Today, I am going to talk about a startup known as ShopBack. ShopBack is basically a cashback portal for online shopping. Do take note that I am talking from the point of view of an end user and I have no known contact with any stakeholders in ShopBack.
The way ShopBack works is that when you do your purchases through ShopBack, the merchants will pay ShopBack a referral fee. ShopBack will then give you a small percentage of your purchase amount from that referral fee. It has a good coverage of merchants, ranging from Lazada to Agoda, covering lifestyle and travel vertical extensively. You can even get a 1% cashback when you purchase from airlines, not bad for a necessary spending when you go travelling 🙂
Initially, I was skeptical that the prices will remain the same when you go through ShopBack’s platform, but after some in depth comparison, I found it to be nearly identical. I was from then on convinced that this is truly a savings portal when I spend. As an analyst, I then thought a bit deeper about the strategy that ShopBack is using. They are trying to position themselves in the mind of consumers that when people spend through ShopBack, they save. And in fact, they do save and this branding is going to be etched deep into the mind of consumers. The question is really whether this true savings will last for consumers before businesses get competitive and try to increase their profits.
I have a few key questions I ponder about when I think a bit deeper about ShopBack’s business model:
- Does that mean that the merchants will forever be reliant on ShopBack as the middleman?
- Will ShopBack eventually make a tweak to their algorithm and increase prices when margins are sliced?
- Will this model be able to be replicated across multiple markets based on the savings point?
- The curation of high quality merchants are necessary to ensure the viability of the platform so which party will eventually have more leverage in negotiation? SR and LR?
- How easy/difficult is it to scale across multiple markets with the curation of merchants and how long will it take for ShopBack to hit their critical mass?
- Consumers today are very smart, especially savers so when the time comes for ShopBack to decrease savings, or increase prices, will they still stay with ShopBack?
Essentially, I believe that this is a marketing play, slightly similar to Groupon. Groupon contrary to popular belief, is not a pure discount site. It is a promotion site because they have managed to attract a massive user base who consistently buy from them. Sometimes, there might be some slight discount, but it is primarily positioned as a marketing channel from firms and businesses. However, the backend work that goes into ShopBack is much higher which creates a question about its costs and viability in the long run.
With that said, I am still going to enjoy the savings ride. I do not know when it will end or will it ever end but until then, sign up for ShopBack at this link: https://www.shopback.sg/?raf=ZECbFQ and get some welcome bonus for both you and me 🙂