Deception is a huge problem for many businesses and in particular Costco returns fraud was rife for a while, so much so that the company decided that they needed to do something about it.
To understand how Costco returns fraud occurred, you need to know a little background information about the process. Many big stores, especially department stores and discounters, have contacts with wholesale liquidation sources to take excess goods and returns off their hands. They end up with excess stock for a variety of reasons, from lack of demand by customers, to overpricing and geographical factors. It’s part and parcel of their business, and something which is counter factored into their pricing strategy.
Returns are a slightly different situation. Costco has a fairly lenient returns policy which means that they will take back unwanted or damaged items even without a receipt and this is where Costco returns fraud can occur.
Overstocks and returns are sold in bulk at greatly reduced prices to wholesale liquidators, the problem is that if the liquidator simply on sells these items, there is nothing to stop the buyer simply going to Costco and returning the item again for a full store credit. It’s a bit of a catch-22 situation, Costco don’t want to change their returns policy, but they also don’t want to fall victim to this Costco returns fraud which can cost them millions.
In actual fact, when your wholesale supplier gets a contract to deal in Costco store returns surplus, they have an obligation to remove all markings from the packaging so that this fraud can’t occur. This is also known as label sanitation.
For you as a buyer, this process can make it difficult for you to ascertain where the liquidated products have come from, as your wholesale supplier will not be allowed to tell you directly that they are Costco store returns surplus items.
Of course, this can create a lot of work for the wholesale supplier, as removing all labels and debadging brand names which are Costco-specific can take much time, but it is part and parcel of why they are able to buy the goods so cheaply in the first place.
For you as a retailer, you can get some great discounted merchandise to on sell if you use this process to source your products. Additionally, even when markings are removed, you can often still identify products as being from Costco, which means that your customers will now that they are buying a good high quality product from a reputable store.
If your wholesale supplier has a contract for Costco store returns surplus and deals in items such as electronics, you may find that there are small markings on the labeling stating that they are salvage items. This doesn’t affect the quality of the product, but simply stops Costco returns fraud from occurring. In this day and age when people are trying to get the best value for money possible, this will be seen as a minor point and will not stop them from making a purchase if they find that they are getting a really great deal.