COD Management and Processing: How to Reduce Refusals

Why cash on delivery still matters in the Italian market

In Italy, cash on delivery remains a significant payment method for many online stores. Across all online purchases by Italians it accounts for 1.6%, according to Netcomm's NetRetail 2026 survey, but that figure hides how much it weighs where it is offered. In stores that offer COD, almost one order in five is paid on delivery, more than one in three in Calabria and Sicily, against 13% in Veneto (2022 data from an Italian shipping software provider).

The reasons are structural, not just cultural. In Banca d'Italia's report on the 2024 ECB survey, cards account for 51% of online payment transactions in Italy, and online payments have grown from 6% of everyday non-recurring transactions in 2019 to 24% in 2024. Cash on delivery does not even appear in those figures, because an order paid to the courier at the door does not count as an online payment. For part of the customers, paying only when they physically hold the product is still the way they want to buy.

For foreign brands entering Italy, this creates a paradox. Refusing to offer COD means losing part of the market, especially in the south. Offering COD without a management strategy means hemorrhaging money on refused deliveries. The solution is not to avoid COD but to manage it systematically.

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The real cost of every refused COD delivery

Understanding the true cost of a COD refusal requires looking beyond the obvious shipping expense. When a customer refuses a COD package at the door, the following costs accumulate:

Outbound shipping: depending on carrier and destination. Return shipping: for the package to come back to the warehouse. COD collection fee: charged by the carrier, with some contracts even when no payment is collected (Poste Delivery Business, for example, charges it whatever the outcome of the delivery). Warehouse re-processing: to receive, inspect, and restock the item. Packaging waste: if the packaging is damaged and cannot be reused.

Amounts depend on your carrier contracts, and we have found no reliable public averages. Here is an example with made-up numbers. A brand processing 200 COD orders per day sees 50 of them refused. If each refusal costs €15, that is €750 per day, or €22,500 over a 30-day month.

But the financial damage extends further. Every refused parcel is extra work for the carrier too, and the COD terms that weigh on your margin (collection fee, holding, return to sender) are set in your contract. Before you renegotiate, bring your own numbers, meaning refusals by area and by month.

There is also an inventory cost. A product sitting in transit or in the returns pipeline is not available for sale. For fast-moving consumer goods or fashion items with seasonal relevance, this delay can reduce the item's full-price sellability.

Strategy 1: Pre-shipping order verification

Phone verification is one of the measures that people who work with COD in Italy recommend, especially for high-value orders. The concept is simple: before a COD order leaves the warehouse, someone contacts the customer to confirm their intent to receive and pay for the order. This catches three categories of problematic orders.

Fraudulent orders: Fake names, incorrect addresses, or orders placed with no intention of paying. Impulse orders: Customers who ordered late at night or during an emotional browsing session and have already changed their mind by morning. Data errors: Wrong address, wrong phone number, or customers who will be unavailable during the delivery window. A 2025 European report lists an incomplete or inaccurate address among the most common causes of failed delivery. No public figure measures how much each category weighs in Italy, so look at your own refusals by cause.

Verification is best done early, before the order goes into preparation, even though no public source measures how the outcome changes with timing. A call or a message asks the customer to confirm the order details and delivery address. If the customer does not respond, the order is held for review rather than shipped blindly. If your warehouse makes the calls, ask how many attempts it makes and at what times.

No public source measures how far refusals drop with verification. You measure it on your own orders, comparing refusals on confirmed and unconfirmed ones, and the call script and its outcomes are in our guide to phone order confirmation for COD.

The ROI calculation is straightforward: verification pays off when the refusals it prevents, multiplied by what a refusal costs you, exceed the cost of the checks. Both figures come from your own contracts and orders.

Strategy 2: Micro-deposits and hybrid payment flows

A micro-deposit strategy asks the customer to pay a small amount (1-5 EUR) online at checkout, with the remainder paid in cash on delivery. This approach filters out non-serious buyers without eliminating the COD option entirely.

