A clear sign that manufacturers are counting on not paying rebates

Aug 24, 2005 17:04 · 311 words · 2 minute read

This is the most egregious example of why manufacturers use rebates that I’ve ever seen. Outpost has a 120GB hard drive for the insanely low price of $20. Even the regular price of $80 is pretty good, but $20 is just nuts. Even if Outpost runs on super skimpy margins, you’ve got to assume that their gross margin on this will be at least $10 of the $80 price. So, counting the rebates, Western Digital would be getting $10 for this hard drive.

But, the rebates are the trick here. There are two of them, each for $30. What’s unique about this deal is that both rebate forms look exactly the same and are mailed to the same place. The only difference between the forms is that one of them specifies that you send the original UPC, the other specifies that you send a copy. Clearly, WD is planning on:

  • some portion of customers will not send in either rebate, or will mess up the paperwork in some way

  • some will send in only one rebate, or mess up the paperwork on one

  • a small percentage will get through unscathed

At $10 a drive, including shipping to Outpost, I’m sure that WD is losing money. At $40 (my assumed Outpost cost of $10 + one $30 rebate), perhaps they’re breaking even or making a little profit. It would be interesting to know what the statistics are here… how many people do get the whole $60 back?

As long as the companies giving out rebates are not being fraudulent and “losing” rebate forms, rebates are a fine, if annoying, way to get really good deals for people who are diligent about sending in their forms. I just have serious concerns about how willing these companies really are to take a loss like this without gaming the system as much as they can.