Costco's renowned satisfaction guarantee and liberal return policy, which allows customers to return most purchases with no time limit, results in a significant volume of merchandise that the company must manage. To address this, Costco operates a wholesale liquidation auction program to dispose of items that cannot be restocked.
This program partners with B-Stock, a company that also assists retailers like Target and Walmart in selling unwanted inventory. Through B-Stock auctions, Costco offers a wide array of items, including apparel, electronics, major appliances, furniture, toys, food, and sporting goods. These auctions can feature both returned items and overstocked merchandise.
Participation in these liquidation sales is restricted. U.S. buyers must possess state-specific resale certificates, while international buyers need to provide proof of business. These requirements indicate that the auctions are not open to the general consumer.
Items submitted for auction are visually inspected at Costco's Returns Depot. Grades are assigned based on the item's condition, with items in original packaging receiving an A grade and those with damage or missing parts receiving a D grade. However, the items are not tested for functionality.
There is a caveat for those purchasing from these sales: items bought at Costco's liquidation auctions cannot be resold within a 5-mile radius of the original point of sale. This restriction aims to prevent arbitrage and maintain the integrity of its primary retail channels.
While Costco's return policy is marketed as risk-free, the company does monitor return activity and can revoke memberships for what it deems excessive returns, though the specific threshold for such action remains undisclosed.
Costco's return policy does have limitations. Most electronics, including TVs, laptops, tablets, cell phones, smartwatches, projectors, and major appliances, are subject to a 90-day return window. Additionally, certain items are non-returnable, such as airline and event tickets, gift cards, precious metals, cigarettes and alcohol (in some states), and custom-installed products. Employees have reportedly dealt with returns of items like mattresses after extended use, patio furniture after the summer season, dead Christmas trees post-holidays, and large televisions the day after major sporting events.