Reuters – U.S. retailers hungry for a piece of rebate pie

February 29, 2008 at 3:29 am

By Alexandria Sage

LOS ANGELES, Feb 29 (Reuters) – More than $150 billion will land in U.S. shoppers’ hands later this year in the form of tax rebate checks and businesses hoping to boost lagging sales are devising plans to make sure they get some of those dollars.

Spend, not save, will be the message and companies from Wal-Mart Stores Inc <WMT.N> to JetBlue Airways Corp <JBLU.O> will court consumers with extra cash in their pockets with promotions and special marketing campaigns.

While some companies will focus on the fun of “free” money, others will highlight bargains to stretch out that check.

J.C. Penney Co Inc <JCP.N> Chief Executive Myron Ullman told Reuters the message to female shoppers will be: “We have what she wants.”

The checks will hit mailboxes during the summer when Penney has a surge in back-to-school marketing, Ullman said, adding: “We believe she’ll get more for that rebate check with us than she will with anybody else.”

Wal-Mart, the world’s largest retailer, expects a “rapid response” after consumers receive their money.

“I would like to think that, as in the past, we have gotten at or more than our fair share of our checks,” Wal-Mart Chief Financial Officer Thomas Schoewe told Reuters.

The tax rebate checks, part of a broader $168 billion economic stimulus package signed by President Bush on Feb. 13, pay up to $600 for individuals and $1,200 per married couple. An additional $300 per child will go to families with kids.

The rebates come as U.S retailers struggle with faltering sales and profits as shoppers, squeezed by higher food and fuel costs, and the slumping housing market, have clamped down on spending.

But there is no guarantee the rebate money will be spent.

The National Retail Federation, the industry’s largest trade group that lobbied Congress for the rebate checks, expects some 41 percent of the money received will be spent, equaling a $43 billion boost to the economy.

Other surveys put the percentage much lower. The International Council of Shopping Centers forecast in a survey with UBS Securities that the lion’s share of the tax rebate would go toward paying down debt, with only 26 percent spent.


While some say non-discretionary items such as food and gasoline will see most of those dollars, rebates could also be the perfect excuse for consumers to splurge.

“This is Monopoly money — let’s play with it,” said Priya Raghubir, a professor of marketing at the Haas School of Business at University of California, Berkeley.

She envisioned companies from Apple Inc <AAPL.O> to Nordstrom Inc <JWN.N> exploiting its potential.

“Nordstrom and shoes: ‘You’ve got 600 bucks. Time to make your feet feel happy.’ I can see that,” Raghubir said.

Since the money is perceived as “free,” people are less likely to spend it on utilitarian items.

“I don’t think they’d get a lot of family-pack chicken,” she said.

That means opportunities for companies such as JetBlue, the first out of the gate to promote tax rebate-funded vacations.

The airline exhorts consumers on its Web site to “Spend Your Tax Refund Wisely” with discounted U.S. fares.

Online travel agency Orbitz Worldwide Inc <OWW.N> may also follow suit. After Hurricane Katrina, it launched its volunteer vacations Web site with online coupons. A spokesman said a campaign to court the tax rebate dollars was possible.

But electronics could be the biggest winners. Best Buy Co Inc <BBY.N> would not reveal any specific plans, but said the timing of the rebates would correspond to a surge in summertime promotions on things such as GPS systems and portable DVD players. Young Americans will find the best deals on iPhones and the newest video game systems with their checks, said Gary Rudman of GTR Consulting, which helps companies market to teens and young adults.

“When it comes to these rebates, these guys are going to go for it. They’re not going to save, they’re going to spend it on technology,” Rudman added.


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