How to compete with Best Buy

It seems home electronics and computer shops are having trouble competing with big box stores like Best Buy and Circuit City. Smaller stores could attract a lot of customers away from big box stores pretty easily: advertise a “no rebates” policy.
Everyone I know hates having to float loans to companies under the guise of rebates, only to have problems collecting. Companies frequently deny legitimate claims, which is basically fraud, but the whole idea behind rebates is to be able to offer a discount that will have a delayed pay out to a limited number of people. They’re banking on the fact that lazy people won’t send them in and that their byzantine customer service protocols will allow them to deflect some legitimate claims.
Given how customer unfriendly rebates are, smaller shops would do well to go the extra mile and eschew them (if they’re even offering them) in favor of instant discounts. People shopping purely on price will most likely wind up buying online, whereas people looking for convenience and immediacy are going to buy from someone that doesn’t make them do homework as punishment for being a customer. Then just add a bit about “Sick of waiting for rebates that never come?” to ads, and watch the uptick in sales.
I can’t be the only one would make a shopping decision based on rebates, can I?

9 thoughts on “How to compete with Best Buy

  1. Rebates need to die. Unfortunately, they are extremely effective for manufacturers. Not only are they free loans, but they can be used to create a sale without actually reducing the base retail price of an item. This is very important for tech companies because price drops are often synonymous with becoming obsolete. Have you ever seen a tech gadget go back up in price after a price reduction?
    I don’t see how a small retailer could convince manufacturers to drop rebates in favor of price cuts. They don’t have the buying power. It’s more likely that a best buy or walmart could force an industry change like this.

  2. Being a person who will shop for items (like cellphones) based on rebates, I agree with their annoyance, but I’m not sure smaller companies could offer the deep immediate price discount on items like that. My cellphone, which retails for $499, or $299 with contract, came with $250 worth of rebates. Those rebates were through two different companies. Logistically I’m not sure how the mom and pop cellphone dealer would be able to reconcile such deep discounts across multiple vendors and still make a solid margin.
    Then again, if rebate remittence was easier, I don’t think anyone would be complaining as much. I just sent in my rebates, but I wasn’t sure what to send with them, or if I could send two in the same envelope. Or which UPC…I’m still not sure why rebates can’t be done online. All the pertinent information is readily available, or can be typed in, especially when the rebate is through the same online vendor.

  3. Here is the thing; rebates are a perfect arrangement for both large retailer and manufacturer. The retailer needs to have the lowest advertised sales price; this is how they get people in the door. But they don’t necessarily want to sell that item at the lowest possible price, so the rebate works great for them. The manufacturer is in a similar position; it needs to volume buying of a giant retailer but does not want to sell the items at the large volume discount that the retailer demands. So the rebate is the answer to both.

    Remember that the lower the price the more both parties lose. So with the rebate, the retailer can advertise their low price, knowing that only about 1/3 of the people will cash it in, and the manufacturer can charge a higher wholesale price, crediting the retailer for every rebate cashed in. So since only about 1/3 of people cash them in everyone’s margins are higher this way and everyone wins.

    Neither part wants the rebates enforced at a higher level, if they actually sold the entire inventory at that price; they would be bankrupt in a week. The goal is to sell one 3rd of the inventory at a loss to maintain a much larger (full retail price) profit on 2/3rds of the inventory. So they are not going to do anything to raise rebate literacy. They will probably save face with a commitment to better turn around time on submitted rebates. Just about the only thing you can do it vote with your feet, but you have to decide what the probability of not getting the rebate you send in is, versus a guarantee of not getting it. I estimate that you have around a 75%-95% change of getting a rebate, with the probability going up as the cost of the item and value of the rebate increases. So is that chance more valuable then the satisfaction of paying a guaranteed retail price at a smaller retailer?

  4. This is slightly off-topic. My ex-employer used to run the warehouse management for a cyber company whose business model was entirely based on the 1/3 – 2/3 ratios mentioned earlier. The idea was to make people buy products at enormously inflated prices (often at over 10x the retail value) and offer rebates on most items equal to the cost … and have free shipping.
    Well, apparently the 1/3 – 2/3 logic falls apart at infated prices.

  5. I for one will often spend a little bit more for a product versus having to deal with rebate hell. My personal record for the longest rebate return was over a year with Dell.

  6. Working in an office with lots of people in it is uncomfortable for me because I’m always finding myself in the following situation….
    I’m walking down a hallway…I need to get like 25-50 yards to get back to my desk…..then someone starts walking towards me from like 25-50 yards away, heading right to where I started walking. So now I have about 12-20 yards to wonder, “do I say hi to this person, give them the straightahead, check my watch, nod, cough so as to avoid talking, look them in the eye?”.
    There’s like a million possible things that could be done in that situation. I work NEAR these people. I see them like 8 hours a day. Granted I don’t really interact with them….but I see them more often then I see my cat. It seems like there should be some level of interaction, but everytime this happens I’m just as uncomfortable as the first time it happened.

  7. Wow. The presence has returned.
    Maybe scott is jealous of the nifty web-design and wanted his thoughts to be surrounded by a nifty web design too?
    Or he could be exercising his supreme conversational terrorist abilities.
    nifty nifty

  8. I see most of the people are discussing the issue based on good faith of the rebate providers.
    For big companies it is a win-win situatation
    1- many of the people do not apply to get the rebate (specialy if ther are under $10.00)
    2- They can use any minor error on the form to discard the form and do away by apying it to customer
    3- Some of the handlers of rebate program make it worst by just dumping the froms (either encouraged by the merchant or internal process).
    I do believe that companies like Best buy or others realy have good-faith in providing the rebate. 4 out of 6 of rebates have been lost in the process and they do not accept the copies. Just try to return an item that you have used a rebate or gift card – there is no way that you can get that part back.
    Mani

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