United Parcel Service of America Inc. this week unveiled an online returns policy, called UPS Returns on the Web, to help consumers - and merchants - deal with goods purchased on the Web that buyers don't want to keep.

As consumers and merchants alike discovered during last year's holiday season, one of the biggest challenges to online shopping is making the return of an unwanted item as painless as possible for the shopper, analysts said.

Atlanta-based UPS's automated, browser-based system allows consumers to initiate returns over the Internet and provides them with on-screen labels they can print on standard paper directly from a PC.

Consumers can then take their packages to a drop-off location, hand them to any UPS driver or, in some cases, have them picked up, a company spokesman said. Once packages are shipped, shoppers can keep track of them directly via the merchant's site or through the UPS Web site.

Online retailer Buy.com Inc. in Aliso Viejo, Calif., has been piloting UPS Returns since June. Because of the service, Buy.com said, the number of calls it receives about incoming returns has been cut by 40%.

"This is exactly what UPS should be doing," said Donald Broughton, a transportation analyst at A. G. Edwards & Sons Inc. in St. Louis.

In contrast to UPS's system, Memphis-based Federal Express Corp.'s 3-year-old Net Returns service doesn't allow consumers to initiate a return request over the Internet or print return shipping labels from their PCs. Instead, they must make contact via telephone with a particular merchant using FedEx's service.

Jeff Maddock, FedEx's manager of reverse logistics, said the merchant processes the return request and schedules a package pickup at a customer's home or office by a FedEx courier, who then prints out the return shipping label.

Maddock said merchants are able to route packages to their destinations, and both merchants and consumers are able to track returned packages.

Broughton said the indicator of whether UPS is on target with its new service will be determined by whether rival FedEx responds and how quickly.

Maddock confirmed that FedEx is working on enhancements to its current returns system, although he wouldn't go into detail.