Rebates everywhere, but where's the money?

Buy that new laptop computer, get a $150 rebate. It sounded like a sweet deal to Margaret Romanowski, but it's gone sour now.

The 53-year-old environmental consultant from Placerville, Calif., says she got the rebate runaround three separate times last summer on a laptop, printer and cell phone. Each product promised rebates of $100 to $150, and each proved challenging to collect.  After filing her paperwork twice, she finally got the $100 rebate on a Hewlett-Packard printer. But she's still waiting for a $150 rebate from Best Buy on her laptop and $100 from T-Mobile for the cell phone, despite repeated phone calls, letters and re-submissions of documents.

"I'm not buying another thing with a rebate," said Romanowski. "Next time, I'm going on store price only."

Her experience highlights the changing nature of the rebate business. Once a low-profile promotion in which consumers might get back a buck or two, rebates are now a heavily advertised strategy to move merchandise, especially in the big-ticket world of consumer electronics. Rebates of more than $100 are common, with some ranging up to $400 or more.

Easy money for vendors, retailers
But according to critics, there's a reason why stores and manufacturers are increasingly advertising rebates -- applying for them is a complicated and difficult task. Many people simply don't bother, and those that do have trouble getting their money back. Either way, consumers too often end up with no rebate - and the company gets to keep the money.

Web sites such as Rip-off Report.com and ConsumerAffairs.com are rife with tales of rebate checks never received and ongoing battles with companies such as Best Buy, CompUSA, and Circuit City on the retail side, and Hewlett-Packard and Dell on the vendor side. Harvey Rosenfield, founder of the consumer watchdog group Foundation for Taxpayer and Consumer Rights, says the list of complaints goes on and on from people e-mailing their complaints to his website.

"Rebates are becoming a rip-off," Rosenfield said. "Requesting one is like filling out a federal tax return, except that these companies have an incentive to keep the customer's money. The reason they do mail-in rebates is because a third of the people never send in their forms, and that increases their margins. It's an easy way for companies to make money."

The percentage of consumers who actually collect their rebates ranges from less than 10 percent to about 30 percent, depending on the product and the dollar amount involved. Meanwhile the number of rebates is growing. Hal Stinchfield, CEO of Promotional Marketing Insights, a consulting firm in Orono, Minn., estimates that 400 million rebates are offered annually, which amounts to more than $6 billion of consumers’ cash.

Manufacturers and retailers see rebates as an effective way to introduce consumers to a new product or to clear out dated product lines. They then contract with fulfillment houses to process rebates, verify them and mail out the checks. Some of the fulfillment houses have gotten into trouble with government agencies over the years for promising low rebate redemption rates to their corporate customers.

Stinchfield says retailers and manufacturers are not out to get their consumers. “That’s akin to brand suicide. But they have not kept up in designing rebate programs with proper structure, or communicating and executing them. So that lack of expertise has got them in trouble with their consumers."

Nevertheless, he says that retailers will probably never give up on rebates. “They’re effective and they move product sales. One featured rebate offer in a Sunday morning ad insert can increase sales by 500 percent."

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