Retailers hope for share of rebates
Prepare yourself.
Tax rebates intended to jolt recession-wary consumers into spending won’t start arriving in mailboxes until next month, but tax-rebate advertising has begun. And retailers are only warming up.
“We will get inundated when those checks start coming,” said Rob Enderle, an analyst at market research firm Enderle Group. “There’s going to be a lot of competition for those dollars.”
The rebate checks are the centerpiece of a $168-billion stimulus package enacted by Congress. Not everyone will qualify. Singles with adjusted gross incomes of more than $87,000 and married joint filers with incomes of more than $174,000 won’t get a check.
Some public opinion polls have found that people are thinking about cashing their checks to pay bills or chip away at debt. Retailers will do all they can to get a piece of the rebate action.
“They’re going to ramp up their efforts,” said Mike Gatti, executive director of the Retail Advertising and Marketing Assn. “You’re going to see special promotions and sales, maybe invitation-only events.”
Some companies that have never run ads linked to tax season will do so this year. Home Depot Inc. will play the green card, urging shoppers to spend rebate checks on energy efficient products such as light bulbs.
“This effort will help turn a short-term stimulus into a long term investment by saving consumers money over time through reduced electric bills and energy costs,” spokeswoman Kathryn Gallagher said.
Elk Grove Wireless in Elk Grove, Calif., is throwing what it calls a “tax rebate sale,” knocking $20 off the price of some phones and giving away Bluetooth wireless headsets.
“It opens the minds of people to think when they get their rebate back, they can get a new phone,” manager Dave Johnson said.
Sony Electronics Inc. will launch its first-ever tax season advertising campaign, nudging shoppers to buy Sony Bravia HD TVs with their rebates -- and heavily promoting Sony home theater systems.
“We’re giving the TV as an idea,” said Megan Bafford, senior marketing program manager for Sony Electronics’ home products division. “If they have a stimulus check, we hope they would purchase a theater system.”
Sung Won Sohn, an economist with the Martin V. Smith School of Business and Economics at Cal State Channel Islands in Camarillo, said the rebates “will have a very significant effect,” giving low- and moderate-income households a chance to do some discretionary spending.
“We are talking about $160 billion being spent within a very short period, in a matter of months,” he said. “A lot of people view it as manna from heaven. They kind of feel like: I can blow it, I can finally buy something I wouldn’t otherwise.”
The checks are expected to arrive during a period that includes Mother’s Day, Father’s Day, Fourth of July and the launch of the back-to-school shopping season.
“We’re pretty excited about it as a company because the refund checks will be coming out at the time of our back-to-school campaign,” J.C. Penney Co. spokesman Quinton Crenshaw said. “From a timing standpoint, we think it’s really great.”
During the 2001 recession, rebate checks prompted a short-lived bump in sales, especially for discounters, said Jharonne Martis, senior research analyst for Thomson Financial. She expects a similar pattern this time.
But there probably won’t be a buying frenzy, with much of the rebate money being absorbed by the higher costs of everyday items such as food and gasoline.
“They’ll spend it -- but they’ll spend it on necessities rather than luxuries,” said Daniel Butler, vice president of retail operations for the National Retail Federation, the industry’s largest trade group.
That’s Jason Tasch’s plan.
“It’s probably just going toward bills -- car payment, insurance payment, something like that,” said the 23-year-old college student from Newport Beach who works at Trader Joe’s. “I barely have any spending money.”
A Los Angeles Times/Bloomberg poll found that only 18% of respondents planned to spend the money, while 65% said they would save it or use it to pay down debt. A survey by America’s Research Group found that about 20% of the rebate check dollars would be spent in stores, while 70% would be funneled to bills and paying down debt, Chairman Britt Beemer said. Respondents said the remainder would be used to eat out.
“The winners from the rebates will be the grocery stores and discount stores and warehouse clubs, because that’s where that 20% will go,” Beemer said.
Wal-Mart Stores Inc. will be ready.
“While most people say they plan to pay down debt with their rebate check, we know a portion may be used for everyday items or special wants,” Wal-Mart spokeswoman Melissa O’Brien said in an e-mail. “Right now we’re listening to our customers about their plans so that we can be ready with the right prices on the right items.”
Eric Best’s plan is to enjoy more meals out once his rebate check arrives.
“It’s not cheap to eat, especially if you’re eating out,” said Best, a 28-year-old Anaheim resident who manages a shoe store. I find myself eating cup of noodles all the time and I’m kind of tired of them.”
But the right ad campaign -- or a big check -- could sway him.
“If I got enough,” he said, “I would love to buy a big TV.”
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alana.semuels@latimes.com
