The great rebate scam.

Commentary about business and finance.
June 10 2003 3:27 PM

The Great Rebate Scam

They owe you a $50 rebate. Here's how they will try to delay, trick, and bully you out of collecting it.

I was recently lured into a Verizon Wireless store by a Web ad for a fancy Audiovox cellphone—only $50 after a $100 rebate. I really only needed a junky $50 phone to replace one I'd put through the wash, but for the same price, why not get the Audiovox with color screen and Ghostbusters-themed ringer? The Web site said the rebate offer lasted three months, and the only catch seemed to be that I had to send them my old phone.

Advertisement

I sat down the next day with the rebate forms, pleased with my own consumer diligence. I felt I'd skirted a major obstacle when I saw that the formhad to be returned within two weeks, not three months. Then I realized I'd made a rookie mistake: I'd thrown out the box with the UPC code. I called up the store and started to explain my predicament. The clerk cut me off: "You threw out your box, didn't you?" Apparently they'd seen my kind before.

I was out of luck—even though they knew for sure I had the phone, since it was on their service. That, however, wasn't the point of the rebate. They were trying to thin out the rebate pool; they succeeded.

Over the last five years, rebate volume has been skyrocketing. The actual volume is hard to pin down because it is only tracked by guesstimaters in the industry. One of those guesstimaters, Michael Leonard, vice president of marketing at Continental Promotions Group, says the volume of rebates is about $4 billion today. Back in 1999 it was reported at just $1 billion.

Rebates are surging not because of manufacturers but because of retailers. You only have to visit an electronics store or leaf through a Sunday newspaper insert to see how far rebate-mania has gone. In a recent Best Buy ad, about one-third of the merchandise came with rebates.

When a manufacturer offers a rebate, you needn't be too suspicious. The manufacturer wants to lower the price temporarily (to move an old product or combat a competitor's new low price), but doesn't have faith that the retailer will pass on the savings. But if it's a retail store that is offering the rebate, ask yourself a simple question: Why isn't it just on sale? The store doesn't have any good reason to offer a rebate, since it could just as easily have a sale—if it in fact wanted you to have the product at a lower price. It doesn't, and that's the point. When you see that a store is offering you a rebate, remember that back at HQ some executive is betting against you, rooting for you to slip up, calculating the odds that you will lose the receipt, go on vacation, write in a wrong number.

A store offering a rebate must pay a fulfillment center anywhere from 40 cents to $1.75 to process each claimed rebate. When you figure in that extra cost and hassle for the store—not to mention the shopper's inconvenience and irritation—how can rebates be worth it? Economically, they make sense only if stores can count on not actually giving the rebate to a large portion of consumers. "They can get all the benefits of advertising a lower price without necessarily having to deliver on that price to everybody," explains David Aron, assistant professor of marketing at DePaul University.

Even with the most attractive rebates, 10 percent of consumers fail to get their act together to turn in the form. Often the failure rate tops 90 percent. Women are better at closing the rebate deal than men. The success rate goes up as the rebate gets more valuable.

Stores use secret actuarial calculations to figure out what kind of rebate they can offer. And, increasingly, they employ brutal tricks to prevent shoppers from cashing in. It's fair enough for retailers sit back and hope consumers trip themselves up. But stores are erecting ever-more-elaborate obstacles to screw consumers out of their discounts.

Many rebates, such as my Verizon one, lure people in with the claim that the rebate offer will last a leisurely several months. Only if they read the fine print do consumers realize that they have only days after the transaction to send the forms in. (For another recent rebate, the store delayed sending me the right forms for so long that I only had one day to get them postmarked in time.) Some rebates require you to cash the check almost the minute you get it.

Other stores offeringrebates don't manage to send the check at all, perhaps relying on the forgetfulness of the customer. If you do remember that the check hasn't come, and you contact the store, it will often respond that it has no record of your rebate application. You're thinking, "Here comes that tip to be cautious and keep copies." Well, no, because often the rebater specifies it won't accept copies. (The super-aware who return their rebate forms by certified letter or Fed Ex are often out of luck, because many companies won't accept those deliveries.)

Many rebates demand multiple kinds of documentation (forms, receipts, UPCs) or require you to complete elaborate forms for each component (printer, monitor, desktop). Sometimes you have to circle a date or price to get your cash back. Many rebaters refuse to give the discount to more than one person in the same household. Some insist on access to your credit record before they'll give you the discount.

Perhaps the most notorious consumer rebate was one offered by Microsoft last year for people upgrading to Visual Studio or Visual Basic. [Note: Slate is published by Microsoft.] To get the $300 rebate, customers had to send in part of the box—from the original program bought years before. One small rebate company ran a program for stores that required the consumer to send in forms by registered mail every six months for three years, an exercise they call a "memory test." After complaints, they now only demand a form at the beginning and end of three years.

I have become so alert to these practices that I have become a paranoid rebate shopper. When I bought some software from Staples recently, I was so girded for battle with the rebating authorities that I filled out the rebate form even before I loaded the software on my computer.

All of this hoop-jumping fuss—the paperwork, the postmarking, the sales slips—is quite unnecessary, says Leonard. Fulfillment centers can now do it all online—whether or not the purchase was online, with a credit card, or with cash. They don't need the UPCs or the old phones or any such nonsense. The sales receipt could contain a unique code number that the consumer could enter into a Web site. Think of that the next time you are dissecting a box to get a lousy UPC code.

Carol Vinzant has covered Wall Street for Fortune and the Washington Post.

  Slate Plus
Working
Nov. 27 2014 12:31 PM Slate’s Working Podcast: Episode 11 Transcript Read what David Plotz asked a helicopter paramedic about his workday.