PC rebates spring up as summer nears

With the early summer selling season approaching, retail PC sellers and manufacturers are stepping up their use of rebates and special offers to keep inventory moving.

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Retailers have begun a new cycle of these promotions despite price increases from most manufacturers on some new models, according to a recent survey by ARS, which tracks retail trends.

These offers, which range from mail-in rebates to gift cards and free financing, will likely last through the "dads and grads" season, which runs from late April to mid-June and refers to the school graduation season and Father's Day.

Best Buy, for example, is offering a $100 gift card this week with the purchase of a Pentium 4-based PC. The promotion, which allows buyers to apply the card toward a future purchase, runs through Saturday. Meanwhile, Office Depot is offering $100 instant rebates on high-end Pentium 4 desktops running at 2GHz or higher. The two chains are also offering 0 percent financing on new purchases made through Saturday.

These retailers often combine custom rebates and special offers with manufacturers' rebates, aimed at encouraging consumers to buy a bundle of hardware--usually a desktop PC, monitor and printer.

Such offers are becoming increasingly important, analysts say, because most retailers are now selling PCs for about the same price. The rebates and special offers have become a way for them to differentiate themselves.

A buyers' market
But rebates often create a buyers' market. At any given time, one retailer could be selling the same PC for $50 to $150 less than a competitor.

"With competition intensifying between retailers for the past year and a half, the majority of retailers go toe to toe when it comes to PC pricing, with promotional activity taking on the role as the key differentiator," Toni Duboise, ARS's desktop PC analyst, wrote in a report this week.

"ARS, however, has witnessed a slightly different picture since rising component costs were publicized as a possible catalyst to PC price gains," she continued. "The variation is found in a growing price disparity between one major retailer and another, resulting in price advantages--or disadvantages--ranging from $50 to $150 depending on the system and the retailer offering them."

Though rebates themselves are nothing new among PC retailers, the fervor with which they are being used is.

Retailers and manufacturers began to use rebates aggressively to clear out inventory in the first quarter of 2001 and to boost sales as the market slowed throughout the rest of the year. Now retailers are generally using them to make the best of the PC market, which was still fairly slow in March but is showing signs of improvement, analysts say.

"Rebating at this point is so ingrained that nobody is going to walk away from it," said Stephen Baker, an analyst with NPD Techworld, which tracks retail sales of consumer electronics products. "We saw a bit of an uptick (in sales) in March and April. But the end of April through May can be an iffy month."

As a result, smart shoppers are best served by evaluating all available deals at the major retailers.

Carpe diem?
Baker advises consumers to decide what kind of PC they want and then narrow their options to a few models and retailers. Then, "when you see something that you think is a good price, pounce," he said. "This industry doesn't make it easy to wait."

Consumers are also advised to keep an eye on major computer manufacturers' Web sites, such as those run by companies like Dell Computer and Gateway, before making the decision to buy.

Dell, for example, has been aggressively promoting its desktop PCs with free hardware upgrades. One promotion that has all but disappeared, however, is a free memory upgrade, because of increases in the cost of memory since last year. Manufacturers have replaced free memory upgrades with other promotions involving CD-RW upgrades, hard drive upgrades and shipping.

Dell's most recent offers include free hard drive upgrades (from 20GB to 40GB), free CD-RW or DVD drive upgrades, free shipping on its high-end Dimension 8200, and free DVD movies or software titles with its Dimension 4400 and 2200 machines. The offers end Thursday, according to Dell's Web site, although the company is likely to continue them or add new ones, analysts say.

For its part, Gateway relies less on rebates and special offers, choosing instead to offer lower prices from the start.

Other PC markers have stepped up their offers in recent days as well.

Hewlett-Packard, for one, this week launched new promotions on Compaq Presario 4000, 6000 and 8000 series desktops, according to ARS. HP offers $100 rebates and free upgrades from 40GB to 80GB hard drives on the PCs when purchased directly or via a Compaq-branded kiosk at retail stores. The company is also offering a $30 rebate on 15-inch flat panel displays and a $100 rebate on 17-inch flat panels. In addition, HP is offering rebates on Pavilion PC bundles that range from $75 for the $599 Pavilion 501n to $275 on the flagship 790n desktop.

Retailers usually publicize their rebates in weekly fliers, making it fairly easy to get the lay of the land by picking up the Sunday newspaper.