Graded Homework

Module Five – Ethical Dilemma – Money-Back Guarantee, No Questions Asked
TradeSmart Inc. operates 1,200 discount electronics stores throughout the United States.
TradeSmart has been quite successful in a highly competitive industry, primarily because it has
been able to offer brand-name products at prices lower than can be found at other discount
outlets. Because of its size, TradeSmart can purchase bulk inventory directly from
manufacturers, and the economies of scale it derives from such purchases can be passed on to
consumers in the form of lower prices.
In addition to low prices, TradeSmart offers an extremely liberal product return policy.
Customers are permitted to return products for virtually any reason and with little regard to the
time period covered by manufacturers’ warranties. In fact, just a few days ago, a customer
returned a digital pager that was more than two years old. TradeSmart gave the customer a full
refund, even though the pager appeared to have been run over by a car, which, if true, clearly
would have voided the manufacturer’s warranty. In another instance, a customer was given a
refund when he returned the camcorder he had purchased three days earlier to record his
daughter’s wedding festivities. The customer could not describe the camcorder’s malfunction—
he said “it just didn’t work right.” The customer refused an offer to replace the camcorder;
instead, he insisted on a full refund, which he was given.
The manager of the customer relations department suspected that the customer had
“purchased” the camcorder intending all along to return it after his daughter’s wedding, but
TradeSmart’s return policy does not dissuade customers from this practice. According to Ed
Davidson, vice president of customer relations, TradeSmart is willing to stand behind every
product it sells, regardless of the problem, because the company believes such a policy is
needed to attract and keep loyal customers in such a competitive industry. The company’s motto
—“Customer Satisfaction Is Our Business”—is displayed prominently throughout TradeSmart
stores.
With such a liberal return policy, how does TradeSmart keep its prices so low? Actually,
TradeSmart ships the returned products back to the manufacturers as defective products, so the
return costs are passed on to the manufacturers. According to the manufacturers, only one out
of every six products returned by TradeSmart actually is defective. But when the manufacturers
complain about such returns as used products or products that have no mechanical problems,
TradeSmart reminds them that the company does not have a service department, so its
personnel are not knowledgeable concerning the technical circuitry of the products—the
products are returned to the manufacturers with the customers’ complaints attached.
TradeSmart’s inventory manager would contend that the company does not intentionally
deceive or take advantage of the manufacturers’ return policies and warranties.