Cashback: Why?

ukaskew

ukaskew

Messages
3,839
Name
Chris
Edit My Images
Yes
'Tis the season for cashback deals, and all that, but why is it so popular in the UK? Are there cashflow or tax reasons?

Take something like the Panasonic G7, currently crazy cheap with cashback (£449 - £200 cashback = £249), I know from experience that Panasonic use an external company (as most do) to administer the cashback promotion, and it's a fairly manual process, so presumably the overall hit for Panasonic is more than £200 per unit as they are employing a company to do a significant amount of work over several months. Why, therefore, do they just not reduce the cost by £200 for a few weeks, that gets them an instant sales boost with no additional administration costs, they could in theory discount even further with no additional hit in profits.

I've noticed other countries don't do it as much, preferring to just discount the cameras (and the US tends to like 'Instant Rebates').
 
I forgot my £50 cashback on my Nikon 16-85mm a while back, my loss their gain, Dohh!
 
I am not an expert but I would imagine there is also some accounting wizardry that makes this tax efficient for Panasonic too. The cost of administering the cash back will be negligible.
 
Hi, Now JMO here but! If a company can sell a product be it a camera or a TV why not just sell it at the price straight off the shelf, OK I no it's a ploy to get you in but sell the item/s in the shops at the cash back price and probably not only sell more but get more people through the doors of shops and once inside will maybe spend more. The other thing that's get me is If the companies can do cash backs and still make a profit then they must be charging way over the value in the first place!! Cynical of me maybe?
Russ
 
If the camera was £249 to start with I would have ordered another Panasonic lens at the same time, so they've lost out in that way, as it is I now have up to 56 days before I get the £200 back.
 
Lots of the stuff (but not all) has been out for a while, so it might as well be sold while they can still make a profit, or at least break even, before newer more expensive models are introduced, either from the said manufacturer or a rival company.
The main thing though I guess, is buying into a system where they can re coup money by folk having/wanting to buy accessories later on.

I'm sure any `losses` will be written off against taxes, also.
 
Last edited:
OldCarlos said:
The main thing though I guess, is buying into a system where they can re coup money by folk having/wanting to buy accessories later on.
Click to expand...

I'm surprised this doesn't happen more so with interchangeable lens cameras, get people into the system with a dirt cheap body and then recoup the money on lenses etc. I guess the risk (unlike say, cheap printers where everyone is going to buy ink eventually) is that people don't expand their system.
 
ukaskew said:
I'm surprised this doesn't happen more so with interchangeable lens cameras, get people into the system with a dirt cheap body and then recoup the money on lenses etc. I guess the risk (unlike say, cheap printers where everyone is going to buy ink eventually) is that people don't expand their system.
Click to expand...
only ever used "legacy" manual lenses on my nikon dslr cameras so nikon must be annoyed the way older lenses are now becoming so popular
 
The cynical part of me agrees with the fact a lot will not claim so it's a benefit but the bigger reasoning is most likely down to the fact the big manufacturers use an approved seller program with very tight pricing policies. Having read reports from some indapendant stores the margins are very tight on their side.

By using a cashback scheme instead of a discount they can more tightly control both the actual retail price and perceived value of their goods as the price doesn't need to fluctuate. Cashback from manufacturer would also mean not needing to offer discounts on units sold to the resellers who may have to hold stock for extended periods of time on some items.

I just wish they'd make cashback mean cash back, how hard is it to process a bacs payment these days, the prepaid credit cards are a pain in the arse.
 
That all makes a lot of sense. The UK market is remarkably in-sync across all the major online retailers and follows a similar pattern for pretty much all cameras/lenses, with absolutely identical prices across the board for many items. How that works without it being price fixing is beyond me.

With regards to the actual payments, the Sony scheme was excellent in my experience, very quick bank transfer and in my opinion exactly how a cashback scheme should work these days. The Panasonic scheme was/is painful and usually goes to the wire with the 28 day processing time, if I remember correctly they offer cheque or Paypal payment.

Thankfully I've never been burned by one of the prepaid credit card schemes, I hope they make that very clear.
 
Last edited:
How else can manufacturers offer discounts without penalising retailers who are holding stocks?
 
I reckon it is simply to get your details, they will then use them for marketing, then sell your details on :mad:
 
jonbeeza said:
I reckon it is simply to get your details, they will then use them for marketing, then sell your details on :mad:
Click to expand...

I don't believe I've ever had any unsolicited mail as a result of cashback claims, we're super careful with our details and rarely get any junk mail.

sphexx said:
How else can manufacturers offer discounts without penalising retailers who are holding stocks?
Click to expand...

Instant Rebates are very common in the US for photo gear and are manufacturer led as per our cashback offers, so there are ways of administering them without a 56 day wait for the consumer.
 
My experience of cashbacks hasn't been too good.

