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Costco gets a lot of returns. The retailer keeps quiet when it comes to numbers, but according to Marketing Scoop, 15% to 20% of purchases end up as returns — two to three times the returns of other major retailers. Costco netted $269.9 billion in 2025. If the estimates are correct, that means $40 to $54 billion worth of merchandise was returned.
Why does Costco get so many returns? Simple: The retailer has a generous return policy. You could, technically, return a moldy, three-month-old rotisserie chicken — though you might become the laughing stock of the local break room. Admittedly, Costco’s policy comes with fine print and it isn’t as generous as Aldi’s Twice as Nice Guarantee. Still, for a retailer of Costco’s size, the policy is unprecedented.
Losing $40 to $50 billion doesn’t sound like a good business strategy, but Costco has built its brand on customer trust, and its generous return policy is one reason customers trust the chain. Besides, those returns aren’t a total loss. When you return an item to Costco, it gets sent to one of 12 massive processing facilities around the country. Employees at these processing facilities sort through over 1,000 returns a day, deciding the fate of the items. Unused items go back to Costco shelves; items with a little wear and tear go to third-party liquidators who resell them; safe, sealed food items get donated to charities; and some items get recycled while others get trashed. It’s all part of Costco’s plan.
What happens after Costco’s returns get sorted?
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Costco’s return warehouses are a little unusual in that most other retailers (particularly smaller stores) sell returns straight to liquidators. It takes time for employees to sort through all that stuff and not everyone is willing or able to pay for the extra hours of labor. For Costco, with its top-quality merchandise and higher-than-average rate of returns, it doesn’t make sense to sell perfectly good items to liquidators at a loss.
Roughly 70% of Costco returns go back to stores. If you’re familiar with Costco’s complex price tag codes, you’ll know how to spot returns on the sales floor. Items that end in .00 or .08 are likely returns. Not everything gets resold, though. Anything that could pose a health risk gets tossed, and some items end up in the landfill simply because they’re too difficult to recycle. Mega-retailers like Costco inherently create a lot of waste: Experts estimate that, on average, U.S. retailers toss around 25% of their returns. That statistic is scary enough to make you wonder about the morality of swapping that new-in-box coffee maker for a different color.
Still, Costco’s system has its perks both for the retailer and the environment. Costco’s returns have a good chance of being resold or refurbished since the chain’s high-quality products are less likely to break and easier to repair. Rest assured, that new-in-box coffee maker won’t usually end up in a dumpster. Costco has spent too much time and money perfecting the process.
