Costco returns in complex logistics and business

Costco’s restored warehouse in Monroe Township, New Jersey, looks like a busy ant farm. There is constant activity as workers unload trucks, stack pallets on forklifts, and move them to different parts of the facility.

Come here for more than 60 store returns and online orders from across the region. This place is huge: 860,000 square feet, or the size of 15 football fields. The workers stand in rows of conveyor belts. Judy Tino examines a plastic storage tank.

“So, unfortunately here, the lid is broken, so it’s basically 50% of the product,” she said.

She scans the bins, packs them, and sends them to a line where the liquid is sold to a third-party vendor. That’s where most of these returns go – even the seemingly new ones. Unused luggage with no tags and a perfectly good football in a torn box.

Although not everything can be saved. Tino picks up the bath mat. “See, there’s a stain right there, two stains in it, so I might as well just donate it,” she said.

The holidays are long gone, but retailers are in the midst of a holiday hangover: the season of returns. Because after you – the consumer – return the item to the store or mail it to the retailer, they have to do more. And it’s not as simple as putting things back on the shelf.

Teano handles more than 1,000 items a day, so she’s become a bit of a Costco encyclopedia. At some point, a blanket without a barcode rolls into the line and she knows exactly where to find it in her computer.

For Costco, this kind of knowledge is invaluable, because the store sells a huge variety of items and each item has its own return protocol.

“It is not a one-size-fits-all product. Everything you touch has a different story,” said Brandi O’Hara, the company’s director of returns operations. “Sounds like a taste of 31’s comeback.”

Take electronics: Most contain user data like a Spotify account or credit card number. Once recovered, they are either returned to the manufacturer or sold to a liquid processor that cleans the sensitive data. It means that any returned TV must be resold as an open box.

Other products have no resale value. For example, O’Hara said Costco donates all returned bikes because of liability issues.

“And until we hear that you can change toothbrush heads and still have this great toothbrush or, you know, other personal hygiene products, there’s no market for it.

Instead, it is recycled.

Finally, the abundance of products is not worth the hassle of testing. Why pay employees to unbox, plug in, and test if you can sell $30 coffee makers quickly and recoup some of the cost? In fact, most stores ship directly to liquidators without inspection. Only large chains like Costco are investing in their own returns technology.

“No matter what you do, it’s the cost of doing business, so how can we get more value out of that cost,” she said.

Price, because the return side of the business is about making money. The Americans They will return more than $800 billion worth of merchandise by 2022, according to the National Retail Federation. That is equal to the GDP of Switzerland.

O’Hara said reverse logistics — that’s the fancy industry term for returns — has exploded in online shopping.

“If I were to return online, I’d take more liberties. I’d order two vanities and see which one I like, which one goes with the floor,” she said.

According to the Reverse Logistics Association, consumers are up to four times more likely to return online purchases. That’s why many logistics experts think more retailers will start charging return shipping or refunding fees or eliminating generous return policies.

That won’t happen anytime soon at Costco, famous for its policy: unlimited returns regardless of condition or date of purchase, with some exceptions. “People use it,” Teano said.

“I’ve seen headphones that look like they’re completely broken in half. I once had a toaster bought in 2001, let it go.