The psychology is powerful. A customer who enters their card details and pays even 1 EUR has psychologically committed to the purchase. They have invested time and effort, making them less likely to refuse delivery. How much less is not measured by any public source, so test it on your own orders.

Implementation approaches include:

A fixed 2 EUR "order confirmation deposit" paid at checkout, deducted from the COD total
A percentage-based deposit (5-10% of order value) for high-value orders, deducted from the amount paid on delivery
A tiered system where first-time customers pay a deposit, also deducted from the COD total, and repeat customers do not

The deposit is part of the price and is always deducted from the amount paid on delivery, so the customer pays the same total as with any other payment method. The key is framing. Position the deposit as an "order confirmation" or "delivery reservation," not as a fee. Italian consumers respond better to language that emphasizes they are securing their delivery slot rather than being charged extra. An actual extra charge for paying on delivery would expose you to sanctions whatever you call it, because Article 62 of the Italian Consumer Code bans fees for the payment method and the Italian Competition Authority (AGCM) applies the ban to cash on delivery. This article is not legal advice.

One important caveat: micro-deposits add friction to the checkout process. A/B testing is essential. Some brands find that the reduction in refusals more than compensates for a slight decrease in conversion rate, while others find the conversion impact too high. The optimal approach depends on your average order value, customer demographics, and refusal rate baseline.

Strategy 3: Delivery speed and communication

The longer a COD customer waits for their package, the more likely they are to refuse it. How much, in Italy, is not measured by any public figure we have found.

The logic is simple. The shorter and more predictable the wait, the fresher the purchase is in the customer's mind, so show a realistic delivery date and keep the customer informed until the parcel arrives.

Beyond speed, communication is critical. Proactive delivery updates help customers be at home and have the cash ready, although no independent study measures how much they reduce refusals. An effective communication flow includes:

Order confirmation (immediate): Confirm the order, restate the total, and provide an estimated delivery date.
Shipment notification (when shipped): Include the tracking number and a direct link to live tracking.
Out for delivery (morning of delivery day): Confirm the delivery is happening today with an estimated time window.
Delivery attempt reminder (if first attempt fails): Offer rescheduling options before the carrier returns the package.

What to do after a failed first attempt, carrier by carrier, is in our guide to failed delivery attempts in Italy. Each touchpoint can reduce the chance of refusal. The "out for delivery" notification is particularly useful because it gives the customer time to ensure they have cash available and are at the delivery address.

Strategy 4: Behavioral scoring and risk assessment

Not all COD orders carry equal risk. A returning customer with three successful COD deliveries in their history is fundamentally different from a first-time buyer with a free email address ordering at 2 AM. Behavioral scoring uses data to differentiate between these profiles and allocate verification resources where they matter most.

Factors that increase COD refusal risk include:

First-time customer with no order history
Order placed late at night, if your history shows those orders are refused more often
Delivery address in a high-refusal-rate postal code
Free email provider (vs. corporate email)
Unusually high order value for the product category
Multiple items of the same product in different sizes

Factors that decrease risk include:

Repeat customer with successful COD deliveries
Verified phone number matching the delivery area
Order placed during business hours
Average order value consistent with the product category

A scoring model, or a few rules you set yourself, assigns each order a low, medium or high risk level. Low-risk orders ship without verification. Medium-risk orders get a confirmation by message or by phone. High-risk orders get a phone check before shipping. This way you do not slow down your best customers while still catching problematic orders. How address validation, blacklists and risk scores work is explained in our guide to COD fraud prevention.

Example: a D2C beauty brand entering southern Italy

Consider, with made-up numbers, a mid-size D2C skincare brand based in France, launching in Italy through a Shopify store. Their average order value is €45, and they offer COD because it matters to their target customers in southern Italy.

Month 1 (no COD management): 3,000 COD orders, 600 of them refused. At €15 per refusal, that is €9,000 a month, before counting customer acquisition costs.

Month 2 (phone verification implemented): All COD orders are now confirmed before shipping, first by message and then by phone for customers who do not reply. The brand compares refusals on confirmed and unconfirmed orders, and the cost of the checks with the refusals they prevent.

