February 26, 2007

Costco Returns

KING5 News reported that Costco altered the return policy on electronic merchandise (iPods, HDTV televisions etc.).

Previously, a customer could return an iPod anytime after purchasing the item.

Due to rampant fraud, Costco changed the return policy to a 90 day window.

Is this an acceptable compromise, or is this a greedy company protecting razor-thin gross margins?

I think this is an acceptable compromise.


  1. I think this is a good policy. While researching a TV I was thinking about buying from Costco, I came across a lot of postings from people who were buying big TV's, keeping them for a year, and then returning them only to turn around and buy the newer/better/cheaper sets that had just come out.

    That's not a good deal for the company (especially one like Costco that seems to do a good job on keeping prices low and quality high), or the members of Costco who might have to absorb the cost of that practice with higher membership costs.

  2. Anonymous6:18 PM

    Well, that's quite a deal, getting a TV free for one year, huh?

  3. Anonymous9:51 PM

    Hi Kevin,
    We do not have a costco near us yet(coming soon), so I am not clear---is the "return anytime" printed on the receipt or anywhere in the store? Or was this just an unspoken policy to accept any return?
    Reason I ask is because if a publicized policy, than this would be one time where I disagree with you. Otherwise disregard this post! :-)
    You see, if publicized in any way, the policy is a way of attracting sales. If a Sony TV sells the same price at BestBuy and Walmart as it does at Costco, then the deciding factor is warranty/service. Obviously Bestbuy charges for its service plan, while Walmart has a 30 day then go to manufacturer. Who wouldn't pick Costco over that?
    Sears did same thing as Costco a few years ago by implementing a 15% restocking fee on most major purchases and phasing out lifetime Craftsman warranty. The difference from Sears and Costco(as I read the article) is that Sears didn't affect existing craftsman owners, while Costco put 2 year limit on existing deals.
    I don't argue a 90 day policy--tis smart and necessary. However, I do believe that when Costco put policy in effect it 1. knew the risks, and 2. believed sales advantage outweighed the risks. When it didn't, it now reneges on the promise, if this promise was publicized that is. This could open way for class action law suits in worst case, and in best case, lost sales that are balanced out by fewer accepted returns.
    So in spirit of being positive, how could Costco compensate the existing loyal customers now told their "warranty" expired on that expensive tv they bought?
    Does Costco have an "elite" rewards program or levels of membership? Maybe a discount toward a new tv/electronic device?

  4. To my knowledge, Costco has different levels of membership.

    I believe Costco had unlimited returns on electronics as a general policy.

    Going forward, on all new purchases, I believe they switched the policy to 90 days for electronics. If you purchased electronics before the date of the change in policy, I believe they are going to honor the old policy.

    Good comments about Costco losing a competitive advantage verses other retailers selling a brand at a fixed price.


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