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Retailers seek refunds

April 15, 2014

Every year millions of Americans file their taxes with the knowledge that Uncle Sam is going to be sending them some money back. While many plan to pay down debt or put the money away for a rainy day, there are still plenty who will take their refunds and go shopping.

According to the National Retail Federation, 10.7 percent of those receiving a tax refund plan to spend it on a major purchase such as furniture or a new TV. One-quarter will use the money they get back to help them pay for everyday expenses.

The Internal Revenue service, via The Toledo Blade, has already sent out refunds in the neighborhood of $206 billion, with filers getting an average check of $2,800.

"You get 20 bucks, you're not thinking all the things you can buy with it," Gbenga Ajilore, an economics professor at the University of Toledo, told The Blade. "But you get a $2,000 check, that opens up the possibilities of things you could conceivably buy."

Retailers know that, while many Americans file much earlier than April 15 and an increasing number are submitting their taxes via electronic channels, today's date is symbolic in the American psyche.

A joint promotion between Amazon.com and TurboTax offers users of the tax software an additional 10 percent added to their refund if they take it in the form of a gift card from the e-tailer.

A USA Today piece pointed to a number of "freebie" promotions tied to the day, including a coupon offer from Office Depot to shred up to five pounds of documents between now and April 29. Hard Rock Café locations around the U.S. will give away free entrees to patrons who perform a complete song between 5 p.m. and 7 p.m. today. The chain expects to give away "thousands" of entrees costing up to $14.95 each.

Discussion Questions:

Is tax refund season more or less important from a retailer promotion standpoint than in the past? Are there particular types of promotions around April 15 that work better than others?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Are tax refund dollars more or less important to retailers today than they have been in the past?

Comments:

The irony is that tax refunds simply mean that the tax payer paid too much money all throughout the year. Ideally, no one should want to overpay their taxes throughout the year and what they should actually prefer is to not owe taxes, and not be refunded any taxes, after April 15. However, tax refunds are perceived my most consumers as free money, so the competition among retailers to motivate consumers to spend their "refund" is quite immense.

Companies like Amazon are very shrewd to be offering the gift card with their tax preparation software. In fact, I will go as far as to say the idea is ingenious.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

It is getting more important for most retailers. Soon, this day will become a bigger shopping day as more retailers recognize and leverage today for promotions and focus on purchases that the average American will find interesting especially electronics....

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Kai Clarke, CEO, American Retail Consultants

I think many retailers have been targeting the "refund" market for quite a while, so without hard numbers, I have no opinion as to whether there's been any increase in chasing the refund activity or not.

I think the answer to the second question depends a good deal on what you're selling and at what price point, and the go-to-market model you employ on the other 364 days of the year. One more price promotion to an active price promotor could just as easily fall on April 27 as the 15 in terms of its impact.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

As certain as taxes may be in life, few people consider filing them an engaging experience. Several firms, including H&R Block and TurboTax, are using loyalty initiatives to fix that.

This article from COLLOQUY titled "Tax Preparers Look to Loyalty for Many Returns" includes four tips for tax preparers and related services to maximize customer loyalty.

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Bryan Pearson, President and CEO, LoyaltyOne

With consumer attention spans shorter than ever, and instant gratification needs at all-time highs, I think retailers and CPG brands can capture opportunity here. The opportunities for partnerships with tax-related entities are working well for those innovators that are executing them. Tax season can become, or perhaps it already has become a retail holiday like so many others.

And, by the way, why cater only to those taxpayers who are getting refunds? What about the last-minute people standing in line to pay their taxes on April 15? Why can't retailers and CPG brands partner for "post office camping out" parties?!

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Based on what the article points out - i.e. earlier and/or electronic filing - logic would suggest "less." Also, left out of the discussion are the (similarly?) large number of people who were smart and arranged their withholding so that they actually owe a small amount today. So all-in-all, it seems like another non-event for struggling retailers to plan their promotions around (and of course blame when they fall short).

'notcom'

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