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It's been well-noted (or perhaps well-lamented) that Apple iPods that were personalized with an engraving cannot be returned to Apple for return or refund in any manner.

Apple's Return Policy clearly states:

RETURN & REFUND POLICY
...
Custom-configured products, including any personalized iPod, cannot be returned or exchanged.
...

Some would say that Apple offers the free engraving as a subtle and inexpensive way to minimize the number of returned iPods. From a business point of view, this is entirely understandable. The time and money to process returns and refunds is usually a major cost center for any company dealing with consumer products and services. It certainly takes more time processing a return than ringing up a new purchase. All the back-office processes that have to take place to track, transport, restock, and resell (as "refurbished") the returned item is, I'm sure, a cost companies would rather not have at all in the first place.

From the customer point of view, when that iPod ordering web page pops up with the inviting FREE engraving option, many people probably indulge the impulse to add the engraving -- especially when it's a gift to someone else. We're conditioned to think that "free" = "good". However, with iPods it's more like "free" = "un-returnable". The only alternative then is to re-sell the iPod on your own or just keep it and use it.

However, all is not lost. The return policy is strict to be sure, and you won't get away scot-free but just realize that if you treat the return process as a negotiation, you'd be surprised what can happen.

First let's look at it from Apple's point of view again. Apple's margins on iPods are probably in the 30-50% range. I don't have a specific source to cite at the moment, but I recall reading their margin on Nanos might be upwards of 50%, although that is probably based purely on parts alone. If we throw in marketing, distribution, etc. let's say, for the sake of discussion that their margin is 30% on all iPods:

So assuming roughly the same level of costs for packaging, transporting, and stocking the iPods (for example, the Shuffle and Nano come in the same size display case), Apple comes out ahead in terms of absolute number of dollars if they sell a more expensive iPod than a lower-end iPod. So a sale of a Nano vs. a Shuffle would be preferable, and an Touch vs. a Nano, and so on.

Let's Make a Deal

So you probably see where I'm going with this already. To make a deal both sides must feel like they're getting something out of it. So while you cannot RETURN a personalized iPod and get your money back per se, you can get it exchanged towards a bigger iPod.

How do I know this? Because I've done it. We called our local Apple store and explained our situation. After a few minutes we were granted permission to exchange a new iPod Shuffle (engraved with someone's name, no less), at our Apple store, towards the purchase of a new iPod Nano. The Shuffle box was opened so we incurred the 10% restocking fee, but at least for an iPod Shuffle that was only $7.90. I made use of my corporate discount which at 6% is pretty meager, but better than nothing. On the Nano the 6% results in only a $9 discount. Normally that'd cover the sales tax, but in this case it'll at least cover the restocking fee.

So if you're in the same situation, I would give it a try. (Obviously, if you have a high-end model such as the iPod Touch, there may not be another iPod to trade up to). The worst they can do is say "no" and you'll be no worse off than you were before. And there's far worse things to be stuck with than a brand-new Apple iPod!

Some random points to consider:

• Legwork: We called and spoke to an Apple Store employee before we went to the store. Although we didn't know for sure, I suspect it was a manager level employee we spoke with, because while there doing the exchange+upgrade, mentioning the possible-manager's name stopped the "Sorry, but our policy states that no returns" chatter and sent an employee to the back room to validate my story. A minute later it was "So-and-so says it's okay, let's ring it up".
• Scrooged: It was the Day after Christmas so perhaps a little holiday mojo was in the air for going the extra mile to keep customers satisfied.
• Deal: Apple still made money as discussed earlier. Not only did they keep the customer happy, but they made more money (not counting costs they incur processing a return). Win-win scenario. I guess this is along the lines of the infamous $100 store credit for the early iPhone buyers.
• New Condition: Our iPod Shuffle was in absolutely pristine condition. The seal was broken and that was about it. Never plugged in or turned on even. As quick peeks go, that was a little on the expensive side ($7.90) I'm sure if it was scratched or banged up in any way, that would've nixed the deal right there.
• Expedience: We did the return promptly. We didn't fret about it for days or weeks before doing something. The best time to pull this off was probably as soon as possible after the purchase (and again, especially on the biggest return day of the year, the Day after Christmas).
• Discretion: Judging from my conversation with the Apple employees our exchange+upgrade was obviously an exception to the official return policy. However, it did not seem like an extremely hard rule to bend at the manager's discretion. So while they may not be going out of their way to offer everyone this trade-up, I would presume that this was not a one-time occurrence.
• Civility: We asked nicely. There was no point in being heavy-handed in this situation, in any case. Yes, probably there are those who have no problems screaming, yelling, threatening and demanding until perhaps the store MIGHT give in. But frankly this was not a life-or-death issue that merited being a complete jerk.

Epilogue:

During the exchange process the very nice Apple employee mentioned several times that since the part numbers were different I had to send the iPod Shuffle back to the Apple Online Store. Apparently the part numbers for our online-purchased Shuffle differed from the in-store Shuffle. The employee wasn't sure, but it may have been because of the personalization and not because it was ordered online.

So this begs the question whether the exchange+upgrade is also allowed if you shipped it back to Apple, or was she just trying to politely deflect me out of the store?

This would be an interesting question to answer, especially for people not lucky enough to have an Apple store in town.

Say what you want about Apple. I'm sure there are some Apple horror stories out there, but I've not been a part of any of them. Despite the Apple Store being jam-packed with Day-after shoppers and the return/exchange line behind me growing (because of my unorthodox request) the employee helping me was nothing but friendly and competent.

I think I'll keep buying Apple products.