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How does a cashback deal work out for you?

FINANCIAL CHRONICLE | KUMAR SHANKAR ROY
Published Nov 21, 2015, 3:46 pm IST
Updated Mar 27, 2019, 12:56 am IST
Cash as a number attracts more than discount
(Representational Image)
 (Representational Image)

Kolkata: A cashback of Rs 1,000 on purchases worth Rs 5,000 at a leading shopping portal is enough reason to grab eyeballs. An instant cashback offer makes deals offered by multiple firms like banks and e-retailers sound fantastic. But what is really a cashback deal? How does it work? Is it just the old ‘discount’ in a new bottle? We demystify the hidden world of cashbacks and tell you what’s the behind- the-scene details of this latest fad that’s making everybody go gaga. Read on

Anil Rego, CEO & founder of Right Horizons, hits the nail on the head when he says cashbacks are a good business model for many firms. “This helps them to make money by e-commerce commissions or through the advertising revenues. It is more of a derivative of traditional discount models,” Rego says.

 

That’s it. It is another discount but, of course, packaged very differently. The use of the word ‘cash’ makes us feel as if we have earned the money.

“Cash as a number attracts more than discount. Fundamentally, there is not much difference between cashback and traditional discounts, but cashback gives a rupee value which looks attractive versus discount,” avers Rego.

Can you spot the difference between the two?

Discounts are received immediately on purchases since the price is already reduced to the mentioned extent whereas in the case of cashback, the same is credited either to one’s account or available on the next purchase, depending on the terms and conditions.

 

Bear in mind that cashbacks are usually conditional, i.e. applicable only if the purchase amount is more than a certain sum.

For example, make purchases above Rs 10,000 and get 10 per cent cashback.

Deal4loans co-founder Rishi Mehra feels that cashback is an incentive, which is over and above the discount that e-tailers offer to their customers. In some cases, the cashback amount is refunded in the mobile wallet of the customers, which they can use for further shopping, mobile recharge or payment of utility bills. Cashbacks ensure more money at the disposal of the customers. Fair enough. Money saved is money spent, right?

 

“As e-tailers offer discounts throughout the year, customers do not find it very tempting. However, cashback offers prove to be the proverbial icing on the cake. Depending on the purchase amount, cashbacks can be as high as 40 per cent,” says Mehra.

Why do e-tailers offer cashback? E-retailing firms adopt various tactics to attract more customers. While discounts are used to woo them, cashbacks help in retaining customers. As e-retailing firms offer consumers a wide range of options and offers and internet is a free world, retention of customers is a hard nut to crack for firms, says Mehra.

 

From that point of view, cashback offers provide a win-win situation to customers as well as e-commerce players.

There are a number of websites that offer cashback. Many websites also offer commission if you refer a friend or an acquaintance.

In this, you get a fixed percentage of the cashback earned by the person referred by you. Firms offering cashback earn through commissions or advertising revenues and pass on 5-10 per cent to customers as cashback, reveals Mehra.

Before you go on a e-shopping spree the next time, all you need to do is to log in to a cashback site. As you continue shopping, cashback keeps on accumulating in your mobile wallet.

 

Generally, a threshold limit of 30-45 days is fixed for the customers to claim cashback. After this period, they are free to redeem their cashback offers.

You can redeem cashback in your bank account, through mobile wallets or gift vouchers.

Opt for a website that has no threshold limit for cashback redemption. You must also remember that the cash accumulated in your mobile wallet cannot be withdrawn.

You can use it for making further purchases or transfer it to another customer’s wallet.

Right Horizons’ Rego feels that before going ahead with any cashback offer, a customer should ideally look at the following things:

 

1) Terms and conditions (T&C) associated with such cashback options, whether the same is applicable only on a minimum purchase amount.

2) The nature of cashback, whether the same is immediate or will be credited back after a certain period or the same will be available on the next purchase only if purchased through a specific wallet.

3) Also, check the extent to which the cashback is available, for example, a website may offer 20 per cent cashback on the merchandise but the same would be limited to only the first purchase.

Mehra feels customers need to remember a few more things to ensure that they are not fooled by random cashback offers.

 

To keep a track of your cashback, you can install a cashback notifier so that you can redeem it whenever you want, he says.

Next, before registering on a website providing cashback you must ensure that its mobile version is user-friendly. Websites such as gopaisa.com and encashit.com have effective cashback platform for purchases through mobile apps, according to Mehra.

It is also very important to check the process of cashback redemption properly in order to avoid any last-minute surprises.

 

 

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