What is your return/exchange system?

What is your return/exchange system? I have been sweeping this under the rug for long enough, and I have decided to finally deal with it. I don't have a system for returns or exchanges. Why? because it's too expensive. It costs me more to pay for return shipping that it does to just let the customer keep the product AND get a refund. Obviously, as you can imagine, this isn't ideal...

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