Call it Murphy's Law of the Web, but as soon as one company announces a concept, eight more come out of the woodwork, no matter how narrow the field.
This is the case for online loyalty companies that provide cash rebates that can be placed in a tax-free fund earmarked for a child's education.
UPromise.com seemingly broke new ground in July when it announced its intentions to launch such a service. However, EdExpress has beaten it to the punch by launching late last month.
This month, consumers can sign up at EdExpress.com to begin receiving 1 percent to 30 percent rebates on purchases made at up to 80 e-commerce sites, including Buy.com, Cooking.com and Garden.com. The cash the consumers receive back, dubbed EdBuck$, is placed in a Fidelity tax-free money market account handled by investment firm Morgan Keegan, Memphis, TN.
To join, consumers must pay a yearly household fee of $15. This fee will rise to $25 on Oct. 1. Consumers can withdraw their funds at any time.
“The most important thing to the online shopper is we aren't skimming a penny off of the top of that retailer's discount. We're giving you 100 percent of what they're willing to pay,” said Kyle Brizendine, founder and CEO of EdExpress, Dallas. “It's a straightforward, honest approach.”
UPromise's program, expected by the end of the year, allows consumers who buy online and offline to earn rebates that go directly into a tax-deferred savings account. It is free to join.
Jeff Bussgang, president and chief operating officer at UPromise, Boston, said competitors have been swooping in like moths to a bug zapper. “There have been 11 or 12 companies since we announced that said, 'I was thinking of that. I had that idea.' “
No matter what the competition, UPromise believes it is poised to become the industry leader. “The scale and scope of what we're doing is unmatched,” Bussgang said. “It's a completely different scale. We have a world-class group of former CEOs, governors and nonprofit leaders. We're building a network of the most trusted brands. Coca-Cola has dedicated substantial resources to supporting this initiative.”
Bussgang pointed out that while both companies are looking to draw offline companies to the program, UPromise has lured Coca-Cola and EdExpress has McCoy's Building Supply Center. “It's a completely different league,” he said.
Since EdExpress just launched, Brizendine said, there are many more clients in the pipeline, including a major restaurant chain.
Brizendine believes consumers will embrace the simplicity of the EdExpress model over UPromise's.
“From what we understand, their program is free,” he said. “They have to generate fees somewhere. They're going to have to start skimming from the top. We think our business model will stand up in the long run.”
Regardless of the competition, Bussgang said, “I think it's great that a lot of people are focused on the problem. I commend people for spending the time and energy to solve the college savings crisis. It's great for everyone.”