In a retail setting, rebates serve as a way to get consumers to buy a product on the spot, knowing they’ll get their discount sometime down the line. In procurement, they’re a little different. Rebates serve as a way for sellers to meet buyers in the middle during negotiations.
In the procurement world, cost reduction represents a huge portion of the strategy. Suppliers lean on rebates as a way to lock buyers in. If buyers switch suppliers, they might get a better price up front, but they lose the rebate down the line — which in some cases, may represent more significant cost savings.