Mail-In Rebates Stirring Shopper, Retailer Backlash

Consumers on the prowl for those manufacturers’ mail-in rebates are finding fewer of them.

Target Stores, a leading discount chain with 341 stores nationwide, including 96 in California, last week eliminated the offers after a survey of 400 consumers in Orange County, Calif., and Omaha showed that most shoppers did not use them or like them.

That action follows a move last year by K mart, the nation’s second-largest retailer, to cut back significantly on the number of manufacturers’ rebates.

Many shoppers, it seems, feel that mail-in rebate promotions, with their often cumbersome requirements, are more trouble than they are worth. And some retailers--who also see them as an administrative nightmare--are responding.

The practice of offering rebates is widely used on items from diapers to liquor to electric drills carried in discount stores, drugstores, supermarkets, home improvement outlets, membership warehouse clubs and some department stores. Manufacturers see them as a way to boost sales.

For years they have worked. But a backlash appears to be building.

Bonnie Mason, a devoted coupon clipper who lives in the San Fernando Valley community of Shadow Hills, detests manufacturers’ mail-in rebate programs, but she could not resist an offer on a $28 microwave oven turntable that she bought recently at a K mart in Sunland.

The only trouble was, the product box offered $8 back, while the mail-in certificate specified $5. “It is a hassle,” said Mason, who is waiting to see how much she will get back in the mail. “I don’t know why the companies don’t simply take it off the price of an item.”

In explaining Target’s move, George Hite, a spokesman, said rebate programs are “a hassle for us as well as for many of our customers.” In some cases, he said, Minneapolis-based Target would make good on rebates if customers complained that they did not get them from the manufacturers. Target’s out-of-pocket expenses for maintaining such programs amounted to more than $1 million a year, he added, not counting the time of workers who had to maintain the rebate bulletin boards and process complaints.

“Today’s consumer has less time to be chasing sales, playing promotional games and doing the other things we used to have the time and energy to do,” Hite said. “(We want to) make it possible for people to shop on their terms and give them the best possible price . . . right then and there.” Target also has seen a decline in the number of manufacturers’ offers. In December, it handled 70% fewer rebate offers than in December, 1987.

Good-Sized Industry

Rebates have been around for about 25 years and run into the billions of dollars each year. In fact, a good-sized industry has grown up around the practice. By one estimate, 30 companies are in the business of processing rebate applications and mailing rebates, at an average of $3 each.

Some manufacturers, consumer groups and retailing executives praised Target’s move, but they were divided in whether others would follow suit and thereby crush the longtime practice.

Retailers complain that rebate programs are a monumental pain to administer. In many cases, merchants must set up bulletin boards to house the many pads of rebate slips that manufacturers supply. Customers, they say, complain if forms are missing. And if shoppers do not receive rebates in timely fashion, retailers say, they go to the store, not to the manufacturer.

Paul D. Campbell, president of Campbell Research Inc., the Minneapolis marketing research firm that conducted the study for Target, said 60% of those surveyed concluded that most rebates are not worth the trouble.

Three out of four said it bothered them to send the original sales slip to the manufacturer, a frequent requirement. And two-thirds questioned manufacturers’ motives, saying product makers used rebates as a gimmick but depended on the fact that most purchasers do not get around to sending in the rebate forms. (According to widespread estimates, fewer than 10% of eligible purchasers end up seeking a rebate.)

“Consumers would just as soon have rebates bite the dust,” Campbell said.

That notion is supported by consumer groups. “We generally feel that if a company wants to give a consumer a discount or a better price, it should be more direct than rebates,” said Linda F. Golodner, executive director of the National Consumers League in Washington.

Last February, K mart, a 2,200-store discounter based in Troy, Mich., discontinued mail-in rebates for small appliances such as blenders and toasters. In July, it extended that to larger items such as televisions, videocassette recorders and microwave ovens.

“We encourage the manufacturers to put the money from the savings . . . into research and development and lowering prices on existing lines,” said Teri Kula, marketing coordinator. The chain, she added, continues to carry items offering rebates on health and beauty aids, sporting goods and some kitchen items.

Executives at Builders Emporium quietly cheered Target’s action. “I admire what they’re doing,” said Ted Kazleman, chief operating officer for the building supplies chain, which has headquarters in Irvine.

Kazleman said he has been asking manufacturers to drop their rebate programs for years because it is difficult and time-consuming to keep rebate slips in stock at each of the chain’s 120 stores.

But Kazleman said Builders Emporium will not follow Target’s lead anytime soon, and he predicted that Target might even lose some customers. “If you don’t offer rebates, the customer that still likes rebates will shop somewhere else,” he said.

Executives of Ralphs Grocery in Compton also said they think customers like rebates. Al Marasca, marketing vice president for the supermarket chain, said rebates on food and other consumer goods get “good customer response.”

He agreed that such programs are difficult to administer but said Ralphs has no plans to stop offering rebates. “We believe that it’s our role to serve the needs of the customer, not change the customer’s needs,” he said.

Processes Rebates

Jay F. Ecklund, president of a Minneapolis company called Young America Corp. that manufacturers hire to process rebate applications and mail checks to customers, also disputed the idea that shoppers dislike rebates.

“I don’t think there is a slowdown in interest on the part of consumers,” he said. “I think that’s something that Target wants the consumer to perceive.”

Ecklund’s company last year processed 80 million orders representing hundreds of millions of dollars in rebates and coupon offers. But this year, in part because of Target’s action, “we anticipate a decline,” he said.

Manufacturers are aware of an increasing distaste for rebate programs on the part of retailers.

Black & Decker, maker of tools and appliances, broke ground with its decision to get out of the rebate business in early 1987. By that time, rebates had become “an addictive device . . . that everybody was doing in order to be on an equal footing with everybody else,” said Kenneth E. Homa, vice president of marketing for the company’s household products division. Roughly 5% of the division’s sales, he added, went to cover rebates.

Since then, he said, contrary to the fear that customers would flock to competitors’ products, Black & Decker has gained market share and sales volume. Other manufacturers, including Procter Silex, Sunbeam, Mr. Coffee and Windmere, maker of curling irons and kitchen appliances, also have cut back on rebates.

Consumer products giant Procter & Gamble Co. said it would study Target’s announcement closely. “We’re concerned if certain retailers find rebates difficult to use or honor,” said Kelly Gillespie, a spokeswoman.

Gillespie said rebates, along with coupons, are an important part of the company’s marketing efforts. For example, P&G; recently offered a $1 rebate on Pampers disposable diapers. P&G; is the nation’s second-largest advertiser, spending more than $1.3 billion a year to promote such products as Tide detergent and Ivory soap.

Aware that rebates are falling out of favor with many retailers, Mattel, the maker of Barbie dolls and other toys, recently mailed rebate redemption forms to potential customers rather than rely on merchants to distribute forms.

Staff writer Denise Gellene contributed to this story.