They will probably replace it. And it will be with a refurb, but one that has no visible scratches, etc.

As far as I can tell, the retail stores will at most reflash firmware on a phone. If the problem still exists after that, they swap the phone, and send the old one off to be worked on some place. Once fixed, the phones start going back out to the stores as spare units.

It's a nice setup as you can leave the store with a working phone, vs having to deal with a loaner and waiting for yours to come back from repair.