Ecommerce companies losing interest in cashback firms, working towards profitability through customer loyalty

In what can only appear to be tough luck for third party services in ecommerce, leading players are gradually bringing down their dependence on the former. Flipkart is reducing its reliance on affiliate programs and turning its attention to other apps. Amazon has altogether closed down its association with third party service providers. Snapdeal has cut its commission to its affiliates by a drastic 40-50%.

The pressure to produce tangible financial results is influencing this trend.

Quality is what rakes in the money, not quantity

Experts also feel that moving away from cashback is prudent. Vikas Choudhury, MD of AIMIA India, a loyalty and analytics consultancy, opines,

“Cashback is nothing but discounting and appeals to the deal-hunting buyers. It is the opposite of loyalty”.

Studies have indicated that if resources spent on acquiring new customers are reduced, it has a significant impact on profits. Which explains why companies are aggressively looking to retaining a loyal bunch of customers.

Cashbacks not helping parent sites

Just a few months back, all the leading commerce players were digging cashbacks big time.

“Cashback acts as a benefit for the user and eventually helps ecommerce players to gain traction, spearhead their new customer acquisition model and do more business at reduced costs,” claimed Swati Bhargava, co-founder of Cashkaro.com, a cashback site.

However, the tide is changing. Amit Chaudhary, co-founder of Lenskart says,

“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,” indicating that the thrust is now on finding and retaining long-term customers.

Rohan Bhargava, co-founder of Cashkaro.com admits, “Niche sites such as 1mg and Healthkart have increased commissions.”

Paytm was hoping to beat the biggies with its festive cash backs, but has now turned to other options like billing, mobile recharge and ticketing. Some cashback companies may cling to hope, however, the focus is clearly on more lucrative options to make money.