Mail-In Rebates Continue Decline

According to this article in USAToday, mail-in rebates on Black Friday promotions have declined dramatically the past few years:

The number of Black Friday promotions from major retailers with mail-in rebates has dropped from about a third a few years ago to just 10% so far this year, says Brad Wilson, founder of BradsDeals.com.

I'm not sure what the statistical basis is for his numbers, but I think it's unquestionable that many suppliers and retailers are avoiding mail-in rebates. The decline began several years ago when the public clamor about practices that were often deceitful and sometimes flat-out fraudulent reached a point where the Federal Trade Commission began investigating. Fines and public shaming followed, and some retailers (Best Buy most prominent among them) began eliminating the practice.

I see a lot of ads indicating 'instant rebates' -- prices reduced at the cash register. Is there any research indicating that this is more effective than a TPR? -- which is what it is.

Rebate firm goes bankrupt

Continental Promotion Group, a rebate-processing firm with several major retail and supplier clients, has filed for Chapter 11, leaving some questions about whether recently issued checks might bounce. Clients include Canon, Adobe, Logitech, Samsung, and Costco.

Canon warned its customers that CPG checks issued for printer and video products may bounce. A spokesman said the company has also secured a new rebate fulfillment partner.

According to another report I saw, Canon had hired Advertising Checking Bureau to take over its rebates. ACB handles trade promotion outsourcing but, like some of its competitors in that field, also does rebates.

The financial health of outsource services is always a concern, but probably ought to move up a few points in priority these days.

More rebate complaints

This article summarizes some past rebate fiascos:

The history of rebates is replete with programs that have been, to put it kindly, less than consumer-friendly.

Microsoft once offered a $300 rebate on a software upgrade but required customers to send in a UPC code from the box for the original software.

Cell phone maker Samsung paid $200,000 to settle a case in New York involving 4,100 residents of apartment buildings whose rebates were wrongly rejected. It turned out the rebate system only allowed one rebate per address but couldn't account for apartment numbers.

And consumer electronics retailer CompUSA was charged by the FTC for failing to promptly pay rebates.

The government alleged that CompUSA advertised rebates from one of its suppliers even after it knew the company was failing to pay rebates, Gold said.

This item details two more actions by the FTC:

• "The Commission’s complaint against the InPhonic alleges that, in connection with its advertised rebate offers, among other things, the company failed to provide promised documents needed to obtain rebates, to send out checks in the time promised, and to disclose adequately certain material terms and conditions prior to purchase."
• "The Commission’s complaint against Soyo, Inc., alleges that most of Soyo’s rebates were delivered late – in some cases, consumers had to wait a year or longer for their checks to arrive."

And this one details another problem -- a manufacturer has failed to give their processing firm funding for the rebate checks, with Office Depot ending up making the rebates good.

The whole rebate business has such a bad reputation no that I wonder why manufacturers continue to associate their brand with it. Well, okay, I do know -- it pumps up sales. Sales up, brand image down.

States getting fed up with rebates

Most of the action to regulate rebates has been done by the Federal Trade Commission, but a few states have enacted their own rules. The most recent to join the parade (if pending bills are enacted) are Florida and Georgia.

A bill filed in the Florida Legislature would give companies 15 working days to make good on a rebate after getting the request from a consumer. In the Georgia General Assembly, a similar bill would allow 30 days from the date a mail-in request is postmarked.

Fifteen days would be a real strain for many manufacturers and their program administrators.

"There are a lot of people who apply for a rebate and eight weeks, 10 weeks, 12 weeks go by," said Russell Cyphers, legislative assistant to Florida state Sen. Bill Posey, R-Rockledge.

Posey's bill said if the company needs more information to fulfill the request, the rebate offerer must tell the consumer by certified mail within three days about what's lacking. Cyphers said that puts the onus on the company instead of forcing consumers to follow up with time-consuming inquiries.

I think this bill probably goes too far, but it's hard to work up a lot of sympathy for a business that has created so much ill-will -- the many manufacturers who sit on claims for months for cash-flow reasons have created a backlash.

If too many states enact conflicting regulations, it will make things extremely difficult for manufacturers trying to offer rebates -- especially through national retailers.

FTC holding "Rebate Debate"

The Federal Trade Commission is holding a workshop on rebates in San Francisco on April 27.

For many years, manufacturers and retailers have used mail-in rebates as a marketing tool. Despite their popularity, however, many consumers have had negative experiences with rebates, and have begun to distrust them. Moreover, some businesses are beginning to question whether the costs associated with rebates exceed their benefits.

At this public forum, manufacturers, retailers, fulfillment houses, consumers, and government officials will discuss how to implement successful rebate programs and how to avoid the pitfalls others have experienced. Speakers will describe various types of rebate programs, share the “best practices” they have developed for fulfilling or implementing rebates, debate the pros and cons of rebate marketing, and discuss the past and future role of government in improving consumers’ experiences with rebates.

Sounds like an interesting event. Details are available here.

Rhode Island outlaws mail-in rebates

Rhode Island now requires that all rebates be credited by the retailer at the cash register, becoming the second state (after Connecticut) to do so.

Under the law, retailers advertising a manufacturer's rebate on any sale item must apply the rebate amount at the time of the sale and complete the rebate redemption process themselves, rather than requiring the consumer to do it.

