Direct-to-consumer brands and continuity shippers face unique challenges in effectively managing product returns. Whereas traditional retailers expect to receive a percentage of returns by product categories, direct marketers are faced with the task of effectively managing the number of shipments that are refused by consumers who change their minds between order placement and final delivery. As these chargebacks become unmanageable and transportation costs soar, they can be detrimental to operations, customer service and inventory management. In order to reduce the exposure of the supply chain to harmful levels of chargebacks, shippers must critically evaluate their strategies for handling small parcel transportation and data management. 

Balancing Chargeback Exposure with Increasing Consumer Demand
It is a given that returned products can negatively impact revenue growth and net income for direct marketers – but chargebacks can be particularly troublesome as they can affect a merchant’s ability to conduct business with credit issuers. The problem typically starts when a customer refuses a shipment with the expectation that the item will rapidly make its way back to its point of origin, at which time credit will be issued for the refund. However, consumers do not necessarily understand the increasing complexity of distribution models and may expect to be issued a credit in an unrealistic amount of time – which in turn can create customer service issues, since customers may demand credit before the return has been received at the distribution center. If a merchant can identify incoming returns before the products arrive on its dock, it can significantly decrease the merchant’s exposure to chargebacks. 

If your carrier has the ability to notify you that a particular consumer has refused a package, you can use that information to proactively contact the consumer, determine the reason for the rejection and then take the appropriate action, whether it is to re-ship the product upon receipt of the original purchase or immediately issue credit to the consumer. In either case, by controlling the communication early in the process, you can reduce the number of chargebacks while simultaneously lowering the number of unnecessary customer calls to your contact center – actually improving satisfaction in a potentially negative customer service scenario. 

Managing Transportation Costs and Inventory
Transportation can account for as much as 40 percent of an operations budget, so any and all opportunities to reduce those costs can help improve your bottom line. This is certainly the case for direct marketers promoting continuity programs such as monthly skincare shipments, as they depend on a consumer’s willingness to continue receiving product shipments as a part of a program. However, several problems arise when consumers simply stop participating. All too often, instead of calling customer service to notify them of their intent to opt out of the program, consumers simply refuse the shipment – setting off a chain reaction that can impair a merchant’s operations on multiple fronts. Beyond the costs and customer satisfaction issues associated with chargebacks, shipping costs and inventory management can also be negatively affected. 

Without the ability to identify refused packages prior to their arrival at your dock, you may unwittingly continue sending follow-up shipments from the warehouse – so you now have the cost of the original shipment, the cost of the follow-up shipment and its likely return, and a customer service issue for you and the consumer. It is a tremendous burden for all parties involved, being both an unnecessary and expensive scenario – not to mention the inventory problems created when new, yet unwanted merchandise in the supply chain could be better used to fulfill the needs of a consumer that wishes to actively participate in the program. 

The way you manage your small parcel shipping and returns can have a measurable impact on your bottom line. Customer demands in today’s market continue to increase, and your return policies must be customer-friendly. However, you don’t have to fall victim to the excessive costs and customer service problems created by poorly managed chargebacks. With the right technology systems to provide visibility into returns and help you proactively identify and resolve problems, shippers can significantly reduce the problems associated with chargebacks and diminish their effects throughout the organization, from the corner offices to the shipping docks.

Kevin Brown is the Director of Marketing for Newgistics. Newgistics is leading companies into the new age of retailing by delivering unrivaled small parcel delivery and returns services on time and under budget, all while offering the most comprehensive set of technology solutions available in a Postal-based shipping environment. The result is a premium customer shopping experience while lowering costs up to 40 percent. Visit for more information, and be sure to follow Newgistics’ blog, The Gist ( and on Twitter (