Deception is a huge problem for many merchants and in particular Costco returns fraud was rife with deception for a while, so much so that the company decided that they needed to do something about it.

To understand how the Costco returns schemes occurred, you need to know a little background information about the process. Many big businesses, especially department stores and discounters, have contacts with wholesale liquidation sources to take excess products and returned stock 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 retail business, and something which is counter factored into their pricing strategy.

Returns are a slightly different situation. Costco has a fairly forgiving returns policy which means that they will take back unwanted or damaged stock even without a receipt and this is where Costco returns fraud can occur.

Overstocks and returns are sold in volume at greatly discounted prices to wholesale liquidators, the problem is that if the liquidator simply sells these items, there is nothing to stop the buyer simply going to Costco and returning the product again for a full store credit. It’s a bit of a catch-22 situation, Costco doesn’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 are required to remove all Costco labels 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 hard 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 goods.

Of course, this can create a lot of extra work for the wholesale supplier, as removing all labels and debadging brand names which are Costco-specific can take a lot of time, but it is part and parcel of why they are able to buy the merchandise so cheaply in the first place.

For you as a retailer, you can get some great discounted products to sell if you use this process to find your items. Additionally, even when markings are removed, you can often still identifyproducts as being from Costco, which means that your customers will know that they are buying a good, authentic piece of merchandise from a reputable vendor.

If your wholesale supplier has a contract for Costco store returns surplus and deals in merchandise 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.