One of the most appreciated aspects of shopping at Costco is the company's no hassle return policy. Bring it (whatever that is) back and the retailer will make good.
While club members are very happy with Costco's willingness to accept returns, there is a negative side for the retailer. The company has seen a number of product returns on more expensive consumer electronics, such as large-screen plasma televisions, because club members were having trouble with installation.
The result of all the returns has been lost sales and margin pressure as the company eats the costs associated with taking products back.
To address the situation, Costco has begun looking at an installation service for members purchasing consumer electronics.
"We are testing a concierge service which includes installation and so far it is working out well," said Costco's Chief Financial Officer Richard Galanti on a conference call with analysts.
"They (customers) want somebody to come in, wire it and hang it up and make sure it is working."
Costco getting into home installations may put added pressure on major consumer electronics chains such as Best Buy and Circuit City. In-home installations, reports Reuters, have been a source of profits for those chains.
Mr. Galanti did not say if the installation service would be rolled out nationwide but he did say, "As you might expect, the last thing we want to do is just change our return policy without trying everything else first, and that may be a little painful short-term, but that's where we're going to go."
Discussion Questions: What will an in-home installation service do for Costco's consumer electronics business? What will it mean for competitors in the same space?