Yeah, Walmart used to be stupid gullible about it. I think that was back when they had competition.
My father knew a guy that bought a tool set from Walmart, used it for years, then saw a new tool set he wanted. He brought the nearly half a decade old tool set back to the store and demanded a refund based on the cost of the newer tool set. The manager caved and let him swap them out.
Stuff like that is ridiculous and is probably part of the reason that stores like Walmart are tightening up their returns policies.
You mentioned the core piece that big box stores have over online stores in your last sentence there. Online returns are a pain.
Making it harder to return items in store is only going to hurt big box stores, I think. I don't mean be lenient like they were in your, and my, story but still - making it tough to return something is only going to force customers to go online where they can probably get it cheaper anyhow.