Nikon - £70 cashback as a prepaid card, Citibank I believe, which had money deducted because I didn't spend it fast enough. Spend on these cards immediately, even if its the groceries.
Samsung - Third Party Company failed to process or ignored a vast number of seemingly valid claims related to Samsung Tablet cashbacks, the Internet was awash with stories at the time. The reputational damage to Samsung must have been significant and many individuals received nothing. I didn't receive my £30 cashback until my Letter before Action communication, sent to the Samsung UK Registered Company address was about to expire. I would have taken this issue to the County Court.
Panasonic - I bought a GH3 last year on Black Friday and cashback cheque for £200 was late in arriving by several days beyond the stated period. Others were also posting on the Lumix Forums that they experienced the same issue.

Cashbacks should work just fine in theory but some have not been well administered or have may actually been deliberately obstructive. In the case of the Samsung affair, there were rumours of inadequate staff numbers at the Third Party Company and that Samsung had not transfered funds for payments to be made, the true facts have never been aired and probably never will be. I don't like cashbacks but the Panasonic experience was the least damaging but was needed to repay the Piggy Bank, I am very tempted by the current G7 offer. The Nikon experience was another nail in the Nikon coffin, along with the transfers of QC issues to the buying public and repaired cameras that aren't, I no longer buy anything Nikon. I no longer use Samsung phones but have bought reduced price Galaxy Tablets that did not have a cashback arrangement.
 
jonbeeza said:
I reckon it is simply to get your details, they will then use them for marketing, then sell your details on :mad:
Click to expand...

They'd get most people's details in the warranty sign-up process without cashback. It's well off-topic, but I had to sign up to a site today with full name, address, phone number and create an account with a password just to download a £3 ebook on processing Fuji raw files paid by Paypal, and that's just utter madness. Giving all this for cashback seems like a relative luxury!
 
Last edited:
I have had quick cashback returns on the two Nikons I've bought but lost out on the cashback on the first because I didn't spend the last £15.00 or so. I wanted to only spend it on camera equipment so I faffed about too long and the account charges kicked in. Something similar happened with a Sony compact I bought, there was a £30 Amazon voucher which I thought was to be credited to my account. As it turned out, I had to claim it from Sony and missed the claimback date. My own fault for not checking. I was going to buy all 3 cameras anyway and the cashback was only a sweetner rather than carrot.
 
It's down to the marketing department it allows the item to be sold at a lower price without devaluing the brand and creates some interest
 
I think that there are a couple of reasons. One, as mentioned before, it means that the reduced price is passed to customer without waiting for the dealer to clear old, higher priced stock, if indeed the dealer passed on the reduced price at all. The period of the rebate can be controlled more tightly by the importer, e.g. Canon had one this spring around the time of the Photography Show, helping boost sales after the Xmas peak, and it rewards dealers and customers who but through official channels as grey / black imports might not qualify.

There is no accounting / tax black magic. It's a valid business expense, allowable for tax purposes just as reduced prices to dealers would reduce the importer’s revenue and be allowable for tax purposes.
 
I've never really thought about it before, but it's probably to make sure that retailers can sell their normally bought stock at normal price to keep their margins & to stop them ordering lots of stock at a reduced price during promotion periods and failing to pass the savings onto customers. It seems the government are the real winners though, say it's £100 back, it's an inconvenience to shell out the £100 extra and claim it back, £20 of it goes in vat so the retailer only nets £80 and then the manufacturer gives £100 back. Money for nothing.
 
RR76 said:
..

It seems the government are the real winners though, say it's £100 back, it's an inconvenience to shell out the £100 extra and claim it back, £20 of it goes in vat so the retailer only nets £80 and then the manufacturer gives £100 back. Money for nothing.
Click to expand...

i would have thought the vat treatment would have been the same as if the product were initially sold for £100 less as a cashback claim would be posted as a vat credit bearing transaction.
 
Also allows then to keep that extra cash in their bank for an extra 60 days? As opposed to discount at start and showing poor margin at point of sale?
 
RR76 said:
I've never really thought about it before, but it's probably to make sure that retailers can sell their normally bought stock at normal price to keep their margins & to stop them ordering lots of stock at a reduced price during promotion periods and failing to pass the savings onto customers.
Click to expand...
I'm sure you are right here.
RR76 said:
It seems the government are the real winners though, say it's £100 back, it's an inconvenience to shell out the £100 extra and claim it back, £20 of it goes in vat so the retailer only nets £80 and then the manufacturer gives £100 back. Money for nothing.
Click to expand...
I'm sure you are wrong here. The cashback is treated exactly the same as a reduction in the purchase price, so if the manufacturer gives you £100 cashback they can clean a VAT rebate of £16.67 (not £20) from the government.
 
I guess the Government just get to earn interest on the VAT paid for a little while then. Peanuts on the economy scale.
 
Surely its to protect the retailers? If a manufacturer sells a retailer a camera at say £249, they retail it at £449 and make £200 per body. If the manufacturer then tells them they have to lower the price by £200 for a promotion they might only break even, or lose money on each model.. surely with cashback the retailer makes their profit but the manufacturer would take the hit...

figures probably arent right but you get the idea..
 
StewartR said:
I'm sure you are right here.
I'm sure you are wrong here. The cashback is treated exactly the same as a reduction in the purchase price, so if the manufacturer gives you £100 cashback they can clean a VAT rebate of £16.67 (not £20) from the government.
Click to expand...

