, carrier execution, labeling, routing, or master data. 

With so many different deduction types and an even greater number of root causes, it’s helpful to zoom in and narrow our focus on one type of deduction at one retailer to illustrate.  

 is considered to be In Full if Walmart receives 100% of all ordered cases. If Walmart receives fewer cases than it ordered or if no cases arrive at all, suppliers could see an In Full deduction. 

Here are some common root causes for In Full Walmart deductions. 

Don’t miss the problem behind the deduction code. Taking time for RCA paves the way for successful disputes and preventing them altogether. 

Why Even Invalid Deductions Need Root Cause Analysis 

Many suppliers and brands assume that invalid deductions are simply an opportunity to dispute — that there’s nothing to fix on their end. This is usually true, but not always. Some invalid deductions (i.e., deductions that are triggered by the retailer’s mistake) have a preventable cause on the supplier’s side. 

For example, invoicing too early causes an apparent shortage, even if the retailer eventually receives the product in full. The deduction is invalid and should be disputed, but the timing behavior that triggered it is still fixable.  

Recover and Prevent Deductions With SPS Revenue Recovery 

Both recovery and prevention have their place in “treating” retailer and distributor deductions, but closing the loop between deductions and the data or operations breakdowns that cause them is arguably the move with the highest leverage. Simply focusing on disputing is an endless treadmill of work. 

 partners with brands selling directly to retailers, grocers, and distributors like Walmart, Target, Amazon, Kroger, UNFI, and CVS, to: 

Our partnership with Serta Simmons Bedding demonstrates the importance of digging down to the root case. Serta Simmons kept seeing the same deductions on their invoices from Walmart, but the math for fixing — or even patching —the problem wasn’t adding up. The Serta Simmons finance team didn’t have time to manually dispute each deduction, and pinpointing what was triggering the deductions in the first place would require extensive excavation.  

The SPS team combed through Serta Simmons’ raw EDI data, identified incorrect shipping methods triggering the deductions, and helped correct the EDI errors issue at the source. Deductions that had been on every invoiced came to an abrupt and satisfying halt.  

Fashion Supplier Deductions: What Markdowns, Allowances, and Chargebacks Actually Mean 

A deduction on a retailer remittance doesn't always mean the same thing. It could be a markdown allowance negotiated because merchandise didn't sell at full price, a vendor allowance you agreed to in advance, or a chargeback tied to a specific compliance issue. 

The distinction matters because each one requires a different response. If you treat a chargeback like a negotiated allowance, for example, you may miss an opportunity to prevent the same deduction on future shipments. If you treat an agreed-upon allowance as an error, you could waste time disputing a cost that was already part of your vendor agreement. 

For fashion suppliers, understanding what's behind each deduction is the first step toward managing it effectively.  

What Triggers Fashion Supplier Chargebacks, and Can You Prevent Them? 

Chargebacks are the deduction you control most directly, as they’re penalties for operational mistakes. A chargeback shows up when a shipment, a document, or a piece of packaging doesn’t match what the retailer requires. 

 for using the wrong hanger, an unapproved hanger, or a hanger nobody asked for, and has required RFID hangtags on private label products since 2021. If you ship 1,000 units on the wrong hanger, then you’ve created a chargeback line before the invoice even gets reviewed.  

 calls its version an expense offset charge: if your hangers don’t meet its standards, you get charged, and you have four months to dispute it before the chargeback is final.  

. Miss a UPC code in the item catalog and that’s $150 per incident, no negotiation. A mislabeled carton adds more fees on top. 

The fix for all three lives upstream of the dispute process. On-time advance ship notices (ASNs), accurate ship documents, and correct labeling data, must be sent the same way to every retailer, in order to keep a shipment out of the chargeback queue in the first place. This is an infrastructure problem, as EDI accuracy and floor-ready compliance are built into how orders leave your warehouse.  

What’s the Difference Between a Markdown, an Allowance, and a Chargeback? 

Once you’ve got chargebacks handled, the other two types of deductions come down to vocabulary. All three land on the same remittance, but they come from different places and need different responses. 

 is your negotiated share of a price cut that the retailer already made. For example, a $60 shirt gets marked down to $30 to clear the floor, and you agreed to cover half that gap. That’s $15 a unit coming out of your check, so being prepared for these losses is key. 

 is money you committed to before a single unit shipped, like a set ad contribution written into the vendor agreement. A chargeback is a penalty for something that went wrong. Mix up deductions with allowances or chargebacks and you may end up disputing a cost you actually agreed to or covering a penalty you could have prevented. 

How Do Markdowns and Markdown Allowances Work in Fashion? 

Fashion runs on short full-price windows. 

 before the retailer has to cut prices to clear room for next season. When that window closes, retailers often ask vendors to help cover the loss. 

 as a long-running industry practice, something retailers treat as a source of profit whenever merchandise doesn’t sell at the price they agreed on.  

Your negotiation elements are your sell-through data and timing. If you can show the buyer exactly how a style sold week by week, then you’re negotiating from evidence instead of just paying whatever number lands on the remittance. A brand that pushes back on a 50% markdown with its own scan data, arguing 30% instead, is in a very different spot than a brand that just pays whatever the buyer sends. 

What Other Allowances Do Department Stores Negotiate? 

Markdowns aren’t the only negotiated cost in a department store relationship. Vendor agreements often include advertising and cooperative-marketing contributions, damage allowances, and similar costs you agree to up front, as part of doing business with that retailer. A brand might commit a set dollar amount, or a percent of sales, toward a retailer’s seasonal catalog or in-store event before a single unit even ships. 

These are commercial terms, not penalties, and they’re spelled out in the vendor agreement before your first order ships. Know what your agreement already commits you to, so an allowance line doesn’t feel like a surprise.  

Why Does Auditing Every Deduction Matter? 

Saks Fifth Avenue disclosed in 2005 that one of its six merchandising divisions had improperly collected markdown allowances from vendors, and the numbers were not small. 

 put the improperly collected amount at $26 million for fiscal 1999 through 2003, plus another $8.2 million from 1996 through 1998. The cause was that merchants in one division sent vendors false information about what they owed. Saks paid the money back with 7.25% annual interest, $48.2 million in total. The company also restated years of financial statements and drew scrutiny from the SEC and the U.S. Attorney’s office. 

That case is two decades old, but the lesson still holds: a deduction record is only as trustworthy as your ability to check it. Say a remittance shows a $4,000 markdown allowance you don’t remember agreeing to. With your own sell-through and pricing records on hand, you catch that in an afternoon. Without them, you just eat the $4,000. Sort every deduction into a category, compare it against your own records, and dispute what doesn’t hold up.  

What does the Saks Global situation mean for counterparty risk? 

Saks Global, the parent company of Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodman, spent 2025 in a very public vendor payment crisis. It pushed some vendors onto 60- to 90-day payment terms, then promised to pay off a backlog of past-due bills starting in July. Many vendors say those payments never fully arrived. 

 they were each owed five to six figures, and at least one was deciding whether to keep shipping at all. The company 

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Prepping for Walmart Audits

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