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December 29, 2012

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I would also be cautious of grey-imports that are not built to the same standards as the "official" products. I sometimes wonder if the specifications these grey imports are designed for are suitable for Australian conditions. A very simple example is soap - Melbourne has very clean water, and so soap made for a location with heavy water will sud much more easily and therefore waste away (i.e. will foam more easily and hence get used up more quickly than soap made for Melbourne's water supply).

My curiosity is however with understanding how these cash-back offers work. The cash back offers are always from the manufacturer, rather than the retailer. Is this some covert way of shoring up the retailer's bottom line to make it look like their revenue is higher? How does the consumer benefit in this transaction?

Gordon Woolf replies: Gray imports are worth a blog post on their own, but you are right in the need to watch whether they match domestic standards. Often they do, sometimes they don't. Detergent makers used to modify their product to suit the area they were being distributed to; now I suspect they give each formulation a brand name and let the customer find out which is right for them.
Cash backs are also worthy of extended coverage but they work at least partly on not all customers making a claim, or the conditions being set so tightly that many applioations fail and the custoimer thinks it too much trouble to upgrade the complaint. As a general rule I will not buy a product with a cash-back offer; I'll ask the retailer to cut the price by half the offer amount if I forgo the cash-back, or I'll go elsewhere. It often works. You are right in thinking it maintains the margin for the retailer while seeming to offer a lower price, but I wonder how many products sell now at the theoretical margin.

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