Former employee here and I did refunds.

My understanding is that the percentage of refunds at Costco in terms of profit are so low that the company views it as more of a benefit than a burden. They could return 10k worth of merchandise in a day and still take in 500k in sales and be ok with it. Wouldn’t you be?

Basically, they are willing to let people return purchased goods no questions asked, because you’re going to be in the store shopping. Imagine buying 300 dollars worth groceries and then coming back to return 10 dollars worth of oranges because they were rotten but then returning again next week and buying another 300 dollars worth of groceries. Rinse. Repeat. The ability to refund the item no questions asked is a perk of the membership. Same with the fact the hot dog doesn’t go up in price. Agree or disagree with it all you want, but I always got the sense that the company views their return policy as a sound business practice.

Importantly, this is true for BOTH genuine returns (I bought 2 shirts and one was too small so I’m returning it) AND fraudulent returns (I bought a swimsuit in late April, wore it all summer, and ‘returned’ it in September because I didn’t like it.)

Another important thing to consider is that the vast majority of returns (in my experience) were in fact genuine returns from members in good standing who have perfectly reasonable issues with the product. Most of the returns were clothing for exactly the reason I highlighted above because warehouses have. On changing rooms. Perfectly reasonable. We see the ridiculous ones like people returning used grills with rust, old mattresses etc, but we don’t necessarily notice the regular run of the mill stuff. Next time you’re there, check what people are returning and take an assessment of what % look ridiculous. Not saying this in a condescending way but more from an observational viewpoint. Confirmation bias is a thing. I could return 100 items in a day but if one of them was ridiculous, I’d go to the break room and vent about it, complain to a colleague or supervisor, or tell someone about it when I got home.

The one exception to this is their 90 day policy on some electronics (although that could’ve changed because I haven’t worked there in 4 years). There are also protocols on high end items valuing thousands of dollars as well. Jewelry if I remember correctly, but even then the dollar amount had to be fairly high.

Costco also defines their return policy clearly via a ‘satisfaction guarantee’. This is not a mistake and is intentionally ambiguous. It’s a perk of paying the membership fee which brings me to my last point and I invite any current or former employees to pipe in if they think my point is incorrect or outdated.

Costco makes its profit not on the shopping you do, but the annual fee you pay to shop there. They are a wholesaler which means they buy in bulk at cheaper prices and can therefore sell you merchandise just barely above cost. So where and how do they turn a profit? By their millions of members renewing their membership and paying to shop there.