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Rebate Expected To Put Sparkle Back In Appliance Sales

Illinois Starts Doling Out Federal Funds For Rebates On Certain Energy Star-Labeled Goods

By Sandra M. Jones, Tribune reporter
April 15, 2010

Call it a Black Friday sale on appliances.

The state of Illinois is ready to hand out $6.5 million in federal funds starting Friday to help revive the recession-battered business of selling refrigerators, dishwashers and the like. Retailers are hoping for a frenzy of holiday-season-like activity, though no one knows how long the funds, or the deals, will last.

Some 670 stores in Illinois are competing for instant rebates in a program that is stretching the organizational wherewithal of the state.

The offer is a simple one: Buy a government-labeled Energy Star home appliance and get a 15 percent discount.

Illinois is one of the few states that is putting the onus on retailers to front the rebate money to customers and then get reimbursed by the state later. That strategy makes it easy for consumers but hard on merchants. No retailer wants to be stuck offering a discount after the cash-for-appliance till is empty.

"We haven't seen this situation before," said Doug Moore, president of appliances at Sears Holdings Corp. in Hoffman Estates. "It's really not our money and we're not in a position to be a bank. When the money runs out in the state, it's similar to a Black Friday special. When you have 100 TVs available and you run out, that's it."

Sears, the nation's largest seller of appliances, is hoping the state rebate program will drive business to its stores beyond the initial program. Sears plans to open at 6 a.m. and to offer an additional 30 percent discount. The retailer sells about one in three appliances in the U.S., down from about 40 percent a decade ago, as Lowe's, Home Depot and Best Buy entered the market. All three are among the retailers participating in the program.

Abt Electronics, the family-run appliance showroom in Glenview, expects Friday to be the biggest sales day by far in the company's history. It is bringing in vendors from Whirlpool and General Electric to explain their products and has called all 200 sales people to work. The store will open at 7 a.m., two hours earlier than normal. Attendants will be directing cars into the parking lot.

"Everyone is worried the money is going to run out in a day or two," said Mike Abt, president of the retailer. "We're going to promote it starting (Thursday night), but it's going to get tricky after that."

Since the federal government created the program last year as part of the American Recovery and Reinvestment Act, each state set the rules for how to hand out its portion of the $300 million available nationally.

After watching Iowa and Arizona go through their cash-for-appliances funds in a matter of hours, far short of the 30 days allotted for the program, Illinois decided to create rebate rules to make sure a wider swath of consumers will get a shot at savings. The rules were being revised as recently as last week as state officials tried to balance the local mandate to make the program consumer friendly with the complicated logistics of letting hundreds of retailers know in real time when the funds have run out.

The Illinois Retail Merchants Association, the trade group that has acted as the go-between for retailers and the Illinois Department of Commerce and Economic Opportunity running the program, is charged with keeping track of the funds and reporting back to Illinois retailers every two hours. Appliance retailers accounting for 60 percent of the market agreed to provide the trade group with regular sales updates throughout each day, through Sunday night.

Last week 152 retailers voiced their concerns during a lengthy Web conference call hosted by the trade group. The feedback prompted the state to make several last-minute changes to the rules, including limiting the order-taking to between 8 a.m. and 9 p.m., and stretching the delivery date deadline to May 28 from May 10.

The state also set a cap of $400 on the 15 percent rebate discount in an effort to make the funds last longer. (If you were planning on buying a $10,000 Sub-Zero refrigerator and saving $1,500, you're out of luck.) Shoppers must come into the stores to place their orders, in contrast to other states that took reservations online or over the phone ahead of the sale.

"What we did over the last couple weeks is to try and find ways to slow the burn rate of the dollars," said David Vite, president of the Illinois Retail Merchants Association. "The whole purpose of the program is to try to drive sales and to create some demand."

The 15 percent discount applies to qualifying energy-friendly refrigerators, freezers, dishwashers, washing machines and air conditioners. Consumers also get a $75 mail-in rebate for getting rid of an old refrigerator or freezer, down from $100 the state originally discussed.

The appliance rebate program, which also launches in Texas and Florida on Friday, comes just as appliance sales are starting to show signs of revival, according to NPD Group, a Port Washington, N.Y.-based market research firm.

U.S. appliance sales fell 2.6 percent for the 12 months ended February to $22.2 billion from the same period in 2009, according to NPD. The drop is an improvement from the year earlier, when sales for the 12 months ended February 2009 fell 9.6 percent to $22.8 billion.

More consumers, when they buy new appliances, are replacing them with upgraded models. NPD analyst Mark Delaney said that's a positive sign, considering the housing market has done little to drive new appliance business.

"It's less ugly out there," said Delaney. "We're starting to see some signs that the bottom is starting to show."

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