A review and analysis of service level agreements and chargebacks in the retail industry

Purpose: The purpose of this paper is to examine service level agreements (SLAs) in the retail industry and uses empirical data to draw conclusions on the relationships between SLA parameters and retailer financial performance. Design/methodology/approach: Based on prior SLA theories, hypotheses about the impacts of SLA confidentiality, choice of chargeback mechanisms and chargeback penalty on retailer inventory turnover are tested. Findings: Retailer inventory turnover could vary by the level of SLA confidentiality, and the variation of retailer inventory turnovers could be explained by chargeback penalty. Research limitations/implications: The research findings may not be readily applicable to SLAs outside of the retail industry. Also, most conclusions were drawn from publicly available SLAs. Practical implications: The significant relationships between SLA parameters and retailer inventory turnover imply that a retailer could improve its financial performance by leveraging its SLA design. Originality/value: Not only does this study contribute to the understanding of retail SLA design in practice, but it also extends prior theories by investigating the implications of SLA design on the retailer inventory turnover.