Direct marketers have always confronted slightly higher return rates than department stores even though they possess loyal customers. In November 1997, L.L. Bean had to begin tightening its liberal customer return policy. Some shoppers began returning articles purchased at garage sales. One customer even tried to return work clothes dug out of the closet of a deceased relative. Often merchandise comes back in crushed boxes, some past its sell-by date, some damaged, some without original packaging or instructions, but some in a good enough condition to be resold.
Manufacturers often assign personnel to the receiving function thus incurring additional costs.
Items typically languish in unopened boxes in the factory warehouse for months as they pass their sell-by dates. This results in the overstatement of assets since the balance sheet indicates the transfer to inventory at the original price when, in reality, the returned goods may not be salable at the original value. The retailer or manufacturer has the option of reselling the items by placing them back in inventory or to recycle them into reusable raw materials. The major decision at this stage is determining if the recycling costs exceed the value of the recovered materials. If the factory is backlogged with orders then recycling usually waits, thus reducing inventory turnover.