cyberrebate.com...what does 100% free REALLY mean?

[ECHO]

I see the adds over at www.cyberrebate.com that say things like:

Compact Radio Cassette Boom Box
Price: $69.99
Rebate: -$69.99

-------------------

After Rebate: $0.00

I've never purchased anything through this site but, with Christmas coming up, I'm very tempted to do so. What's the catch here? Do they charge a huge shipping and handling fee to make up for the difference?

just wondering...

 

[stso]

I think they do not charge shipping fee, however; however, they had huge markup on their prices.
About the mail-in rebate, you have to wait about 3 months to get your money back.

 

[Evilmage]

actually shipping is FREE
I know, I know, that's mighty supicious.

Here's how they work. They charge an outragously high price to collect from you to start. Like 60 dollars for a generic mouse or 50 dollars for some headphones. They take that money and somehow invest or make it grow. Sorta like mutual funds, they take other people's money to make money in exchange for giving some part of the profit(in this case, a free product). Then they repay you and the costs for the product, and keep the profits.

Here's an example.

1.)Say they sell 100 dollars speakers. They manage to sell 1000.
2.)With that 100k, they invest it for maybe a 10 - 15% return over the 3 months.(of course, they get more time since the capital keeps on coming in and they're not limited to 100k.
3.)They pay back your 100k and maybe 5 or 10k for the original product they brought.
5.)They keep the 5 or 10k profit.

Just think of this example in a much larger scale and more long term(most likely higher returns).

You don't lose anything unless they go bankrupt or something really. It's just the matter if you would shell out the big cash now for a product and get that money back months later.

PS-My analysis is based on what I've heard about the company. And being a business major, it sorta makes sense to me.

 

[Healey]

They have a faq section that answers most questions. I've bought literally thousands of dollars of stuff from them. Used the stuff at charity auctions, for gifts etc. So far I've received all the rebates, although I did have a problem or two. My emails went unanswered but the site I went through,FredsFreeStuff , intervened and help set things right. Props to Fred. I guess he sends a lot of business their way.

I just got like a dozen binoculars from them for Christmas gifts. Came in about 5 days. Just have to remember to send in the rebates. I'm pretty sure they make their money from shmoes who don't.

 

[PicPop]

very well analysis Evilmage....

 

[awrmplace]

Interesting...

 

[Hossenfeffer]

Yep, they have your money to invest -plus- they can bank on a percentage of people never turning in their rebates.

 

[mcdull]

I have spent more than 2K there and so far received the rebates promptly (about 15 weeks) However, recently they mark up the price even higher, it makes me worry.

 

[nippyjun]

What they are really counting on is that you forget to send in your rebate form!

 

[Ranger X]

Uh no, they're making money off of your money that they keep for a good 3-4 months. They use it to invest and generate interest. Kind of like what banks do ...

 

[Healey]

Evil and RangerX I think your math and reasoning is wrong.

Let's keep this simple and look at a $100 item, say one of those Bushnell binoculars I just bought.

They get my $100 and they have use of that money for about 3.5 months. Let's assume that they earn 10% annual interest on their investments. If they could make much more than that they wouldn't have to be dealing in stuff, they would just become bankers working with financial instruments and not getting their hands dirty. So on my $100 they will make about $2.91 ($100 x 10% / 12 x 3.5). That's a whopping 2 dollars and 91 cents!

Now I remember reading that it costs a company around $3.50 to process and send a check. So clearly these guys aren't making their money off the "float" they get from investing your cash. That $2.91 isn't going to cover the cost of processing the rebate check much less less the handling, shipping, marketing, affiliate commissions, full page ad in Newsweek magazine, web maintenance, lights, office space, paper clips, etc., etc. Not to mention the cost of the product, which in the case of my binoculars is probably around $15.

So where do they make their money? My guess is that they make it from the people who don't ever bother to send in for the rebates. But that's just a guess. It doesn't seem like a great business model, that's why I don't have too much money "on loan" to them at any one time.

