Today’s Wall Street Journal has an article about returned items. The article describes a four-year-old service that keeps a database on people who return items at any one of the service’s retail clients. The article points out that returns are equal to 13% of retail sales. Returns come from ordinary customers most of the time, but there is plenty of fraud from employees, from people who wear the clothes and return them, and from scammers who buy on sale or switch tags. Of course, a database would be helpful.
One so-called consumer privacy group has complained about the service. The group clearly doesn’t understand business. Returns, especially excessive and fraudulent returns, cost consumers money, as I am about to explain with an example. Prices come down when returns are controlled.
I had a successful client in Los Angeles in the late 1970s. It was a gigantic wholesale club that had hundreds of thousands of members, many from Lockheed nearby. Customers were given a clipboard at the entry and the entire store was filled with samples and each sample had a number and a price on it. The customer wrote down the number of the product they wanted on the clipboard and at the checkout stand all the merchandise was immediately handed to the customer, delivered by automated equipment from the warehouse behind the wall of the checkout stand. 
I was hired because the owners wanted to sell the business. My job was to change the highly personal management of the owners into a standard corporate form. The prices at my clients' store were much lower than in retail stores because there were no floor sales staff, very small display costs and no shelf re-stocking to do.
One problem, I was startled to find, was that in the back of the sprawling business was another sprawling warehouse made up of many small buildings and containers. It was the fiefdom of a gentle elderly black man. It was all the returned items, slowly being sorted for shipping back to the manufacturers for credit. The returns section was growing steadily and no increase in the number of employees working on it did much to reduce the backlog.
A shipment of returned TVs would have be sorted by manufacturer and put in shipping crates with proper invoices. Almost all businesses have to handle returns this way. Arduous and costly work.
My clients' business was sold and I lost track of my clients who moved to mansions in Hawaii.
A few years later, Price Club emerged on the scene, outgrowing its origins in San Diego. The founder of Price Club, Sol Price, had been a founder of the “wholesale club” industry. Price Club was a spectacular success and is today known as Costco.
There are a number of innovations in retail sales that Sol Price introduced in his so called “wholesale clubs” but the most brilliant was the way he learned to handle returns. By the time Price Club was big enough to be important to manufacturers, Sol Price set up a loading dock policy.
When a truck loaded with Sony TVs backed up to loading dock, it wasn’t allowed to leave until it took all the TVs on the dock regardless of the brand of TV.
No physical plant was needed to sort or store returns. Returns went directly to the loading dock where they were constantly forced on all the trucks making deliveries. A truck delivering boxes of sporting goods, left with an assortment of open boxes of all the returned sporting goods from the previous day. "Take what we give you or don’t expect to unload what you are trying to deliver." 
Invoices to the manufacturers were sent out without regard to what was happening on the loading dock and the manufacturers paid according to whatever arrangements they had with Price Club.
Within a few years secondary markets had developed all over the U.S. to re-sell and trade the merchandise that was coming off the Price Club loading docks.
Solving the returns problem was a great contribution of Sol Price for which we all benefit when we get low prices at Costco.