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How does Costco afford its return policy?

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AeroEngy said:
Costco's return policy is the awesome ... it is sad that some people abuse it.

The return policy used to not have a time limit on any product with a full refund of the original purchase price. I know a guy who bought a Pocket PC for about $400 had it for about 3 years then when it stopped working took it back with no receipt and they gave him his $400 back.

People used to buy TVs and do the same thing until they changed their policy on certain electronics.

I have friends who work for Costco and the have told me of people returning dead flowers after a couple weeks or half eaten bread. They just roll their eyes and give them their money back.

I have used their return policy only twice, both times for Xbox360s. The first one was purchased when their policy was still unlimited but returned after it switched to 90 days (2 years later). I didn't want them to think I was trying to cheat them so I called and asked if it was ok. They said no problem. Then about a year after that my second one broke. So I looked at the electronics policy and it did not call out game consoles ... so I called again and they said no problem just bring it back. I did feel a little bad about it ... but they were more than willing to take it back.
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Those doing the returns due to a broken item were more or less not abusing the warranty...it was those 'upgrading' every 3 months or so their TV, laptops, etc that really killed the deal.
 
I can tell you sure, if I was a manufacturer, my products would not be in Costco. Who wants back products you can not resell ? ? And I agree, if something fails within a reasonable time, say 1 or 2 years, then a refund or exchange is a good idea. After that or the factory warranty expires, you should be out of luck trying a return for a refund or exchange.
 
bruceb said:
I can tell you sure, if I was a manufacturer, my products would not be in Costco. Who wants back products you can not resell ? ? And I agree, if something fails within a reasonable time, say 1 or 2 years, then a refund or exchange is a good idea. After that or the factory warranty expires, you should be out of luck trying a return for a refund or exchange.
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Manufacturers make plenty of money selling to Costco even with the returns, that's why they sell thru Costco. Most of those returns are refurbished and resold anyways.
 
I love Costco, they treat employees well, they have a CEO that gives a damn about more than just the bottom line and they treat customers like they actually matter. Aside from all that, they will sell you a hotdog and a drink for $1.50.
 
I've been shopping at Costco since 1983, used to go to their very first store which is in Seattle. Costco was founded in Kirkland, WA, which is on the other side of Lake Washington, opposite of Seattle. That is where the "Kirkland" store brand name came from.

Anyway, Costco rarely sells crap, they are known for having high quality items in their stores which helps cut down returns too. I talked with someone once who worked in their corporate offices, and they said companies are dying to get their products into the Costco warehouses. Even a small company can instantly go nationwide if Costco accepts their merchandise, which is a process unto itself as Costco has strict requirements for allowing products into their stores.
 
MixMasterTang said:
Actually look at their financial statements, they make around a 1.1 billion dollar profit a year while taking in 1.5 billion in Membership fees. Between the returns, employee salary/operating costs they actually lose money overall on the products they are selling and are only in business because of the membership fees.
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I am pretty sure that profit figure is their net and not the operating income figure. I think that figure is more in the 1.7 billion dollar range. Meaning they would still make a profit without the memberships albeit much smaller.
 
I had to use it once. Projector died on me and manufacturer was unresponsive even though I am still under warranty. So I returned it. Costco lady thought I was going to buy another one that is on sale. I said no, it doesn't work and I tried to have manufacturer take care of it but they did not.
 
xBiffx said:
I am pretty sure that profit figure is their net and not the operating income figure. I think that figure is more in the 1.7 billion dollar range. Meaning they would still make a profit without the memberships albeit much smaller.
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ended(1)
Aug. 29, 2010
(52 weeks)

RESULTS OF OPERATIONS
Net sales . . . . . . . . . . . . . . . . . $76,255
Merchandise costs . . . . . . . . . 67,995
Gross Margin . . . . . . . . . . 8,260
Membership fees . . . . . . . . . . . 1,691

Operating income . . . . . . . . . . 2,077
 
They also change what they stock regularly and takes things out of circulation quickly if they don't sell well or get returned a lot. Much more than any other big box store I've seen.
 
torpid said:
They also change what they stock regularly and takes things out of circulation quickly if they don't sell well or get returned a lot. Much more than any other big box store I've seen.
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I think this is part of Costco's business model: They develop a feeling among customers that what is there today, might not be there next time you visit. SO BUY BUY BUY!
 
davmat787 said:
I think this is part of Costco's business model: They develop a feeling among customers that what is there today, might not be there next time you visit. SO BUY BUY BUY!
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Most of the store is constant...all stores have 'end cap' items that they get a good deal on and won't have again. Costco operates on a larger buying level...
 
bruceb said:
I can tell you sure, if I was a manufacturer, my products would not be in Costco. Who wants back products you can not resell ? ? And I agree, if something fails within a reasonable time, say 1 or 2 years, then a refund or exchange is a good idea. After that or the factory warranty expires, you should be out of luck trying a return for a refund or exchange.
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You'd probably do well to read the section from ECO101 where they talk about volume and cash flow.
 
I've never abused the Costco policy, not once. I have returned things before but usually it was the next day. Never food or anything perishable. Once I was buying so many DVD's, faster than I could watch them, and I bought a movie at Costco and found out I already had it. So I just went back to return it.
 
I feel bad for the manufacturer and store, but then again, they agreed to it, which I think is stupid.

I saw a 32" or 37" LCD on a trolley at Costco by the returns area once. Thing was completely covered with dust with no packaging. I bet it was defective...
 
I returned a bunch of raw hamburger patties right while I was still at the store. My wife mistakenly bought way to many patties for a small party we had and as soon as I got to the cart, before we left the store and saw that I pointed that out. Since the return desk is on the way out to the exit we stopped by and asked if we could return them because of the mistake. They said sure and refunded us our money and then threw them right into the garbage.

I was like "WTF!!??!?!" "WHY?!?!?" and he said they're not allowed to put it back out for sale after it's been sold.

WTF? Shit man if you'd of told me that's what you were going to do with it before just doing the refund I'd of said screw it and kept them and not done the refund. Killed me to see that much waste.
 
lokiju said:
I returned a bunch of raw hamburger patties right while I was still at the store. My wife mistakenly bought way to many patties for a small party we had and as soon as I got to the cart, before we left the store and saw that I pointed that out. Since the return desk is on the way out to the exit we stopped by and asked if we could return them because of the mistake. They said sure and refunded us our money and then threw them right into the garbage.

I was like "WTF!!??!?!" "WHY?!?!?" and he said they're not allowed to put it back out for sale after it's been sold.

WTF? Shit man if you'd of told me that's what you were going to do with it before just doing the refund I'd of said screw it and kept them and not done the refund. Killed me to see that much waste.
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waaay cheaper than liability.
 
I bought a package of hot dogs, and in a few days they went bad in my fridge and I returned them for a refund.

Then I found my fridge had a problem, so it wasn't Costco's fault. I went back and told them I wanted to pay the money back, and they said they couldn't take it.
 
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