I don't think you are right. If Canon give me a £100 cashback, I'm not VAT registered so I can't give Canon a valid VAT invoice and the original sale by Canon was to the retailer; not me. Canon will have provided the retailer with a VAT invoice for the original wholesale price, not the reduced price after cashback. This means Canon will have to account for all of the output tax on their invoice to the retailer.
 
mortimerhill said:
I don't think you are right. If Canon give me a £100 cashback, I'm not VAT registered so I can't give Canon a valid VAT invoice and the original sale by Canon was to the retailer; not me. Canon will have provided the retailer with a VAT invoice for the original wholesale price, not the reduced price after cashback. This means Canon will have to account for all of the output tax on their invoice to the retailer.
Click to expand...

Why would your own vat status affect canon's vat records?

If they process a cashback claim then that claim will incur standard vat at 20% in the same way that it would if they offered a discount.

link
 
Last edited:
I think cashback started in the US, and I never really understood it. Why not discount the price at the point of sale, with the manufacturer/distributor crediting the retailer with the rebate? My American friends were cynical about the whole thing. They reckoned it was good advertising/marketing and didn't cost much, because the claims procedure was a pain and a lot of customers just couldn't be bothered or forgot.
 
mortimerhill said:
I don't think you are right. If Canon give me a £100 cashback, I'm not VAT registered so I can't give Canon a valid VAT invoice and the original sale by Canon was to the retailer; not me. Canon will have provided the retailer with a VAT invoice for the original wholesale price, not the reduced price after cashback. This means Canon will have to account for all of the output tax on their invoice to the retailer.
Click to expand...
No. Canon account for a £100 cashback as being inclusive of VAT. If they pay it to you, you get to keep the whole £100. If they pay it to me, I keep £83.33 and I give the VAT element of £16.67 to HMRC.

At least, that's how my accountant says it works. I'm inclined to believe him; he wouldn't be telling me to pay the £16.67 unless I really had to.

Still, it's possible he could be wrong. Does anyone here have advice from an accountant which contradicts this?
 
MartynK said:
I think cashback started in the US, and I never really understood it. Why not discount the price at the point of sale, with the manufacturer/distributor crediting the retailer with the rebate? My American friends were cynical about the whole thing. They reckoned it was good advertising/marketing and didn't cost much, because the claims procedure was a pain and a lot of customers just couldn't be bothered or forgot.
Click to expand...

This is exactly what happens in many US stores now, instant rebates are far more common than our convoluted cashback system. It also means the customer has that money 'back' there and then, which I would hazard a guess will sometimes go against lenses etc at point of sale.
 
OK, chapter and verse of the VAT treatment of cashbacks, courtesy of my accountant.
Manufacturers providing cash backs are entitled to reduce the VAT accounted for on their sales, provided they charged and accounted for VAT on the original supply.

If you are VAT registered and you receive a cash back, it reduces the taxable value of your purchase and so you must reduce your input tax accordingly.
Click to expand...
So cash back is treated exactly the same way for VAT purposes as a reduction in the selling price. There is absolutely no tax advantage to the manufacturer or to HMRC.

Source: https://www.gov.uk/government/publi...at-notice-7007-business-promotions#cash-backs
 
Last edited:
hi my son bought sony products on cash back last year and the claim was fast and easy, I have just bought a sony product on cash back I think the main reason sony do the cash back is because they learn a lot about the end users ie contact details, age relating to the products bought must be of value to these companies and unless the person buying over the counter registers products after purchases these companies have no idea who buys what or any point of contact with that buyer
 
I don't think cashback has anything to do with clearing old stock - the current Panasonic double Cashback offer includes their GX8 model which is still current.
 
Hi! A couple of years ago, I bought a Windows 7 Pro HP laptop from Ebuyer for £450. That price was fine for me but there was a £100 cashback offer - even better! As I've never bought anything with a cashback offer before, I was interested to see how it works; I'm interested in Consumer Law generally.

After the obligatory 60 days' wait, I went to the HP website to apply for the cashback. For the life of me, I absolutely could not find my way round! The wrong dates for my purchase kept coming up and telling me that it was too early to apply. I must mention that I have IT qualifications and have designed websites and am fairly computer competent.

After hours of frustration, I e-mailed the Managing Director of HP, UK and Northern Ireland! The next day, a Customer Service person from HP e-mailed me a direct link to the appropriate cashback claim!

This all confirmed my suspicions that companies will make the cashback process as obstacle-ridden as possible in order to profit from their customers. What a surprise:rolleyes:!
 
in addition to the points mentioned another thing is that with cashback they have your money for 56 days ... muliplied across tens of thousands of sales thats a lot of both liquidity and interest.
 
cash back claims are normally in the 10-25% zone - so it allows the vendor to advertise big rebates - at a much lower cost - i.e. the if you get a typical 20% claim rate on a £100 - that only costs £20 per item + costs - but allows the vendor to advertise a £100 discount
 
You must log in or register to reply here.
Back
Top