 

[dopcombo]

I think u have to look at a much bigger picture than your analysis.
Do not forget that even though they are charging you 100 for something, they might have bought it at 30. now if they took what u gave them and immediately paid back that supplier company, they still have plenty to invest in.
now 100 for 3 months is small sum of course, but if 1000 people buy that damn camera, that's 100 thousand dollars for 3 months.
of course u have to consider overhead charges, and labor fees and stuff like that, but if u think abt it, its a mighty smart way to do business. the customer's happy cos u get ur money back (buying something for free, well sort of), and they're happy cos they make money.

the only catch in all this is that u lose the interest on that 100 bucks for 3 months. From your point of view it's small sum, esp if u get the item for "free". but the interest that u r losing from investing (frequently known as opportunity costs ;p) is going to them. And they get a whole lot of it cos a whole lot of you people are buying from them.

And that is why people who own banks get so much richer without having to do much.

 

[Hector13]

dopcombo:

what does it matter whether he is talking about 1 or 1000 units?
If you are losing money on each unit, having 100 people buy the stupid camera isn't going to help at all.

I am sure that their model is to make money off of investments, but I really doubt that they will be able to survive in the long term.

I think the truth lies somewhere in between what you and Healey have said. I am sure that they can earn more than 10% yearly on their investments (at least I hope they can). When using CAPM for picking stocks (or other investments), most firms use a flat rate of return of atleast 11% without even considering the actual performance of the stock at hand. Plus when cyberrebates probably created their model, seeing 30%+ return from stocks was not uncommon at all.

On a side note, there is now urbanq which does the same for clothes,

 

[Healey]

Okay let's be very generous and assume that theses guys are financial geniuses. Wizards even. Let's say they've figured out some way to generate a steady 30% annual return on their investments. In that case they'll see $8.75 from my $100 binocular purchase.

Sure they'll see this $8.50 multiplied hundreds of times, but as Hector13 pointed out they'll also see the associated costs multiplied by the same amount. The economies of scale only save you so much. And if you're losing money on each transaction, that scale is working against you. "Yeah I lose a buck fifty on each sale but I make it up in volume."

There is no way that $8.50 is going to cover their cost of doing business for that item. Again, just getting me a rebate check is costing about $3.50. I used to deal in sporting goods sales, I know the binoculars must cost them $15, even if they get a great deal 'cause they buy a boatload of 'em, we're still talking considerably more than $8.50. And then there are the rest of the many, many costs of running an operation of their size. For example they pay 7% commission for referrals. Right there that almost wipes out the $8.50.

And don't forget the man hours it takes them to process each rebate. I transposed a couple of numbers on my rebate, and they caught the error and sent me a snail mail notification. That kind of attention doesn't come cheap. (I still got my rebate, see earlier post)

And I doubt they're getting 30% APR. If they could guaranty that kind of return I'm sure they would hang out a shingle that says "Investment Bankers", move to the South of France, and not deal with a bottom feeding, deal hungry, pain-in-the-a$$ Anandtecher like me. If they could earn a consistant 30% the statue on Wall street symbolizing good times would not be a bull, it'd be the Cyberrebate frog.

I still think they depend primarily on people failing to send in for the rebates to earn their daily bread. And the meat for that bread may come from the not 100% rebate items. Mangling the meal metaphore once more, the "float" might cover the salt & pepper.

But I could be wrong. In the mean time, enjoy the rebates but save a copy of everything!

 

[jjm]

For CAPM, the 11% rate is the long-term rate of return on stocks. That's not an appropriate assumption for short-term investments.

They likely earn 6.50% to 7.50% on the float.

In addition, they buy closed out products for pennies on the dollar and then sell them at hugely inflated prices.

And they depend on some consumers screwing up the rebate, or not sending it in.

 

[jedimasta]

I checked these guys out the other day, and I'm no investment banker or anything, but just by looking at the prices on these things, there has to be a scam here somewhere.

For example, those cheapo crap speakers Fry's and CompUSA advertise ALL the time anywhere between 7 and 12 bucks (which is too much too) and always have huge stacks of them in their aisles, sell for 79 bucks on this site with a 80 dollar rebate.

Just looks too damn fishy.

 

[Healey]

Well speaking of the devil, guess what the mailman delivered today? Cyberrebate rebate checks.

