Costco’s low prices are one reason we are big fans of the warehouse store. Their generous return policy is another reason why Costco is the first stop for our purchases. Over the years Costco has tightened up their return policy somewhat — now, shoppers have just 90 days to return electronics goods such as televisions, computers and digital cameras but their return policy on other merchandise remains very generous.

Last year, I had purchased a pressure washer at Costco and ended up using it around the house less than a dozen times. Over the weekend, I found that the water inlet into the pressure washer was broken. The manufacturer offers a 1-year limited warranty but I did not keep the original receipt or register the product and in any case “limited” likely means a long list of exclusions buried in the fine print.

I thought it is worth a try to put the washer into the original packaging, take it to my local Costco, explain that it is broken and ask if they’ll provide me with a refund. I wasn’t very hopeful considering that (a) I did not have the receipt and (b) it was almost certainly more than a year since I purchased it. To my enormous surprise, Costco took the washer back and provided a full refund even though it turned out that it was purchased 15 months back.

It is a rare business that tries hard to provide customer satisfaction these days. You can find so many instances of businesses trying to hide behind the fine print on Ellen Roseman’s blog. But, generous return policies may not be just altruism on Costco’s part. After all, a satisfied customer is more likely to stay loyal and put in a good word for you. Being nice to customers is just good business.

This article has 27 comments

  1. In addition to treating their customers well, I’ve heard that Costco treats its employees well.

  2. I agree that Costco offers excellent return policies, and the products they carry are usually high quality.

    It is worth pointing out however that Costco’s prices are NOT always low. In fact, the prices on most of their grocery items are quite high. I suspect they have maintained their reputation for low prices by fooling their customers with unusual package sizes that make it difficult to calculate the true cost of the product. Don’t believe me? Take a trip to your local Costco this weekend, calculator in hand, and figure out what you’re actually paying for groceries.

  3. CC – delighted that Costco works for you, and the good returns policy definitely is icing on the cake.
    Like ChrisR, we’ve just found CostCo not worth it for us. If you want to stock up on standard branded goods, then by and large their prices do seem better (and probably with coupons even more so). But whenever we’ve checked on basics, we’ve found that a) there are some things we want they don’t have, so we’d have to make a 2nd trip, and b) if you factor in store brands, smaller volumes, just isn’t worth it, especially for a small family.

    Your post prompted me to check on 2 higher ticket items I’m planning to buy shortly. I checked costco.ca, which may not be showing the full selection, but again the prices don’t seem to match up well against the sources we are intending to buy from. (In addition, the sources have more selection and we will probably buy something slightly different).

    – Canon EOS Rebel XS w/18-55mm IS & 55-250mm IS – $799 at Costco.ca, $699 mail order at Simons Cameras.
    – 30″ range hood – $599 Ancona at Costco.ca, very similar to a $589 Hurricane at Universal Appliances in Ottawa

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  5. Been with Costco quite a long time. We really like it as we find their products to usually be of very high quality for reasonable prices. I have found I can usually get a better product for about the same price as elsewhere; often cheaper, sometimes a bit more expensive but its a better product. I do agree with ChrisR on the expense of groceries, Loblaws has really started discounting groceries in our local store to compete with the new Metro that recently opened. Not really sure how Costco can maintain that return policy with people returning 15 month old pressure washers. Where is the line drawn? What if it was 60 months later? Five years of use on a pressure washer and they will take it back and give you a full refund?? I’ve read that actualy happens!!! I guess it is the minority of people taking full advantage of the policy

  6. I`m in the Cult of Costco Shoppers as well. To get an even better deal, I go at the beginning of every week and use their coupon handouts like a mini flyer. If there`s something I like that`s already at a low Costco price and then $2-$5 cheaper, I stock up on it.

  7. Canadian Capitalist

    @Michael: I’ve heard that as well. It must be true because I see a lot of long-term employees at Costco.

    @ChrisR, @Houska: I’ll agree that Costco isn’t for everyone. Electronics at Costco tends to be higher priced than FutureShop or BestBuy. But if you buy when Costco gives out coupons you may be able to get a very good deal. Not all groceries at Costco have the best price but for the items they do, we buy at Costco (For example, 2% milk: $3.99 and Homo milk: $4.79 are the cheapest around where I live). Yes, that means another trip to buy produce but we have to do that anyway because fresh produce at our local Loblaws is consistently disappointing.

    I’ve never purchased through Costco.ca, so I checked the price of the pressure washer we recently replaced. Store price: $169.99. Costco.ca price: $179.99. You can’t draw an inference with one observation but I wonder if, on average, the website prices are higher than at the store.

    @James: IIRC, the official policy is that Costco will provide a full refund up to one year. I don’t know why they let this one slide — maybe they felt that the item looked brand new and I was returning it only because it was broken?

    @Tom: We do exactly the same thing. Things like soap, toothpaste, laundry detergent can be stocked up when they hand out coupons.

  8. This is 3rd hand information, but a friend of mine once witness someone returning an opened frozen pizza at Costco.

    • Canadian Capitalist

      @slacker: Reminds me of the Sienfeld episode in which Kramer tries to return a half-eaten peach to the produce store. Perhaps, this is another case of life imitating art?

  9. i’ve never seen that costco advertises themselves as the lowest prices around. they have excellent produce and meats, cheeses and some food items are only made for costco. my membership pays for itself on soymilk alone.

    where i live the cheapest of the cheap cheap groceries are found at stores like real canadian superstore. a store that is constantly dirty, has enormous till lines and has yucky produce. you’re always bound to be in a ‘price check on aisle 4’ line up as ppl battle to save an extra 15 cents.

