There aren't many successful brick-and-mortar retailers that don't accept returns. Online stores should be no different. You should stand behind your product, and if a customer doesn't like a certain purchase - don't make it difficult for them to return the item. The nature of the product (ie. intimate, clearance, damaged) obviously may determine whether you issue a full-refund, partial, exchange, or perhaps none at all.
People return products when they are disappointed with their purchase. Minimize disappointment by creating accurate product descriptions and proper product photography. If the products you're selling have informative descriptions and proper pictures (or even product videos), you'll greatly reduce the number of returns.
Make sure your policy isn't hidden away. Post your return policy on your website, on customer correspondence, on receipts and even in the package so that customers have every opportunity to review your return policy.
It's normal to give a specific time frame to accept returns. You certainly don't want to accept a return a year later, so it's important to define how long the customer has to make up their mind. Tell your customers if they must return the product within 30, 60 or 90 days of purchase. Also, you should have a separate time frame for damaged or malfunctioning products.
State whether the customer can expect to exchange the item, get store credit, or enjoy a cash return. Every merchant has their own preference, and you shouldn't feel pressured to offer "full-refund, no questions asked." In the event of a malfunctioning or damaged item, it shouldn't be the customer's responsibility to pay extra for anything. Make every effort to replace the item, or give a full refund without incurring any costs to the customer.
Make sure that the customer has assembled the product correctly. If the product requires batteries, ensure that they've been inserted properly. Make sure that the product is correctly installed and turned on before deeming it damaged.