WSJ Article on Goodbye to Mail-In Rebates NOT HOT but IMPORTANT

Interesting article in the Wall Street Journal

Maybe not hot but very interesting to all of us who are rebate fans.

Goodbye, Mail-In Rebates

By ALEKSANDRA TODOROVA
August 27, 2006

As regulators crack down and consumers grouse about how hard it is to collect mail-in rebates, some manufacturers and retailers are taking note and moving to curtail or even eliminate the mail-in promotions.

Shoppers certainly won't miss all the mind-boggling rebate paperwork. But as rebates dwindle, consumers who had been diligent rebate filers may end up paying more for electronics and other goods.

Consumers hate the weeks-long, often dead-end process of filling out forms and waiting for claims approval on rebates. "Government agencies are investigating and consumers are complaining," says Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, a Washington, D.C.-based consumer advocacy group. "Companies that have any smarts realize this is a poor way" to do business.

Companies often deny claims because of missed deadlines or incomplete paperwork. But because offers typically require original receipts and codes cut off from packaging, refiling isn't an option. (Staples in 2004 launched its Easy Rebates program, which lets consumers file and track rebate data online, without having to mail in product codes or original receipts.)

'Huge Number of Complaints'

"We get a huge number of complaints about mail-in rebates," says James Hood, editor of ConsumerAffairs.com, a consumer Web site. "People buy products based on the promise that they'd get a rebate of X dollars and when they don't, they justifiably feel they've been robbed."

Best Buy, OfficeMax and Dell have all announced they will stop offering rebates and instead will lower product prices accordingly. The new OfficeMax policy took effect in July, while Dell plans to phase out rebates over 12 to 18 months. Best Buy eliminated nearly all mail-in rebates on computers and related accessories in April and plans to phase out rebates on all merchandise by the end of 2007.

It's a trend that has been praised by consumer advocates such as Mr. Mierzwinski, who found that a laptop he purchased this year required him to file for five separate rebates in order to get the advertised $210 discount. "It's a sloppy system that drives people nuts," he says.

But the decision to say goodbye to rebates -- which all three companies say was enacted in the customers' best interests -- has one unpleasant side effect: It will probably mean higher prices, at least for consumers who would otherwise use the rebate, says Peter Kastner, vice president and research director at Aberdeen Group, a Boston-based consulting firm.

The 40% Factor

Why? Because of the dirty little industry secret that about 40% of mail-in rebates aren't redeemed by customers or are filed incorrectly and denied, Mr. Kastner says. "The manufacturers know that, and they build their pricing models around the fact that they can offer rebates, but only a fraction of consumers will respond."

Say you're buying a PC with a $100 rebate offer. You go through the paperwork ordeal and eventually get your $100 check. But if only 60% of the consumers who bought that product did the same thing, the manufacturer ended up keeping 40% of the rebates, or $40 for each $100 offer.

If the manufacturer wanted to substitute a price cut for the rebate offer while leaving its profit unchanged, it would cut prices $60. That would be a clear benefit for many buyers but really a price rise for those who'd have diligently filed for a bigger rebate savings.

Both Dell and Best Buy say they will work to keep their prices competitive. An OfficeMax spokesman says: "An advertised mail-in rebate cost can appear to be the better deal until you consider all the fulfillment steps required -- or the fact that most people don't even follow up with the rebate."

Mr. Kastner estimates that across the market for consumer PCs priced at $400 to $1,000, prices may rise by $25 to $50 a product.

damn, my AIO scanner/copier is becoming useless if this is true.


Also, it will be the end of 'free' or 'make money' deals.

rseiler said: That Aleksandra Todorova sure gets around:
http://www.smartmoney.com/consumer/index.cfm?story=20060817&src=fb&nav=RSS20
Might be higher prices in the future, but until they all eliminate rebates, then it'll be a nice PM. We'll see what happens in the long run. Personally, I despise rebates, but they sure do get me some really cheap stuff over the past several years.

A few years ago, Proctor & Gamble eliminated most coupons and promised to lower prices permantently instead...but didn't lower prices!

nietsni3 said: is it just me or all the names, including the author's, in this arcticle sound russian - or foreigned at least?

Duh!

But this is a good spot to bring up a true story... I'll never forget a post made by a person who did not live in the US (UK I believe) who honestly did not know what a rebate was. Many people thought they were kidding, but when they responded back that they lived outside the US, people realized this person wasn't kidding. Rebates are a marketing gimick which apparently is only in the US and AFAIK Canada.

Now to respond to the post above, who honestly cares who wrote the article. Accuracy is all that is important.

