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Consumer Angst Causes OfficeMax to Eliminate Mail-in Rebates

By Jul 12, 2006

After years of fending off consumer anger over its rebate programs, OfficeMax, one of the nation’s largest office-supply distributors, has eliminated the majority of its mail-in rebate programs. OfficeMax is not the only retailer to eliminate the incentives and others are pondering exiting the programs as well.

OfficeMax said that the change, effective July 2, was a “bold move” to improve the in-store experience for customers as well as the overall value of shopping at it stores. Instead of offering the manufacturer-rebate programs, the company will offer instant discounts in product pricing at checkout.

“We’re intent on providing OfficeMax customers with the best shopping experience possible and the retail mail-in rebate program was not consistent with that goal,” said Ryan Vero, executive VP and CMO for OfficeMax, in a statement. “By simply reflecting a discount in the purchase price for computers, printers, digital cameras, and other products at OfficeMax stores, we are giving customers what they really want without subjecting them to a complicated and often confusing rebate process.”

The company does plan to continue to carry a small assortment of software products that offer rebates on the packaging.

According to Charleston, SC-based America’s Research Group, only one third of rebates under $20 are ever redeemed. As the dollar value of the rebate goes up, however, so too do the redemption rates. Rebates valued at $50 to $80 have an 80% redemption rate, the company said. Still, its consumer research indicates that consumers much prefer coupons—59% of consumers redeem coupons on a regular basis—with their instant redemption, to mail-in rebates, said Britt Beemer, chairman and founder of ARG.

He added that 75% of people have a favorable impression of coupons, while only 25% have a favorable impression of rebates.

“The days of mail-in rebates are probably going to come to an end as more and more companies begin to drop them all together,” Beemer said. “Those retailers will be viewed as much more friendly than those who don’t.”

“With the new OfficeMax no-rebate program, all shoppers will receive the savings—not just the consumers willing to endure the typical four-to-six week rebate process,” Vero said.

Rebates and their lengthy, often complicated process of saving receipts and filling out forms all within a set time frame, has left many consumers frustrated and complaining and has raised concern among politicians and regulators. Retailers often take the brunt of the anger from consumers who return to the stores demanding their rebates.

In January, Sen. Charles Schumer (D-NY) asked the Federal Trade Commission to standardize rebate procedures, saying that rebate scams are created by companies whose job it is to ensure consumers have a hard time getting their money back. In a letter to the FTC, Schumer urged an investigation of company rebate policies, and an overhaul and standardization of the rebate process (PROMO Xtra, Jan. 4, 2006).

About one half of the 400 million rebates offered to consumers each year are never redeemed because the application process is too difficult to understand, Schumer said at the time.

In March 2005, the FTC reached a settlement with CompUSA, Inc., requiring the computer superstore to pay for thousands of consumer rebates that a supplier failed to make good on. It was also required to overhaul its rebate program (PROMO Xtra, March 16, 2005). And in April 2005, Best Buy Co. announced that it would abandon its mail-in rebate program after numerous consumer complaints. The consumer electronics retailer said it would phase out the program over the next two years and shift spending to its Reward Zone loyalty program, whose members earn discounts through purchases (PROMO Xtra, April 13, 2005).