1. Ecommerce: Amazon, Flipkart, Snapdeal rethink cashback models

Ecommerce: Amazon, Flipkart, Snapdeal rethink cashback models

The new government norms on discounting and marketplace and investor pressure for profitability have forced e-commerce companies to rethink their business models.

By: | New Delhi | Updated: August 28, 2016 7:03 AM
GST Bill, GST bill today, gst ecommerce, gst bill today news, gst bill in rajya sabha Top e-commerce players such as Amazon, Flipkart, Snapdeal and Shopclues have rationalised their affiliate marketing initiatives this year.

The new government norms on discounting and marketplace and investor pressure for profitability have forced e-commerce companies to rethink their business models.

Top e-commerce players such as Amazon, Flipkart, Snapdeal and Shopclues have rationalised their affiliate marketing initiatives this year. With GMV in the e-commerce space down 20-25% during the first six months this year, a similar impact is expected on the affiliate marketing industry, say industry experts.

Industry sources say Snapdeal has cut down its commission paid to affiliate marketers by as much as 40-50% for existing customers in March.

Paytm, which was the darling of affiliate marketers due to its cashback offers, also stopped paying commission for its marketplace this year, shifting focus towards services such as ticketing, mobile recharges, billing, etc.

While commissions at Flipkart more or less remained stagnant, there is focus towards new customers and apps.

Amazon, which has a flat structure of advertising rates, has discontinued business with cashback and rebate sites.

“We want to enable customers to discover and shop directly on Amazon without the need to come through intermediaries. While we still work with rebating sites for enabling discovery of deals and prices, we have stopped any cashbacks from being passed on to the end customer,” says Kishore Thota, director, digital marketing, Amazon India.

Flipkart, Snapdeal and Paytm didn’t reply to emails seeking comment on their affiliate marketing commissions.

Research findings claim that it costs up to five to ten times more to acquire a new customer than to retain an existing customer and a 5% reduction in the customer churn rate can increase profits by 25% to 85% depending on the industry.

These factors have compelled e-commerce giants to attempt various ways to retain the ever-elusive ‘customer loyalty’, resulting in a discount syndrome.

“Cashback is nothing but discounting and appeals to the deal-hunting buyers. It is the opposite of loyalty,” says Vikas Choudhury, managing director, AIMIA India, which recently launched its Nectar loyalty programme for e-commerce players in India.

Big merchants are not seeing value in cashback models as direct traffic is getting diverted to the affiliate, says Ravi Kumar, founder, FreeKaaMaal.com. He also runs cashback site Cashora.com.

“Around 90% of the cashback sites are repeat users, while deals and coupon sites see 50% new users,” he adds. Lenskart is now working with only five partners in the affiliate space, which include CouponDunia, Komli and vCommission.

“Till last year we were working with 15 affiliate partners. We now work with fewer partners who have better capability of buying inventory, provide quality traffic and are doing better customer segmentation,” says Amit Chaudhary, co-founder, Lenskart.

Rohan Bhargava, co-founder of online cashback site CashKaro says due to investor pressure, e-commerce companies may have cut down on affiliate commission, but this is true only in the short-term. “Niche sites such as 1mg and Healthkart have increased commissions,” he says.

“In a mature market, a focus on the long tail of e-commerce stores becomes important as consumers become more open to the idea of shopping from smaller, niche e-commerce stores,” says Yosha Gupta, founder and CEO of LafaLafa.com, a cashback, coupon and product search company.

“We have started to focus more on such long tail niche stores,” she adds.

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