Bad credit financing for notebook computer

Cash payment for mail-in promotions fall behind schedule. resellers claim

Many Canadian VARs are blaming belated product rebate payments -- both to resellers and their customers -- for vanishing margins, customer relations problems and credit cutbacks.

A recent survey of 50 Canadian VARs conducted by Albert Daoust, an analyst with Etobicoke, Ont.-based Evans Research Corp., reveals that many resellers are dissatisfied with the speed and efficiency of vendors' customer rebate programs. The research shows that some VARs feel there is even a deliberate strategy to frustrate redemption, Daoust adds.

According to Fred Wilken, president of the MicroAge reseller franchise in Hanover, Ont., "a high percentage" of customers complain that they never receive payment for their mail-in rebates.

"The manufacturers rely on a number of people not following through on rebates, so if everybody went for the rebate, the vendor couldn't afford it," Wilkin says. "But when a customer doesn't get their rebate, we're deemed as the bad guys, and we end up spending a lot of time looking up phone numbers or following up for them."

Darrel Gunderson, manager of Hi Tech Business Systems in Grande Prairie, Alta., says he thinks VAR rebates are a better option than promotions handled by the manufacturer. "I'd prefer to see an instant rebate to the VAR, which we could then pass on to the customer," he says. "The vendors give out coupons to customers and then the customer has to wait eight weeks, sometimes up to 10 weeks, to get the rebate back. The rebates get cancelled, all sorts of snags come up, and this really frustrates my customers. It makes (rebates) useless as sales tools."

Direct VAR rebates are also clogging the channel and tying up cash flow. At Business World Computer Centre, a Kamloops, B.C.- based VAR, several major vendors are "hopelessly behind" in their rebate payments, says Ian Frazer, the firm's network architect. IBM, he continues, averages six months when it comes to delivering VAR rebates on notebook PCs, while Hewlett-Packard is averaging 60 to 90 days on a guaranteed 30-day rebate.

"We're now the bank of IBM or HP," Frazer says. "They're pushing their financing back to the dealers."

Despite daily calls made to rebate program representatives, Business World is still waiting for thousands of dollars to arrive, Frazer continues. The reasons he has been given for these delays, he adds, include: lost paper work; representatives on holiday or off sick; discrepancies between suppliers' and resellers' invoices; and ironically, "I'm sorry, our computers are down."

"The most common comment," he adds, "is We'll get right on that,' and then nothing happens. The trouble is, the vendor reps seem to have no input into the rebate program, and no control over it."

To simply stop buying from the guilty parties hurts customers that rely on products from the vendor in question, he continues. "This makes us look foolish, the vendor looks incompetent, and it hurts the channel all the way down."

In a typical rebate scenario, Business World pays $100 for a product through distribution, and then sells it for $98, expecting to receive the promised rebate, Frazer explains. A four to five per cent vendor rebate accounts for a thin profit margin. But when it takes 90 days for VARs to receive this margin, this ties up cash flow and cuts off lines of credit with suppliers. Four out of five VARs have problems with rebates, Frazer says.

Indeed, The Home Office Place in Chesley, Ont., is in the same boat, says owner Ray Mayer, adding that he would like to see rebates abolished altogether. "If you can afford to offer rebates, you can afford to simply lower the price. It's a low-margin business right now, cash flow is critical, and to be waiting for cash to come in from rebates is very frustrating and damaging to our business."

From a vendor perspective, delays in rebate payments are rooted at the reseller or customer end, says Cord Ball, IBM Canada's national channel sales executive. "When we have the proper data, our execution providing rebates is excellent. We have a target of turning them around in 10 to 20 business days and we meet those targets more often than not. The biggest delay appears to be at the VAR end, in providing the information required in the proper format."

IBM Canada has developed instant rebate programs that allow VARs to estimate the value of a rebate at the time of sale, receive money from IBM, and then reconcile the correct amount at a later date. "IBM's strategy is not to make money financing our business off resellers," Ball continues. "We want them to have the rebate funds as quickly as possible, because rebates are a key incentive for resellers."

Resellers with rebate concerns should contact their IBM business partner representative, the national sales manager for resellers, or Ball himself, he adds. "Most VARs who contact IBM concerning rebate problems find the delay is rooted at their end, at which point corrections are made and we deliver the rebate in the 10-to-20-day period."

According to Evans Research's Daoust there's little doubt vendors shift certain costs onto their channel partners. "This is an accepted strategy," he says. "If you can shift the cost of bearing receivables to your channel partners -- somebody has to bear the cost, so why not your partners? Part of the game of having channel partners is to see if they can bear more of the cost than you."