Start-ups reinvent ‘cashback‘ concept

Gargi Banerjee

If you were to pick a signature trait of the typical Indian, what would it be? Bingo! Whether groceries, apparel or electronics, which Indian doesn’t love to save a few bucks while driving a great bargain?

Cashing in on this ‘typically Indian trait’ is a handful of young entrepreneurs who are offering cashbacks on every online purchase customers make through a major e-retailer in India. So whether it’s a restaurant meal, an airline ticket or even a haircut at a fancy salon, these cashback providers deposit the discount offered, in cold cash, into a customer’s bank account.

Why, it’s almost like paying customers to shop! And with the Indian middle class fast warming up to online shopping, the ‘cashback kickback’ is already working.

It’s an ingenious scheme because e-retailers benefit from repeat customers who can’t resist the bait while the cashback provider receives a commission for every transaction.

Performance marketing start-ups in India point out that while discount coupons are common overseas, nothing works better than a direct cashback in India. That’s why the idea is catching on here.

How It Works
Currently, there are a handful of startups that provide this facility to online shoppers, among them Pennyful www.pennyful.in, Cashkaro cashkaro.com and Cazback www.cazbak.in.

Most importantly, these three providers alone have tied up with around 400 merchant partners across India, across a gamut of verticals. This presents a wide array of choices to online shoppers. The deal is accessed by customers who need to sign up with the cashback provider, which then redirects them to various online portals.

While travel and electronics are the most popular verticals, fashion accessories and baby care products are gaining traction.

After the customer makes a purchase, the e-retailer is bound to offer a discount, which ranges between 1 and 15 per cent of the product price. When the return period of the product lapses, the cashback is credited directly to the customer’s bank account or sent across via cheque. Ravitej Yadalam, founder and CEO of Pennyful, has devised another option – accumulating cashback rewards in a ‘virtual piggybank’.

Land of Opportunity
Yadalam, who also runs an e-commerce affiliate marketing website that offers coupon cashbacks and price comparisons in the US, reveals, “In 2012, the average American customer spent $1,200 on online shopping, whereas the average for Indian customers was just $ 200. However, the number of transactions was the same – six to seven.” Online penetration in India is currently a miniscule 10 per cent but Yadalam believes there is great scope.

Rohan Bhargava, co-founder, Cashkaro, which also has a UK avatar called Pouringpounds, is of the same view. “Receiving cashbacks is a great kick for online shoppers in India, especially in Tier II cities as these shoppers do not have access to big shopping malls.” Bhargava says online shoppers in Tier II cities such as Pune, Ahmadabad and Chandigarh are fast signing up with cashback providers. “It’s a special feeling to not only get the product of one’s choice but to also earn money while shopping,” he adds.

Tell A Friend
To sweeten the bait and lure even more customers to the e-merchants they have tied up with, cashback providers are devising innovative incentives for shoppers. In a word – referrals. Yadalam’s portal has an initiative called a ‘missed call programme’. A customer gives a missed call to the toll-free Pennyful number and receives a text message with a unique number. All the customer does then is share the number with friends (on social networking sites or otherwise).

For every 5 referrals, the customer receives Rs 100 in his Pennyful account. “We have seen a phenomenal response to this programme as 72 per cent of referrals have transacted at least once on our website,” says Yadalam.

Top This!
E-commerce affiliate marketers are not only milking the Indian mentality but are also accommodating it by working on variations of cashback to lure more customers. “Even though they shop online, many Indians are still wary of sharing their bank account details online. So, instead of sending them a cheque, we are working on solutions such as providing mobile top-ups or providing prepaid credit cards,” reveals Bhargava, who is planning to roll out these initiatives later this year.

How The Merchants Gain
Nearly all the frontliners in e-retail have tied up with either of these cashback providers. Rauf Saiyed, founder of Cazback, explains why e-commerce ventures prefer to enter into a cost-per-sale model with these affiliate marketers. “By allocating a small part of their marketing budget (10-15 per cent of the total advertising spend depending on the size of the e-retailer), they get the benefit of marketing and well as direct sales through platforms such as ours.”

Since e-retailers are already dealing with a lot of back-end work, they are happy to share a small commission on sales to affiliate marketers, who in turn attract more customers through their innovative solutions. “They are happy to tie up with us because it is a risk-free proposition for them,” explains Yadalam.

The Road Ahead
Currently, it is the large e-commerce ventures that have tied up with cashback providers and marketers largely because they have the technological capabilities to integrate their own platforms with these cashback specialists. Going forward, though, performance marketers believe they will have to work on affordable and convenient platforms that will integrate with smaller e-commerce ventures. In such a scenario, these marketers will have to facilitate the technological integration for them.
Naturally, revenues will not be restricted to the cost-per-sale model and will have to be worked out individually with each e-commerce venture and the level of services they opt for.

Although all this is yet to be worked out, clearly, it’s good times ahead for online shoppers, whose tribe is swelling by the day!

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