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Thanks, But: Returning a gift is easy; the explanation is much more difficult

You've most likely found yourself in this most unenviable position: you receive a gift, and you absolutely and unequivocally don't want it.
You smile, nod accordingly and exchange pleasantries with the person who gave it to you, all the while assuming that a trip to the return counter is in your future. You swiftly but respectfully push this unwanted gift to the side and assume that the person who gave it to you will never inquiry about how you're enjoying it when you see them again.
But, what if they do?
What if the item was for the household and ask to see "where you put it" when they visit?
Do you really want to be that person who puts out gifts that you get only would the applicable person comes to visit?

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Maybe, in this case, honesty is the best policy; or at least something that resembles truthfulness to a degree.
So is there truly a nice way to return unwanted gifts?
"Nice" might not be the word that most resembles telling someone that what they bought for you isn't exactly what you want. That said, you don't want to be hurtful or go out of your way to make them feel bad for their purchase.
You may want to just tell them that the item wasn't working properly or didn't fit, even if both aren't necessarily exactly true. What you want to avoid is returning the gift and walking away with money. You'd be wise to find something comparable to replace the unwanted gift with so you have something to show for it, and show to the person who bought you the original item.
And by all means, don't make the mistake of taking a gift you don't want and give it to someone else, especially if there is even a remote chance that action could get back to the original gift giver.
This practice might not always be the perfect one; if the gift you're thinking about returning came from your parents, sister or your spouse.
That might be your cue to clam up and find a nice spot in the basement or attic for the gift you simply don't want to embrace. If you're feeling especially engaged to be honest, that probably isn't the worst move, either, but that depends on the nature of the relationship or how well a little truth is interpreted among family or your inner circle of friends.
No matter what your course of action, always keep the most important sentiment regarding even the most repulsive, repugnant and ridiculous gifts in the back of your mind: it's the thought that counts.

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