I hardly ever shop at REI because there are no storefronts in my area and I shy away from buying my gear online--mostly because I have a great locally owned gear shop that suits my needs for everything except "Big 3" type items.
My local gear shop has a no-questions returns policy on new-in-package items, no time limit. For anything that's been used, they'll charge a restocking fee or suggest you consign it in their huge used-gear department. I think it's a very fair system, as the original purchaser recoups some of the original cost, minus the value of whatever use they got out of the product (rather than expecting a full refund on something that is no longer worth its MSRP). From my perspective, consigning saves me the hassle of maintaining an eBay/GearTrade account and shipping things all over the place when I want to upgrade my gear!
Likewise, the local bike and ski shops here do annual swaps where folks can bring their stuff, set a price, and find new homes for used bikes, skis, etc. It's a great resource for young folks, families with kids, or anyone else who wants to get into a sport but doesn't have the cash to buy shiny new equipment. It's similar in concept to the REI Garage Sale, only none of us go into it expecting a full refund on used items. I wonder if restricting their returns policy will reduce the volume of stuff for sale at the Garage Sales...
Plus, shopping local and trying things in person reduces the likelihood that you'll need to return items in the first place!