Here's the timeline. Place order 8/29, received shipment 9/6, sent in rebates 9/7, received 3 out of the 4 rebate checks 11/30, hopefully the 4th check will arrive tomorrow. Assuming they received the rebate forms on 9/14 it took them them exactly 11 weeks to get the checks into my hands.

BTW my CC cycle starts on the 27th, so the cash to pay for this purchase wasn't taken out of my interest bearing account until 10/25. It will be deposited and start earning for me again today. The total order was for around $600. So this deal cost me about $3.50 in lost interest and $1.28 in postage.

Of course the $1.28 postage cost me nothing, stamps.com promotion. And I actually earned $42 "commission" from ebates.com.

Doing the math, if I time it just right I can take that $600 and turn it over about 11 times in one year. My gain? If I compound the 600, I should gain about $426 (tax free?) and my interest lost would be about $42. Of course I also have all the stuff.

I better get ordering!

 

[conroeguy]

I started buying from them in May. I've spent right at $12,000 with them and gotten every penny back without a problem. A friend of mine has spent more than double what I've spent and gotten all his money back.


So it does work. I'm not sure how....but it does work.

 

[jjm]

I have bought things from them for more than a year, and I have gotten every rebate too. But be careful about locking up too much money at a time with them. If they go bust, you will be a general creditor. It is not likely you would ever see a penny.

 

[hkchan]

It's incredible that some people actually think they make money off of people that send in and receive the rebates. They won't make enough in three months off your money to cover the shipping and credit card processing fees, let alone product, labor, and overhead costs. As others have said, they wouldn't be doing this if they're getting a 10-15% return in three months on your money.

 

[scamjefe]

You guys have to be careful.. It could work like a pyramid scheme in which as long as they have people buying their stuff they have enough money to pay for the rebates.. If they go belly up a lot of people are gonna be hurt. Just imagine how much in rebates they owe people right now. I don't think it'll be worth it to buy anything from them considering how fast these companies are going out of business. You just need to be screwed once and all your past gains will be gone.

 

[qacwac]

If you do order make sure to go through ebates. And use a crdeit card with a annual percentage back.

I only just joined ebates a while back so I've only gotten a check for 18.90 but that was from a cyberrebate order. So my net expendature was roughly

270.00 for a bunch of stuff
-270.00 worth of rebates
- 2.00 credit card return
- 18.9 ebates
= $21 gain.

That's about a 7.8% return on my money in about 3 months. I think that rules. Plus the free stuff and building credit history. I figure if they remained open indefinitely I would eventually become a millionare.

 

[Seattle]

I agree that this appears to be a pyramid that will eventually collapse. I've got about $3,000.00 out to them, I've gotten a 5% rebate from ebates from going to their site first, and have only bought things that I will receive 100% rebates on. Thus, I'm making 5% in three months, which is a good return, and getting mercahndise as well. What concerns me is seeing things that are worth about $15.00 that I bought for $100 now being sold for $300. Some items they charge $50.00 for aren't worth 50 cents. It's like they have to keep charging more and more to keep paying out the rebates, and that can't go on forever. I hope they don't fold their tent after the holiday season when they have a huge amount of capitol and leave town.If that happens, the credit card companies involved and ebates, techbargains and others are going to really get burned.

 

[Healey]

Actually if they fold, the credit card companies will probably not be involved. As I mentioned earlier I had a problem with Cyberrebates that they were dragging their heels on. I spoke with my CC company (MBNA) and they said that as long as I received my merchandise I had no claim.

They said they would not stand behind, or get involved in, any rebate dispute.

If you have any different first hand knowledge, please share it.

 

[allen]

One thing you guys are forgetting, they are also making money off the lost/forgotten/inaccurate rebate requests. I seem to remember some number like 30-40% of rebates forms are never filled out correctly, or at all, by the buyer. Now, no doubt the average internet buyer is a little more motivated, especially if they shelled out $200 for a pair of headphones, but even if 10% didn't fill out the forms right, that's probably where they make their profit (or at least pay for the product they sent you). That's my guess anyways.