1. In Indian e-retail, cash back ensures repeat purchases

In Indian e-retail, cash back ensures repeat purchases

Cash-backs are an add-on benefit to the customer. Any money the customer gets can be transferred to a linked bank account or a mobile wallet.

By: | New Delhi | Updated: November 4, 2015 1:51 PM
On Tuesday, the Alibaba-backed Paytm, the newest kid on the e-retailing block, announced 100% cash back on selected products.

On Tuesday, the Alibaba-backed Paytm, the newest kid on the e-retailing block, announced 100% cash back on selected products.

Discounts offered by e-commerce firms in the form of a cash-back offer could add up to Rs 2,500-3,000 crore in the current year, accounting for about a fourth of the total discounts of Rs 10,000-12,000 crore, according to industry players. In 2014-15, cash-backs amounted to just around Rs 500 crore. While etailers are perhaps the most generous, others like Citibank are also joining in — the bank offers cash back of Rs 1,500 on every domestic air ticket purchased on MakeMyTrip.

On Tuesday, the Alibaba-backed Paytm, the newest kid on the e-retailing block, announced 100% cash back on selected products. Saurabh Vashishtha, vice-president, business, at Paytm, told FE the move was aimed at ensuring more repeat purchases. “Our customers use the platform four times a months while the industry average is three times a year,” Vashishtha said, adding that any cash that a customer gets back accumulates in the Paytm wallet and can be used to pay utility bills or to buy an item. Money, however, cannot be withdrawn from the wallet though it can be transferred to another customer’s wallet.

Vivek Agarwal, founder and CEO of Compare Munafa, believes cash-backs, as a share of total discounts, could double over the coming year. “Cash-backs are an add-on benefit to the customer,” Agarwal said, adding that any money the customer gets can be transferred to a linked bank account or a mobile wallet.

Ankita Jain, co-founder, GoPaisa, which routes cash-backs for etailers such as Flipkart, Amazon, Paytm and Snapdeal, says there are special products on offer this Diwali that will cost customers just R11. While in the normal course the etailer funds the cash back, for the special offer GoPaisa will be bearing the expense. “While the product may cost more, the balance will be credited in the customer’s GoPaisa account which can then be used for further purchases,” Jain explained.

GoPaisa’s top line comes from commissions earned by it from e-retailers which are typically around 7.5%. For the Diwali sales however, the commissions will be a much higher 20%. Last Diwali, total transactions via GoPaisa amounted to Rs 1 crore; this time around, transactions have already hit Rs 29 crore, the company said.

Till as recently as two years ago, cash-backs were offered by banks or credit card companies, but with the growth of mobile wallets and companies that route cash back, banks now account for only 20-25% of the total cash-backs. Cash-backs range from anywhere between 5% and 40%, depending on the product.

Around 20% of the gross merchandise value generated in the digital commerce space is accounted for by affiliate players including comparison websites, coupon companies and cash-back companies.

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