I wonder how some online shopping sites provides cash back offers. Are they losing money? I know some sites used to increase the money of product and then give cash back offer. But I have seen some sites where they sell products in same price and then provides good cash back offer. So I wonder how they are doing it? Is any one having experience such cash back offers? I wonder how they can offer such cash back.
I often thought about this but the only other way I can think of is may be they get these products from the production site in bulk and hence much cheaper or as a donation so that they can afford to give out the cashback offers.
This is one of possibility. But this is really amazing. You must heard about paytm in our country. They were offering one tablet phone in 17000Rs, I checked on each site and price was same, even on brand site it was the same. But paytm was offering 2000Rs cashback after purchasing. So my cousin pay 17000Rs and during shipping he got 2000Rs back in paytm account. So that's really amazing. Its not like small amount for sure. That is why I wondering how they can offer such big discount or cashback offer.
Well, that is one of the many ways of marketing selling techniques. That is actually, as far as I know, when I studied salesmanship in college, an approach to attract customers. It simply is the indirect approach to vouch for a good quality of the product. That is what we call reverse psychology. Most customers who avail of that offer never request for their money back.
I think the price of products we buy on shelf has already been marked up, perhaps a lot. Hence they might still be able to earn even though they give cash back rewards. They might just give cash back rewards for some items, and they still earn more for other items if the customers buy those. I also think attracting and retaining customers are good for long term, and they will gain more in future too. I learned from my senior in my ex-company, they really marked up the price a lot, then they gave discount. She told me the customers would feel happier this way, even though the price might be the same or more, when they see the discount, they thought they are saving money.
@Nakitakona Its not like as you thinking. Just read the above comment I replied to decentlady. It is like when I purchase something that site give me money back just as an offer. Not like we need to ask because of some problem. One of my cousin purchased tablet in 17000 Rs, (which was the rate in all site) and he also received 2000Rs back as cash back offer. So in the end he got it in 15000Rs. So how this site offering it in such price cut. All other sites are having that high price only (even the original company site showing same price). @kaka135 But such big cashout!! Suppose item is of 260$, and they are giving cash back of 30$ after purchase when item gets ship. I have checked other sites for same product they were all showing 260$ without any cash back. Also the product official site were showing same price. So how can one site offer 30$ as cash back, it's not that small amount. Is it means that other sites are taking that much more commission or something like that.
Remember a lot of these products would have been bought by the companies for really cheap and then marked it up by a lot to ensure they make a pretty good profit. This means that even though the cash back offers will look like they are losing a lot of money, most of the time they will either be losing a few pounds or just breaking even. I think for these companies the exposure to potential customers is worth more than the profit they make
Before a shop would decide to offer cash back then they would have worked out the formula to sustain the offer without going bankrupt. Although I am yet to benefit from this kind of sales arrangement but I may not be too surprise how the shops are able to organize a type of money back. They must have worked it out.
@kingcool52 Even I was thinking the same, but that should be correct for each sites , right. Here I have seen that all sites were offering that high price. But only one site was offering good amount of cash back. As I said the amount of cash back was good for sure. So I am surprised why it is offering that product with that much discount. If this site is still not having any lose then is it means that other sites are taking too much earning. It is bit confusing.
@naruto100 I am actually not surprised the shop actually still makes profit even they give $30 cash back. For some products, they might even mark up the price more than half or even double. Do they give cash back to all items or just one particular item? All the time or just within a period? I am thinking even if they are not making profits for that particular item when they give the cash back offer, they might still earn more from selling other products. Moreover, if this marketing technique helps to attract more new customers, it's still good for them in long run even if they really make some losses for the cash back.
One thing I am sure of before a company decide to render cash back offers on purchases they must have made enough profit from the earlier sales of the items. This may just be a way to promote more sales and attract more customers to the business. For sure the cash back program will most likely be short-lived but before it ends it must have make a remarkable big change in the company's customers' base.
@kaka135 I know one thing that nobody is going to give something for free. So yes they are making profit for sure. About your questions. The site I use is providing cash back on almost all products and every time. When I compare same products on other site, they all have same price. But this site do offer cash back. I wonder why. So this is only means that other sites are getting big commission for it, or the site I am talking about it having some direct contacts with manufactures so that they are selling them with cashback. Can't assume more. Lol.
I can only guess that the store is sharing part of its commission as dealer to clients to move the products out to a wider customer base at a much faster time. In my country, for instance, dealer's commission can run from 10% to 30%. A dealer may opt to give further discounts, or in your case, cashback, over the list price to increase store patronage. Hence, while a manufacturer's price may be the same among stores/sellers, a store may opt to charge less and take less profit per item but potentially more profit in total due to higher sales volume. This is true whether a store is online/offline. A mall-based appliance store here can give discounts over and above the discounts that's being offered openly by the store but only if you ask for it. So it pays to ask if the store can give further discounts though the price appears fixed in malls.
@Jamille Yes exactly. May be it is like that. But it is hard to believe as even on official sites prices are high but on other site they are giving cashback/discount which is quite high. I wonder why. If officials sites itself start selling products at low price then they may not need to give any kind of commission to other sites.
