Why is Cashback Growth Stunted in India?

The Internet promotes a sense of carpe diem as well as of caution as one treads through the shifting sands of virtual space and tim Cashback rewards. And as its roots deepen into everyday lives, it has achieved a status of indispensability. It is THE platform for any and every kind of transaction.

The legend of the ‘CASH BACK’ is one such hidden traveler traversing the World Wide Web, almost a mystical guide about whom a selective few know and others distrust or lack knowledge of. Some swear by it while others discard it as myth and scandal. Amidst this, two kinds of people suffer—those who perpetuate and spread information on the system, and those who fail to make use of the system. And the online cashback websites, perhaps, suffer the most.

How does the cashback model work?

An online cashback website is a site that guarantees some amount of cash returns on a purchase, back to the customer through affiliate links, provided the purchase has been made through that very site. The ‘cashback’ amount is usually a percentage of the purchase amount, or a fixed amount promised on a particular deal. The average percentage varies from 5 to 10% but can go as high as 50%.

Basically, instead of shopping directly on the retailer’s site, if one mediates the transaction through a cashback website, one is rewarded in monetary terms (usually conceived through the commission that the site receives from the retailer). Cashback offers can come in the form of various kinds of deals, coupons, gift vouchers, wallet transfers, specialized online sites and even direct bank transfers.

Many e-commerce websites also give out cashbacks or product discounts to customers who refer them to their friends and acquaintances—through online surveys and/or membership sign-ups etc. These are strategies to maintain site traffic, customer loyalty and enticing potential customers onto the site.

Cashback rewards that provide virtual money in ’e-wallets’, especially aid the aforementioned strategies. The amount of time taken for the rewards to reach the customer is contingent on the medium through which the transfer occurs, as well as the nature of the deal etc.

What is the status of the Cashback model in India?

With the explosion of e-commerce, the notion of online shopping for goods and services has become a convenient and preferable option for many, but the idea of cashback remains overshadowed by the relative novelty of the e-commerce business in India. A lack of conceptual knowledge around the topic, coupled with the usual tendency to distrust anything non-tangible has only aided this overshadowing.

Since, the internet and more specifically, the e-commerce situation portrays the qualities of both ‘alluring’ and ‘luring’ the customer, the average Indian either doubts or blatantly ignores such deals. Moreover, there seems to be a lack in advertising perse, if one compares the amount of promotions carried out by the competing ecommerce giants, to those cashback sites that offer a mediated, but fairly advantageous access to those websites. The cashback deals that the ecommerce sites offer within themselves also remain secondary in promotional strategies.

Along with that, this mediated access provides a virtual comparison chart amongst various deals and prices that different retailers have on offer, so that a practical and well-researched choice can be made. People usually look for ‘discounts’, but forget to take into account that the cashback provision is a perpetual discount in itself which can, over a period of time, turn into hard cash.

In this sense, cashbacks are a form of bargaining which, needless to say, is a widespread practice in India.  It is exactly this idiosyncrasy of a large part of the Indian population that defines the target audience for such sites, but the model is only gradually gaining popularity primarily because of the lack of awareness.

Amongst the many reasons for a very gradual increment in the spread and utilization of these initiatives, is the fact that rarely do sites offer instantaneous cashback rewards; the process is usually long and takes around 6 to 2 weeks before the cash is actually obtained. Also, all ecommerce websites offer a 30 day replacement guarantee, retailers take at least 45 days to two months to pass the final confirmation of the transaction to the cashback website. Therefore, the sites in themselves are bound to this time period before they can pass hard cash onto the customer. This is a deterrent to a majority of customers, especially those who do not shop frequently and thus, find the offer as worth the wait.

What can be done?

Of the various advantages associated with such sites, this model aids the popularity of small-scale ecommerce websites, which lack the funds for an impressive ad space, but can promote themselves by partnering with cashback websites. This also allows a customer access to all possible deals without having to limit themselves to ‘trusted’ ecommerce sites for each and every purchase. The customer can also pay indispensable everyday bills such as phone, internet, gas, electricity etc. through the deals that some of these sites offer, which entails a win-win situation for everyone.

Also, since the competition is staggering in intensity, these sites require rigorous digital marketing through apps, ads, social media, etc. so as to reach the average consumer on a larger scale. Thus, one needs to address the obstacles of marketing and the acute distrust in the credibility of such transactions. A huge impetus in increasing customer trust comes through peer –to- peer referrals. Thus, these sites should increase focus on the provision of incentives to current members who refer the site to their friends and acquaintances.