I doubt Mail In Rebates will ever end for Cell Phones. There is some serious money involved and I just don't see the rebates ending on cell phones.

thekid72 said: hedwigdaowl said: I hate to see MIRs go away. most of the hot deals involve rebates and people who know how to get the rebates only can take advantage of these deals. companies defrauding valid rebates should be looked into - not getting away with rebates totally. Staples is good example - why not follow them!

Good point. If rebates were legit and honest, we would not have this problem. Staples too the bull by the horn and beat it down by revamping their rebate system - and it works. Close rival OD (or as I call them, Rebate Depot) went the other way... and is likely scratching their heads as to why their stores are dead when Staples stores in full on a Sunday.

I've tracked rebates on the program Rebate Rebate! for about 5 years; I've actually received 99% of mine; except for TaxCut rebates; as I recall, they don't give a phone number, but an email address that no one returns or monitors responses. Other than that one, if they give an toll-free number, the fulfillment houses can be coached into validating the purchase.

I suspect that the "meisters" who take advantage of the rebate programs are encroaching into the profit that the reported 40% of those who fail to turn in their rebates provide.

This story smacks of companies who used to profit from the routine 40% no-return, who are now tracking them with deep probing databases from Oracle and SAS and realize that after third-party fulfillment contacts, monitoring, etc., it's not worth it.

It's a cycle: they'll stop the programs, and then they'll appear again.

RebatesHQ (Arizona) used to be the dregs as well as YoungAmerica...now they pay with a phone call.

They'll be back. (they haven't disappeared, yet).

And, green for the article.

i received about 105% of all my rebates.

When a rebate did not come, I complaint to BBB, etc. They would mail me a check and then validate the rebate.

It is a disaster for FW if all rebates are stopped.

Rebates are great if you are diligent.

But I still wish that manufacturers were forced to advertise the price BEFORE the rebate, instead of after. If 40% don't get redeemed (and I've heard higher numbers) then that item is not $59.99 for 40% of the buyers.

And I just wonder how much of that 40% are people who submit legitimate rebates, and they are denied for totally bogus reasons or "mistakes". Rebate pros know to call back and get it straightened out, but the average consumer probably assumes they made an error and doesn't follow up. I'd love to see what % of the "mistakes" result in good rebates being denied versus bad ones being approved.

tomprc said: i received about 105% of all my rebates.

When a rebate did not come, I complaint to BBB, etc. They would mail me a check and then validate the rebate.

It is a disaster for FW if all rebates are stopped.

I would gues I am around a 101-102% collection rate. Microsoft's rebate center is good at double paying, and of course the Peachtree rebates that pay more back than I paid in store with coupons and price-matching.

I only missed $20 dollar rebates over $23,000 worth of rebates. whenever I don't get it, I call and fix them.

Just thought of something... another party gains by rebates - the state! We pay pre-rebate sales tax... good reason for the states to drag their feet on this one.

Personally the only rebates I've had hopeless trouble with are with Samsung and eMachines. Samsung runs promos for such a long time, that you can go back months later - buy the same item - and it's still the same rebate promotion. So the limit 1 gets you when you aren't looking. With eMachines, they pull the "postmark after date specified" trick - might as well stand in the corner and bang your head against a wall with them.

I do have a MIA with OD, but it is looking like a legit missing submission that just needs a call.

I have had weird rejections with HP, which they ultimately pay. They ask for the UPC and serial number(s) again quite often.

Yeah, overall I don't mind rebates if the company plays fair.

jswede4722 said: I like Targets rebate system. Gift card automatically at the register. Now, if Walgreens would follow suit.

Call it the luck of the draw, but the one time I submitted a monthly rebate with Walgreens - the gift card came back in record time. Suprised the heck out of me! Not a Walgreens fan, and I don't shop at Target much due to their lack of locations here.

On the eMachines rebate that I lost out on, I was really surprised to have that rejection happen - I was definitely on time and they definitely were not going to give in. I figure Compaq sells computers all day long... Hmmmm!

RiteAid is fast & easy. No need to mail stuff in. Checks come fast, you can take them to the store & use them to buy stuff.

jswede4722 said: thekid72 said: With eMachines, they pull the "postmark after date specified" trick - might as well stand in the corner and bang your head against a wall with them.


I just got my rebate checks from Emachines no problems. They sent the received emails quickly and the checks were processed rather quickly.

I think if rebates end, we'd see much less sold on eBay and people would just buy what they need. This could potentially put speciality stores out of business (Staples, Best Buy, etc). I like Targets rebate system. Gift card automatically at the register. Now, if Walgreens would follow suit.

