Deception can be such a big problem for businesses. costco returns fraud was such a serious incident that the company had to take action to correct it.

Understanding the process is key to understanding how costco returns fraud could have happened. Large stores, department and discount stores in particular, use wholesalers
to help sell of their excess goods and take care of their returns. Having too many in stock of a particular item can be caused by anything from a lack of demand by consumers to overpricing to geographical location. The amount of overstock has an effect on how a business prices their goods.

Returns work just a little differently. For costco, returns are accepted for anything from them being unwanted to being damaged, even if you do not have a receipt. This is what opened the door to costco returns fraud.

Both overstocks and returns are priced down greatly for sale to wholesale liquidators. This creates the problem of possible repeat returns. If a person buys a returned item or overstock item from a wholesaler, they pay less than they would if they bought it at costco. They can then return it to costco’s main store for a full store credit. Thus the costco returns fraud. This is were costco is caught in a dilemma. They like the return policy they have in place, but they also don’t like the prospect of losing millions with costco returns fraud.

It is a fact that when a wholesaler receives products through a contract with costco store returns surplus, it is their responsibility to remove any and all costco packaging marks in order to prevent this fraud from occurring. The term used to describe this process is “label sanitation.”

As a buyer, label sanitation can make it very hard to determine where the liquidated products originated, and your wholesaler will not be permitted to disclose that they are costco store returns surplus.

Having to perform label sanitation, by removing any costco-specific identification can be very time consuming, but this is part of the reason they can be bought so inexpensively.

For the new retailer, if you choose this wholesaler as the source of your product, you get wonderful discounted products. With experience, even after label sanitation, you are able to tell that the products originated from costco, and you can use this to your advantage by letting your consumers know that they are getting quality products from a respectible store.

electronics sold as costco store returns surplus, often have small marks on the labels that indicate they are trade goods. Without any affect to how good the product is, these markings stop costco returns fraud from happening. With the economy being down, and people looking for the best deals on quality merchandise, these markings will be overlooked and forgotten.

Leave a Reply