Case Great Rebate Runaround
402
DESIGNING AND MANAGING THE SUPPLY CHAIN
rlX\s
E
~\C)I\ The Great Rebate
Runaround
'-----'
Ah, the holiday shopping season: Santa Claus, reindeer-and rebate hell. Those annoying mail-in offers are everywhere these days. Shoppers hate col lecting all the paperwork, filling out the forms, and mailing it all in to claim their $10 or $100. But no matter how annoying rebates are for consumers, the country's retailers and manufacturers love them.
From PC powerhouse Dell to national chains
Circuit City and OfficeMax to the Listerine mouth wash sold at Rite Aid drugstores, rebates are prolifer ating. Nearly one-third of all computer gear is now sold with some form of rebate, along with more than
20% of digital cameras, camcorders, and LCD TVs, says market researcher NPD Group.
Hal Stinchfield, a 30-year veteran of the rebate business, calculates that some 400 million rebates are offered each year. Their total face value: $6 billion, he estimates. Office-products retailer Staples says it and its vendors alone pay $3.5 million in rebates each week.
TAX ON THE DISORGANIZED
Why the rage for rebates? The industry's open secret is that fully 40% of all rebates never get redeemed because consumers fail to apply for them or their applications are rejected, estimates Peter S. Kastner, a director of consulting firm Vericours. That trans lates into more than $2 billion of extra revenue for retailers and their suppliers each year. What rebates do is get consumers to focus on the discounted price of a product, then buy it at full price.
"The game is obviously that anything less than
100% redemption is free money," says Paula
Rosenblum, director of retail research at consulting firm Aberdeen Group.
The impact on a company's bottom line can be startling. Consider TiVo. The company caught Wall
Street off guard by sharply reducing its first-quarter loss to $857,000, from $9.1 million in the same period last year. One reason: About 50,000 of TiVo's
104,000 new subscribers
DESIGNING AND MANAGING THE SUPPLY CHAIN
rlX\s
E
~\C)I\ The Great Rebate
Runaround
'-----'
Ah, the holiday shopping season: Santa Claus, reindeer-and rebate hell. Those annoying mail-in offers are everywhere these days. Shoppers hate col lecting all the paperwork, filling out the forms, and mailing it all in to claim their $10 or $100. But no matter how annoying rebates are for consumers, the country's retailers and manufacturers love them.
From PC powerhouse Dell to national chains
Circuit City and OfficeMax to the Listerine mouth wash sold at Rite Aid drugstores, rebates are prolifer ating. Nearly one-third of all computer gear is now sold with some form of rebate, along with more than
20% of digital cameras, camcorders, and LCD TVs, says market researcher NPD Group.
Hal Stinchfield, a 30-year veteran of the rebate business, calculates that some 400 million rebates are offered each year. Their total face value: $6 billion, he estimates. Office-products retailer Staples says it and its vendors alone pay $3.5 million in rebates each week.
TAX ON THE DISORGANIZED
Why the rage for rebates? The industry's open secret is that fully 40% of all rebates never get redeemed because consumers fail to apply for them or their applications are rejected, estimates Peter S. Kastner, a director of consulting firm Vericours. That trans lates into more than $2 billion of extra revenue for retailers and their suppliers each year. What rebates do is get consumers to focus on the discounted price of a product, then buy it at full price.
"The game is obviously that anything less than
100% redemption is free money," says Paula
Rosenblum, director of retail research at consulting firm Aberdeen Group.
The impact on a company's bottom line can be startling. Consider TiVo. The company caught Wall
Street off guard by sharply reducing its first-quarter loss to $857,000, from $9.1 million in the same period last year. One reason: About 50,000 of TiVo's
104,000 new subscribers