  10. I love Costco mostly for their return policy… We had an office printer that we had purchase online at costco (over $2000) that broke down after 2 years of use – they returned it without box or original receipt!

  11. Don’t get me wrong, I love Costco, but it is the only store I know where you go in to buy a bag of milk and come out spending $200.

  12. Whether you’re lucky or you’re good, either way, nice story! :)

  13. Nice to hear you got such a great deal CC. I’ve only actually been in Costco once since there isn’t one in the small town I live.

    This story brings up a much more interesting question- Just how good should a store’s return policy be? If stores get too lenient on their return policy then they just end up getting screwed by crooks and scammers. If they’re too tight, people don’t shop there because they can’t return anything. Where’s the line?

    If I was a shareholder of Costco, I’d be a little upset with this story. You bought the thing 15 months ago and returned it without a receipt? I understand repeat customers are important, but maybe you got a little too good of a deal. What does everyone else think?

  14. Canadian Capitalist

    @Michael: Yep, same here. I just went in the other day for routine groceries and came out with a portable external hard drive. That’s Costco’s aim: get you in the store and convince you to buy stuff you probably don’t need! :)

    @Financial Uproar: First off, all your purchases are logged in Costco’s database. That’s how they knew (and let me know) it’s been 15 months since I purchased the item. I thought it was just over a year but wasn’t entirely sure exactly how long.

    Costco is an enormously profitable business and their extra-long return policy and above market wages must be good business. After all, there are not many retailers that went competed with Wal-Mart and could claim to be winners.

  15. I have been a member at Costco for some five years.

    Now I am no fan of shopping however I do accompany my better half when she goes to Costco.
    I am not really sure why but that store pushes all the right buttons in me.

    From their wide selection of electronics to the constant changeover in tools/yard equipment/housewares keeps me interested.

    They do have decent prices for good quality and its true, you never leave without spending a minimum of a hundred dollars.

    But I do like the store.

  16. Costco also has the cheapest propane in southern Ontario. I BBQ a lot, all year round and the savings in propane covers a good portion of the membership costs.

  17. Why are people like “Financial Uproar” such prudes. Costco is a multi-billion dollar multinational corp. I’m sure their number crunchers have factored in antipicated losses from returns to their bottomline as well as how much their popular return policy helps their bottom line in terms of attracting and retaining members who pay a nice annual fee. Enjoy the return policy if your a consumer and if you’re a shareholder then enjoy their success as well. Some people will complain about everything and anything. I’m just grateful.

  18. Well “Fred”, I like to look at the world critically instead of just accepting things the way they are. I thought it would be an interesting thought exercise to discuss whether this return policy was perhaps a little too generous. CC brought up the excellent point of every purchase being linked to your membership account, something I hadn’t thought of. I’m hardly complaining, I’m just asking “why is this thing like this.” If that makes me ungrateful, then I’m proud to be.

  19. To Financial Uproar, I got to agree with Fred in terms of Costco thinking big.
    If they have a generous return policy, then customers will feel quite pacified to buy large ticket items without apprehension if something goes wrong.
    Its nice to have the store giving you a back door if any issues arise without haggling.

    Also, as the first poster Michael James correctly stated, Costco is good to their employees.
    The turnover is very low and employees are compensated very well compared to anyone in the retail indusry.

    And now, our local Costco has recently added a gas station that prices out anywhere from two to six cents a litre less than any other station in town.

  20. i’ve tried to buy electronics at places like ncix and newegg, but their return policy turns me off. restocking fees, must be unopened blah blah blah… i’m sure their number crunchers have factored in the lost sales due to their policies.

    in the end there is a store for everyone, which i am happy about.

  21. Canadian Capitalist

    I remember reading somewhere that large retailers have a return policy because customers are more inclined to buy items in their store if they know that they have the option of returning it later. Apparently, having a return policy results in higher sales. I wonder if a return policy as generous as Costco’s also has a similar effect. After all, so many shoppers seem to enter Costco intending to pick up milk and end up spending $200. I’m willing to bet that Costco has done a cost-benefit analysis of its return policy and has decided to keep it the way it is.

  22. @Canadian Capitalist
    Prices are higher at Costco.ca because they include shipping…

  23. As I understand it, the generous return policy of big box stores is mostly because their agreements with their suppliers stipulate that any item that is returned is deducted from what they owe the supplier. Have you noticed that most things now have notes pleading to call the manufacturer before returning an item? Costco loses no money on returned items; it is the manufacturer that is taking the hit.
    They also pay their suppliers long after receiving and selling the goods, so they collect the money from the consumers and have 90+ days before they have to pay the supplier. With their volume, mark-up is only icing on the cake in terms of profit.

    • Canadian Capitalist

      @jack: If that’s how returns work, it makes perfect sense for Costco to have a generous return policy. After all, anyone can afford to be generous when someone else picks up the tab…

  24. To Jack, its only fitting the manufacturer takes the hit, after all most returns are because of malfunctions.

  25. Regarding cheaper in-store pricing: we bought an aluminum patio set. Online price was $500. In-store was $360. That seems like a big difference to be accounted for by shipping alone. Also, at the time, I couldn’t find any all aluminum sets in Ottawa for anywhere near that price.

    Also, I bought the water filled rowing machine they sell at costco.ca. This one we did buy online. It was $400 less than the next cheapest Canadian vendor I could find, and $100 cheaper (before considering shipping) than I could find at any USA vendor.

    Like people are mentioning…I guess it just depends on the item.

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