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Stores benefit from rebate, warranty offers

January 12, 2007
Dave Wightman, owner of Geeks to Go, a computer repair service, connects a diskette drive before attempting to reinstall Windows XP Professional on a client's computer Thursday. —

Millions of people braved weather conditions, waited in long lines and potential financial ruin this holiday season to search for the perfect gift for their loved ones.

Chances are that many found themselves wandering the miles of aisles at one of several major electronics retailers and facing important questions about their purchases at the check-out line.

Holiday retailing mainstays such as Best Buy, Circuit City, Target, Staples, Wal-Mart and Meijer make a lot of money during the heavy consumer season, convincing customers to commit to a few of their proverbial favorite things: warranties and rebates.

Although the two items are pretty prominent for sellers and consumers alike, little is really known about the nature of each. How long does it take to receive money from a rebate? Is purchasing extended warranties actually necessary?

The bigger question about these so-called services is whether they benefit the customer or are just attachments that big-time corporate executives can use to create a profit.

Dr. Linda Good, associate chairwoman of MSU's advertising, public relations and retailing department, warns against lofty spending because of the promise of a mail-in rebate.

"The general rule for rebates is this: Don't buy it if you can't afford it without the rebate," she said. "Sometimes, it is difficult to get the rebate and the money back."

In fact, only 8 percent to 50 percent of rebate offers are actually acted upon, Good said.

Usually, rebates are an involved affair that differs from retailer to retailer and has strings attached like requiring membership status, rebate forms, strict deadlines and multiple paper receipts to complete the transaction.

Good said mail-in rebates are a strategy often used by retailers or the manufacturer to benefit from busy consumers.

"The retailer, when they offer those rebates, they know that a lot of people are not going to respond," Good said. "They can offer that savings, and then they know that they're not going to have to make good on 100 percent of the offers."

Couple all of the complications attached to rebates with the fact that even if they're mailed correctly, it still can take months before you see any money.

Although most retailers promise to redeem the funds in about four to six weeks, Good said in reality, it's more like four to six months.

But the tides may be turning as some retailers are trying to take a more progressive approach to the rebate system.

Public relations coordinator for Staples Inc., Debbie West, said Staples is pursuing a more aggressive approach to its customer rewards system as a rebate substitute.

"What we use a lot better than rebates is a rewards program," she said. "A lot of times our customers are small-business customers that purchase a lot of the same items in a cycle. So, as opposed to putting a lot of rebates on items, we offer coupons and free shipping via the rewards program."

But mail-in rebates aren't a thing of the past at Staples. West said an online system was created to help save time and money for customers.

Although the world of rebates is changing and evolving, extended warranties offered with products are a different story.

Warranties are written guarantees offered to the purchaser of an item by its manufacturer, which promises to repair or replace it if necessary within a specified period of time.

Retailing Professor Patricia Huddleston said when customers purchase an extended warranty, they don't realize they're purchasing an additional product — not an intangible chunk of safety.

"It buys consumer peace of mind. If that is appealing to the customer, then some people are willing to pay that," she said.

Jackie Foreman, a Circuit City Stores Inc. spokesperson, said her company's extended warranty plans offer considerable protection, and they sell based on the individual customer's needs — not the retailer.

"We present the plans to the consumer — some buy them, and some do not," she said. "We think that consumers are smart and make choices that fit their needs."

Huddleston said warranties are ultimately a profit gauge for retailers and aren't that effective for shoppers.

"Warranties that retailers offer are profit centers for the retailer," Huddleston said. "More often than not, the appliance will work well beyond the end of the warranty program. So the common advice for the consumer is not to buy into those."

Huddleston added that most major electronics already come with a viable warranty for as long as an extended warranty would cover.

When a consumer opts against purchasing a warranty, electronic repair stores benefit. David Wightman, owner of Geeks to Go, a small-scale computer repair center in East Lansing, benefits when electronic equipment breaks after the warranty date.

"We offer convenience and the ability to only pay for the parts that you need," he said. "There are some very distinctive advantages to having local service: We do things relatively fast and effectively."

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