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.