You gotta be kidding if you think ending rebates will put major retailers out of business. BB has ended rebates for the most part already, and I don't see any of them closing up shop. As for Staples, they might not end it, but what you realize is that if the rebates are sponsored by them and coming out of their pockets then they might be losing money on some rebate item (and definately would on FAR items) for the people who successfully redeem them. They are counting on that number being low enough, but if it gets too high, they will lose money overall (IOW, the money they lose on the items successully redeemed outweighs the money gained on the rebates denied), so it is only in their iterest to offer such rebates them if it draws people in their store to buy other items, to make up the cost.

Additionally, the margins on some electronics is low. One office supply manager told me the markup on tech items is 5-18% (others here have reported similar numbers). They barely make any money selling at full price, even if the rebate is redeemed. Add to that PMs, coupons, sales and clearance, plus Staples Business Rewards and then take off for the rebates. Must be a huge drag.

One thing that rebates do is limit the number of "freebies" each customer can get, so that FWers can't buy up all of the loss leaders and keep the profitable customers from buying the stuff that helps the store, but that doesn't work too well anway. FWers get advanced copies of the ads, stay up until midnight, buy all of the online stock, throw in coupons, go to the B&M stores on Saturday, buy up all of the stock, return and rebuy, use every conceivable coupon and PM known, create multiple accounts for multiple coupon use and mutliple orders, use prepaid credit cards, PO boxes and prepaid cell phones to avoid blacklisting, buy everything they don't need, just because it's a deal and max out on the 10 rebates per household and have extremely large extended families for multiple rebate redemption.

timothy86 said: I doubt Mail In Rebates will ever end for Cell Phones. There is some serious money involved and I just don't see the rebates ending on cell phones. if you buy the phone online the rebate is ofter given to you at check out because the rebate is forbidden by law in many states. IE verizon wireless they call it a internet online price or internet instant savings which negates the rebate.

In fact Staples made a boo-boo this week and must give over $360 worth of norton and other software for free at thier Rhode Island B&M stores they advertised the softwares as free after rebate which in RI means Free at the counter. They then went and changed their web ad, and reprinted the ads to be passed out in the stores. Check it out for yourself. Staples.com zip code 02818 circular pages 9,10, and 11. They now say full refund. But the paper that shipped in the sunday paper was (go back and change the zip to Boston, MA 02122) now check out the circular. Because of that 02122 wording which shipped in the sunday paper in RI they must sell for ZERO at the reg. Now Staples is trying to deny poeple by requiring them to bring in the ad from the sunday paper. Which is the same one poeple can pick up from say another store in Massachusetts for free. HAHA

johnstexas said: jswede4722 said: FWers get advanced copies of the ads, stay up until midnight, buy all of the online stock, throw in coupons, go to the B&M stores on Saturday, buy up all of the stock, return and rebuy, use every conceivable coupon and PM known, create multiple accounts for multiple coupon use and mutliple orders, use prepaid credit cards, PO boxes and prepaid cell phones to avoid blacklisting, buy everything they don't need, just because it's a deal and max out on the 10 rebates per household and have extremely large extended families for multiple rebate redemption.

crazy. i stick to the rules.

I don't believe that rebates are going away because of consumer complaints. These businesses are concerned about 1 thing only - bottom line. As long as rebates are profitable I see them using that tactic. Alexandra sounds like a friggin BB or Dell shill.

Jamare said: They then went and changed their web ad, and reprinted the ads to be passed out in the stores.
They probably just got the ads they use in Connecticut, which has similar restrictions (although I am not sure if they have to give it to you free in-store if they make a mistake). I personally hate it, because it makes it much more difficult to find the really good deals in their ads, at least in CT, because they show the in-store price and the rebate in a smaller font.

Actually they Do. Their computers only allow them to back the price down to 1 cent so I and many others took it for the 1 cent eac software. On an occasion or two i had them back the price down on other items 1 cent so infact I got teh soft for free but i forgot or didn't push the issue on several trans. So Final over $2000 in software for less than 48 cents OTD. Gotta love the RI rebate law. I look forward to more mistakes.

billrubin said: Jamare said: They then went and changed their web ad, and reprinted the ads to be passed out in the stores.
They probably just got the ads they use in Connecticut, which has similar restrictions (although I am not sure if they have to give it to you free in-store if they make a mistake). I personally hate it, because it makes it much more difficult to find the really good deals in their ads, at least in CT, because they show the in-store price and the rebate in a smaller font.