Costco's ridiculously liberal return policy

When you read Costco’s return policy, it’s pretty extraordinary.

For instance, check out the rules governing electronics:

The following must be returned within 90 days of purchase for a refund: televisions, projectors, computers, cameras, camcorders, iPOD / MP3 players and cellular phones.

That means you could, for example, buy a laptop computer or a camera, take it on a full summer vacation, return it, and not even pay a re-stocking fee. That’s one liberal return policy.

But what’s even more remarkable is what the policy doesn’t say. Those electronics listed above are restricted.  What about everything else that isn’t mentioned? Patio furniture, clothing, tools, etc?

Those, it turns out, have no set time limits.

So, with the exception of perishable goods, you can theoretically sleep on a mattress for two years, decide it’s not as firm as it ought to be, and haul it back in; buy a living room chair, get married, learn your spouse hates your taste in furnishings and sheepishly bring it to ‘Returns;’ use a treadmill till your knees wear out, and walk it back in. And so on.

Not that many of Costco’s 55 million worldwide members do these things. If they did, chances are the giant warehouse would have to change the policy. But still, it’s comforting as a consumer to know you have that option. And, not incidentally, it buys Costco a lot of good will.

(A similar policy, by the way, exists at Costco’s main competitor, Sam’s Club, although Sam’s offers considerably less leeway on cell phones and refrigerators. In comparison, Walmart’s policy, which offers 90-day returns on many items, but only 15 to 45 days on electronics items, seems positively tight-fisted.)

People don’t abuse the return policy, according to Sally, a chirpy and enthusiastic customer ‘resolution agent’ we chatted with over the phone. Her and the company’s reasoning falls along the lines of, ‘you belong to a club. So stealing from it would be like stealing from yourself,’ Sally says.

Also behind the policy is Costco’s commitment to prioritizing the member. “If we are giving them this level of customer service, they’ll be returning to us. It’s not just a matter of taking money from us,” she says.  When describing the warehouse’s attitude towards treatment of its members, Sally the rep even uses the words ‘kings and queens’ without, somehow, making it sound wretch-worthy.

Costco’s return policy gets slightly tougher after two years, at which point it requires a manager’s sign-off. And, of course, items have to be returned in reasonably good condition.

Ok, but if you get out of hand, you go on a list

Costco keeps track of who returns what, and occasionally flags a chronic abuser. But even these members are handled with what might be considered a slap on the wrist. Sally says that a typical ‘abuser’ might buy $24,000 worth of merchandise in a year, and return $20,000 worth of the goods that same year. That member might be prohibited from purchasing electronics or other big-ticket items for six months or so ‘but still be allowed to shop for other merchandise.

And the policy is open for modifications. For video game systems, such as Wii or Playstation, Costco has noticed an uptick in returns that coincides with the release of newer versions of the games and is keeping an eye on that.

Costco is the third largest retailer in the United States, and ninth largest in the world, and while one can’t underestimate the world’s need for packages of 20 rolls of toilet paper and 1000 Ibuprofen pills, clearly the returns policy is working for both Costco and its members.

There’s one more benefit about having a generous returns policy that goes unsaid: when a customer returns an item, flush with money in their pocket, there’s a pretty good chance they’ll say to themselves, “As long as I’m here…”

A customer who has returned something is a customer who has returned to your store.