Month 3 (behavioral scoring added): Only medium and high-risk orders receive verification, which lowers the cost of the checks. The brand checks that refusals on low-risk orders, now shipped without a call, do not rise.

How far refusals drop is not something any public figure tells you in advance. It is the number this brand reads in its own orders, month after month, and it decides whether COD is a growth channel or a financial drain.

The COD payout cycle: managing cash flow

One aspect of COD that catches many foreign brands off guard is the payout delay. When a carrier collects cash at the door, that money does not reach your account immediately. Each carrier has its own remittance cycle:

Poste Delivery Business: within 5 business days of delivery, according to its product sheet (September 2026)
BRT, GLS and other carriers: the cycle or the maximum term is in your contract, so ask for it in writing and check it against your statements

If cash on delivery goes through your 3PL, the carrier pays the collections to the 3PL and the 3PL pays them to you, so the 3PL's time is added to the carrier's.

For a brand processing 200 COD orders per day at a €50 average order value, each day between carrier collection and bank deposit keeps up to €10,000 "in transit" (our calculation), so even a five-business-day cycle ties up around €50,000. This working capital gap must be planned for, especially during peak seasons when volumes (and therefore the float) increase dramatically.

If your cash position is tight, ask your carrier whether a faster cycle is available and at what cost. Whether it is worth paying for depends on your cash position and the opportunity cost of tied-up capital.

Measuring and optimizing: the three metrics that matter

Effective COD management requires tracking three metrics consistently, at minimum on a weekly basis:

1. COD refusal rate: The percentage of COD orders that are refused at delivery, meaning COD orders refused or returned to sender divided by COD orders shipped. At the time of writing (October 2026), Italy has no public, measured benchmark, so the comparison is with your own history. Track this by carrier, by region, and by customer segment to identify where problems concentrate.

2. Cost per refused order: The total cost including outbound shipping, return shipping, carrier fees, and warehouse processing. This number should be calculated precisely for your specific operation because it determines the ROI of every prevention measure you implement.

3. COD share of total orders: The percentage of your total orders that are COD. This metric helps you understand your exposure. The higher this share, the more your refusal rate weighs on the whole business, so read the two together.

Additionally, track verification conversion rate (what percentage of verified orders proceed to successful delivery) and COD payout cycle time (how quickly carriers remit collected cash to your account). Cash flow from COD depends on each carrier's remittance cycle, which affects your working capital.

Why COD is a competitive advantage, not a problem

The brands that master COD management in Italy gain something their competitors cannot easily replicate: access to the customers who prefer to pay on delivery, a significant share of orders in the stores that offer COD, especially in the south. Brands that offer COD with fast delivery and professional service give those customers a reason to come back.

Furthermore, COD customers who have a positive experience can move to prepaid methods on later orders, and how many do it you can see in your own order history. COD becomes a customer acquisition channel, not just a payment method.

The key is treating COD management as a core operational competency rather than an afterthought. This means a clear verification process, carriers that handle COD well, and rules on which orders to check that you keep refining on your own data.

For foreign brands, there is a strategic angle as well. Many international competitors avoid COD entirely because they do not understand the Italian market well enough to manage it. By building a competent COD operation, you differentiate yourself from other foreign entrants and compete more effectively with local Italian brands that have been managing COD for years.

How Tissquad can help

If your brand is selling in Italy or planning to enter the market, COD management will directly impact your profitability. The difference between a high and a low refusal rate is not marginal, it can decide whether your Italian operation is profitable or not.

Tissquad handles logistics for cash-on-delivery orders for ecommerce brands, Italian or foreign, from its warehouse in Campania, near Naples. Before shipping, we check the address and, on request, confirm cash-on-delivery orders by phone, in Italian. We usually pay out cash-on-delivery collections every week, with a summary of what was collected, and you get access to the warehouse and shipping panel. More on how we work on our cash on delivery service page.

Want to work out where to start with your COD refusals? Request a call with our team, the first one is free.