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Did you use that gift card or rebate?
Commentator Ian Ayres
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TEXT OF COMMENTARY
Kai Ryssdal: Here we are in the second week of August, which means the first day of school will soon be upon us. For the nation's retailers, it can't come soon enough. Most of them posted weaker than expected July sales this morning. High gas prices get part of the blame. Also, sluggish sales of traditional back to school items. Parents procrastinating before shelling out for new clothes and supplies.
Of course, retailers are trying everything to get us into stores, including gift cards and rebates. Commentator Ian Ayres points out retailers are banking on that aforementioned habit: Procrastination.
Ian Ayres: My kids' school has repeatedly hit us up to buy Stop N' Shop gift cards to pay for our groceries. For every $100 card we buy, Stop N' Shop gives the school five bucks.
It sounds like a great deal. But nobody tells you the proportion of Stop N' Shop cards that people forget to redeem. I bet it's a lot more than 5 percent.
When Tivo offered 100,000 new subscribers a $100 rebate in 2005, nearly half of them failed to mail in the rebate. Bam, that's an extra $5 million in profits. The rates of redemption are often below 70 percent.
Sellers make you clip, copy and mail rebates because they want you to screw up. That means more than 30 percent of the time, the retailer gets to keep the money.
So while my school's gift cards seem to raise money without costing parents anything, I view the fundraiser as bordering on the immoral. The school doesn't disclose the real risk. But this fundraiser is costing parents real money — and they don't even get to claim a charitable deduction.
What's behind all this? Firms are just taking advantage of the fact that consumers underestimate the chance that they'll fail to use the gift card or send in the rebate.
The next time someone hits you up for a gift card, you should ask them what proportion of people actually cash in the card. Or ask the computer salesman what the redemption rate is on the mail-in rebate. If sellers disclosed redemption rates, then consumers could decide whether it's worth the risk.
Better yet, if a seller has legitimate reasons for offering a manufacturer's rebate, it should be willing to donate any unclaimed gift cards or rebates to charity. Maybe even my kids' school.
Ryssdal: Ian Ayres teaches law at Yale Law School and Yale School of Management.
The suggestion that consumers ask about rebate redemption rates is nonsense. Redemption rates shouldn’t factor into one’s decision about whether to buy a rebated item. No matter how many others avail themselves of the rebate, an individual consumer will have a 100 percent success rate merely by complying with the rebate’s terms. Rebate offers aren’t like lotteries or sweepstakes involving chance. They’re a sure thing totally within the consumer’s control. Any reasonably intelligent and conscientious consumer can fulfill rebate requirements. I have taken advantage of dozens of rebate offers, and I can’t recall ever having failed either to submit one or to have received the promised rebate. Yes, in a few instances I had to contact the offerer to resolve submission issues, but always successfully. I love rebate opportunities. Getting something of value for nothing or at a deep discount is rewarding, and saving money in that way makes me feel good. I suppose one could say I’m profiting from the carelessness or laziness of others who don’t comply with rebate terms or fail to submit claims at all, which is what rebate offerers count on. But I’m playing by the rules. Just because many consumers don’t follow through is no reason to criticize rebate offers or imply they are be victimized. That’s their choice, just as submitting valid claims is mine.
