On a side note, should the customer want to return the defective item without a replacement we normally consider this a standard return. That is, with the customer paying shipping and restocking fees.
The reasoning being that if they don't want a replacement they are returning because they did not want it, rather then because of a defect.
But now, we are considering changing the return/defective policy to let people do a free return on a defective item, that way we break almost even because we save on shipping x 2. We don't have to ship out the new item or pay the return shipping on the defective one.
The only catch is that it could cause an irate customer to damage an item for a free return and call it a defect.
Maybe this could be an unwritten clause whereby we could implement it on a case by case basis without adding it to the written return policy, so nobody would know beforehand.