Costco tightens return policy enforcement

Costco is tightening enforcement of its famously generous return policy as retailers absorb a growing bill for return fraud and ‘friendly fraud’—customers exploiting lenient terms as a kind of informal rental program.

The Independent reports that Costco staff are increasingly requesting additional proof of purchase for certain returns and that managers may check how frequently a member returns items, citing reporting from Cleveland.com. The anecdotes are familiar because they are viral: Christmas trees returned after the holidays, dead plants, half-eaten food, even couches allegedly brought back years later. What used to be marketed as “no questions asked” is being re-priced as “questions, eventually.”

The macro number is not trivial. The Independent cites Appriss Retail and Deloitte estimating fraudulent returns and claims cost US retailers about $104 billion in 2024. That is not a rounding error; it is a parallel tax on honest customers, paid through higher prices, tighter rules, and more surveillance at the counter.

Costco’s model makes this especially interesting. Membership retail is a contract: customers pay for access, and in exchange they are promised low margins and high trust. A lax return policy is part of the brand—an implicit warranty that lowers perceived risk and supports high-volume purchasing. But when a subset of members arbitrage that trust, the policy stops being customer service and becomes an unpriced insurance product.

The predictable corporate response is not to admit the policy was mispriced, but to add friction: documentation requirements, pattern detection, and discretionary manager review. That may reduce abuse, but it also erodes the simple price signal that returns are supposed to provide. In a functioning market, a return is information about product quality or fit. When returns are treated as a behavioral risk category, the signal gets mixed with enforcement noise.

Costco is also pushing more ordering into its app for custom cakes and deli trays, The Independent notes, replacing paper forms with digital workflows. CEO Ron Vachris framed the shift as removing “clunky” processes and better integrating physical and digital operations. The other obvious benefit is auditability: digital orders and identities make it easier to verify transactions and spot patterns.

The story shows that ‘generosity’ in mass retail is never charity. It is a pricing strategy that works until it is gamed—then the response is more monitoring and more gatekeeping. Return fraud doesn’t just steal from a corporation; it invites the kind of low-grade control systems that end up applied to everyone.