The Costco returns warehouse in Monroe Township, New Jersey, looks a bit like a busy ant farm. Crews are constantly on the move as workers unload trucks, stack pallets on forklifts and move them to different parts of the facility.
Returns from more than 60 stores, as well as online orders from the region, are aggregated here. The place is huge: 860,000 square feet, or the size of 15 football fields. Employees stand on rows of conveyor belts carrying various items. Judy Teano examines the plastic storage bin.
“So, unfortunately, right here, the cap broke, so basically it’s 50 percent of the product,” she said.
She scanned the bins and sent it to the production line, where it would be packaged and sold to third-party sellers, known as liquidators. This is where a lot of returns go – even things that look brand new. There was an unlabeled unused suitcase and a perfect football in a broken box.
Not everything is salvageable. Teano picks up the bath mat. “Look, there’s a stain there, and this one has several stains, so I might have to donate it,” she said.
The holidays are long gone, but retailers are in the middle of a holiday hangover: returns season. Because after you (the consumer) bring the item back to the store or mail it, the retailer has a lot of work to do. And it’s not just about putting things back on the shelf.
Teano handles over 1,000 items a day, so she’s sort of the encyclopedia for Costco. Once, a blanket rolled off the production line without a barcode, and she magically knew exactly where to find it in her computer.
For Costco, this knowledge is invaluable because the store carries a wide variety of items, each with its own return agreement.
“It’s not for every product. Everything you touch has a different story,” says Brandi O’Hara, the company’s director of returns. “It’s almost like 31 Flavors Payback.”
Take electronics, for example: most contain user data, such as Spotify account or credit card numbers. After they are returned, they are either sent back to the manufacturer or sold to a liquidator who wipes the sensitive information. This means any TVs that are returned must be resold as open-box merchandise.
Other products have no resale value at all. For example, O’Hara said Costco donates all bikes returned with liability issues.
“Even though we feel like you can replace the toothbrush head and you still have this really good toothbrush, or you know, other personal hygiene products, there’s really no market for it,” she said.
Instead, it gets recycled.
In the end, many products aren’t worth the trouble of checking out. Why pay an employee to unbox, plug in, and test a coffee maker when you can quickly sell it to a liquidator for $30 and recoup some of the cost? In fact, most stores send returns directly to liquidators without checking. Only a large chain like Costco has invested in its own returns technology.
“It’s a cost of doing business no matter what you do, so how do we get the most value out of that cost,” she said.
Value because the returns aspect of the business is about getting money back. Americans will return more than $800 billion worth of merchandise in 2022, according to the National Retail Federation. This is equivalent to the gross domestic product of Switzerland.
O’Hara said reverse logistics — the industry term for returns — has proliferated with online shopping.
“If I have an online return, I tend to take extra liberty. I ordered two dressers and I wanted to see which one I liked and which one would fit my floor,” she says.
According to the Reverse Logistics Association, shoppers are up to four times more likely to return online purchases. That’s why many logistics experts believe more retailers will start charging return shipping or restocking fees, or cancel their generous return policies.
That won’t be happening anytime soon at Costco, known for its policy of unlimited returns no questions asked or date of purchase, with some exceptions. People do take advantage of it, Teano said.
“I’ve seen headphones that broke completely in half and they would return them. I once had a toaster from 2001. Let it be.”
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