The law prohibits retailers from advertising a "net," or final, price for an item that includes a payment from a manufacturer -- unless the retailer gives the buyer the amount of the manufacturer's payment at the time of the sale.

Further down in the article, I learned something I hadn't heard about before:

Separately, Massachusetts filed suit against Young America to demand that it submit to an audit of $43 million in uncashed rebate checks. Bay State officials claim the company kept that amount over seven years in return for charging its clients lower fees. The arrangement could be an incentive to deny legitimate rebate requests.

I've heard before stories that some rebate fulfillment services were using uncashed checks as a revenue source (I have no way of knowing if it's true), but I wasn't aware that any states had taken action on it.

Rebates: Another one bites the dust

Dell has jumped on the bandwagon:

Dell joins several retailers who have cut back or eliminated mail-in rebate programs since last year.

In June, OfficeMax Inc., one of the nation's leading office supply chains, said it would offer immediate discounts on product pricing instead of mail-in rebates. And in April 2005, electronics retailer Best Buy Co. Inc. said it would abandon all mail-in rebates in two years.

If I were in the rebate-processing business, I'd be looking for some ways to branch out.

OfficeMax eliminating rebates

OfficeMax says it will eliminate mail-in rebates. I predicted when Best Buy announced last year that they were phasing out rebates that others would feel the pressure to join in.

It's a major customer satisfaction issue -- rebates annoy the consumer.

The decision was the culmination of almost uniformly negative feedback regarding the lengthy and often-frustrating process of mailing in a rebate form and proof of purchase, followed by weeks of waiting for a check, a company spokesman said on Friday.

"Rebates were the No. 1 customer complaint we were getting," said Ryan Vero, OfficeMax's chief merchandising officer.

Toshiba announces channel rebates

According to CRN, Toshiba is making changes in its pricing and rebates structure to even the playing field for indirect purchasers.

[Toshiba] said the higher margins create “absolute parity” with direct market resellers for independent Toshiba partners buying from distribution. “Resellers will now be able to compete with mail order,” he said.

Toshiba is also ratcheting up rebates: Entry-level Silver partners will get rebates of 1 percent, vs. zero previously; for Gold partners, rebates will rise to 2 percent, from 1.5 percent; and for Platinum partners, rebates will increase to 3 percent, vs. 1.5 percent.

It sounds like there may also be changes coming in other channel programs.

Kevin Murai, president of distributor Ingram Micro, Santa Ana, Calif., said the price parity changes are important but don’t always equate to brand preference. “To gain momentum quickly, Toshiba is working with us to develop and execute on an effective partner program that offers VARs the support and resources they need to move the needle and drive sales,” he said.

Iowa sues rebate fulfillment firm

The state of Iowa has filed suit against Young America, claiming that the rebate fulfillment company is sitting on $43 million in rebates due to Iowans. Under escheat laws, unclaimed rebates must be reported to the state that is the last known residence of the intended recipient.

"We view non-compliance by the rebate fulfillment industry with unclaimed property requirements to be an industry-wide issue," [the State Treasurer] said. "We will soon be knocking on the doors of other rebate processors to seek compliance with our unclaimed property laws."

The lawsuit notes that Young America "took as its own revenue" uncashed checks totaling almost $43 million from January 1, 1995, to June 30, 2002. Such funds are called "slippage" - checks issued to consumers that are not cashed.

Young America denies the charges.

Anderson says his company has been checked by two states and found to be doing business properly. He says they've been audited by Minnesota and Oklahoma and he says the department of treasury in both states examined their records and said they were not a holder of unclaimed property. Anderson says they're simply a third-party fulfillment service provider that mails rebate checks for companies.

Anderson would not say if he thought some of the companies that hire Young America are withholding rebates. Anderson says, "We don't take any position regarding our clients and we don't offer them legal advice."

Best Buy continuing to cut back on rebates

Best Buy announced today that it is eliminating rebates on laptops and introducing an on-line rebate submission process. In April last year Best Buy announced they would be phasing out rebates. The corporate press release said:

"Best Buy is taking a leadership position within the retail industry with our plans to eliminate mail-in rebates," said Ron Boire, executive vice president and global merchandise manager, Best Buy. "Our customers told us they hate mail-in rebate programs. As a result, we're working as a company and partnering with our vendors to find new solutions to give our customers a better shopping experience, while remaining competitive on pricing."

Best Buy saw the light on rebates right after the FTC nailed CompUSA.

Senator calls for rebate regulations

Sen. Charles Schumer of New York has called on the Federal Trade Commission to investigate rebate offerings and to regulate rebate more strongly.

Schumer asked for the following rules on rebates, according to Promo magazine:

• Companies must provide consumers at least 30 days to redeem their rebates and must fulfill the terms of the rebate within the same amount of time required of consumers but it should not exceed 60 days.
• Companies must take steps to send the rebate check in a manner which identifies the piece of mail as the expected rebate check.
• Companies must accept copies of receipts, not just originals.
• Companies cannot require consumers to write identifying information on the rebate form unless the receipt does not identify the purchased product.
• Companies offering rebates may not require information that is not necessary to process the rebate, including information other than name, address and phone number.
• Companies must provide telephone numbers or contact information for rebate inquiries so consumers are able check on the status of their rebates.