November 10, 2004

Staples Automates Refunds with Eye on Holiday Sales

By Evan Schuman, eWEEK

The time-honored tradition of retail rebates assumes that many customers won't bother. Staples Inc. this week challenges that approach with an online campaign aimed at making rebates point-and-click easy.

In the first phase of Staples Easy Rebates, Staples is partnering with Parago Inc. to provide an automated online approach to rebates. After making an in-store purchase, a customer will be issued a thermal receipt with the rebate URL. After typing in a unique product identifier, the system will wait 14 days and then issue a check.

Why wait 14 days? That's not coincidentally the length of Staples' return/exchange policy. A known but unquantifiable retail fact-of-life is that some customers buy products with a rebate, submit for the rebate and then return the product for cash or exchange, in effect profiting the amount of the rebate.

Few retailers have a system to prevent such efforts. By delaying 14 days, Staples is hoping to prevent or minimize such losses by checking against a returns database right before processing any rebate check.

From the Staples' Web site, the process is essentially the same, although the site would be able to link directly to the returns site.

Staples officials want to push the returns system as a way to recruit business holiday shoppers who want anything that will reduce paperwork.

"Rebates have been a problem for years, and we're working to make it easier," said Jim Sherlock, Staples' director of sales and merchandising. Sherlock said that he believes the new rebate program "will absolutely influence" customers to shop with Staples rather than a rival.

Staples has been considering several changes to its rebate program, but Sherlock said the company rushed to announce this Phase One of the program now to take advantage of holiday sales. The program was launched this week, only able to handle 75 percent to 80 percent of Staples' rebates, Sherlock said. kiosks at Staples stores can also be used to submit an Easy Rebate.

In Phase Two—which Sherlock said is set to be launched "midyear 2005 or sooner"—customers will be given several additional options. If the rebate is for $50, customers could take it as a $50 check mailed to them or a $50 direct deposit to their bank account, or be given the ability to "use that $50 for their next purchase on," he said.

One option that is being debated is allowing customers to either take their $50 as a $50 check or, Sherlock said, "would you prefer to have two ink-jet cartridges with a value of $60, delivered to you free from"

That is an interesting proposal because it potentially could benefit both the retailer and the customer. The retailer could pay $50 for that $50 check or could give away the $60 product, which would cost it far less than $50. If that customer was about to buy the cartridges anyway, he or she is saving $60 in exchange for giving up $50. It has the potential for a true win-win.

Another possibility is for Staples to let customers use the $60 offer on any Staples product, making it more likely customers would use it as a discount on something they were about to purchase anyway.

"That gives the customer more of an opportunity to select something they might need," said Parago CEO Ken Johnsen.

Johnsen stresses that what makes his rebate service strong is mostly an intuitive design. The benefit is "having a Web interface that is extremely easy to navigate. It's not just easy, but fast," he said.

From the IT perspective, the key advantage is a very tight integration between the Web interface and Staples' POS (point-of-sale) system. The customer enters the unique product identification code, "and then we automatically pull all the rest of the data from the POS system. There's no worry about promo numbers, nothing to cut out, nothing to mail. Accuracy will improve as a result. Efficiency will improve," Johnsen said.

As soon as the order is received, the Parago system initiates a 13-step validation process, making sure that the rebate is being submitted within the rebate's time limits, that it's the correct product that qualifies for the rebate, that it's in accordance with any limits as to the number of products per household and that there are no records that the product has been returned, among other restrictions.

On Staples' end, the updates to Parago are not instantaneous and automatic yet, Sherlock said. That means that a customer might make a purchase and rush home to find that the system doesn't yet know of the purchase and can therefore not process the rebate.

With purchases from the physical store, Staples sends a file electronically to Parago every couple hours, and they are going to try to get "as close to real-time validation as possible," Sherlock said. Ironically, the updates are much less frequent on the dot-com side and happen only once overnight, he said.

When the customer checks out at a physical store, the printed receipt will alert the customer to a rebate opportunity. During an online transaction, though, "it's perfectly automated," Johnsen said. "It will flag a rebate, and you can immediately add that to your rebate shopping cart. The rebate process is a separate process."

Parago will also be delivering to its retail clients a sophisticated promotion effectiveness analysis so that retailers can use the rebate-process information as a CRM (customer relationship management) mechanism. "What really happens is that more sales are driven as a result of the process," Johnsen said.