I HATE seeing stuff like that. At my local Target, I brought a Leatherman package to a clerk because it clearly had a two-dollar stamped steel looking folding knife in there that did not match the thing that originally came in that package. Of course, to a light/knife/gun nut like me, that was SCREAMING fraud, but to the average everyday sheeple, it was not out of the ordinary.
Retail stores that accept returns do so for customer service. I worked at a grocery store, and I could not FOR THE LIFE of me understand why we took whatever the heck we were given. People would return expired orange juice that was the store brand juice for a different chain of stores!
I learned a marketing aspect to the problem and a potential reason for loose guidelines on returns: Of the people who know they can bring crap into your store and get a refund, a certain average percentage of those people will shop at your store for the added convenience. Bringing customers to your store is worth a certain amount of money per year. For instance, at the grocery store I worked at, a new customer was worth $5000 a year. If you have to take back a $2 carton of juice, or a $25 turkey from customers to make a certain percentage of them come back as regular customers, then it's worth it to take the hit on bad returns. I don't know what a customer is worth per year to a retail chain like Target, but it's probably more than $5000. If they have to take a hit every now and then, it's most likely just seen as the cost of doing business.
It stinks, but the alternative would be to have a more restrictive returns process that would in turn inconvenience the other thousands of good, honest people who need to return defective or unwanted, wrong-sized products and make them jump through hoops and produce receipts and have the items scrutinized which makes people wait in line, which makes them unwilling to take a chance and buy things that they might otherwise purchase if they knew "the could just return it for any reason". It's a trade-off.