Local sites set to cash in on international 'free money' phenomenon
Gavin Male estimates he used to get $1500 a year extra in his bank account, just from shopping using British online cashback sites.
Now New Zealand providers are hoping to offer Kiwi shoppers the same opportunity, tapping into the growing international trend for cashback sites – websites that offer shoppers refunds on their spending.
HOW DO THEY WORK?
Customers sign up for an account with a cashback site. They then click through to a retailer from that site, and complete their purchase.
In return for referring the customer, the retailer gives the site a commission. The cashback site then passes on some or all of that money to the customer.
It is an alternative to traditional advertising for retailers and is used internationally as a way to attract new customers and retain existing ones.
Male, who operates S.L.I.C.E Digital, technology that powers affiliate marketing platforms, said cashback sites were likely to soon be a much bigger part of the "online consumer shopping funnel". "They are very big in the UK and US. There is a fledgling market here and in Australia. But it's a massive way of getting a bit more for your shopping."
He said the delay in take-up in New Zealand was primarily due to a lack of local providers.
"It's a good way for advertisers to acquire new products, and a good incentive to encourage switching and competition. Particularly for commodity products. If you're buying a bunch of flowers and you always shop with Interflora but find through a cashback site you can get 10 per cent back if you switch to Auckland Flowers and Baskets, it could be the thing that pushes you over to try something new."
He said he used cashback sites regularly while living in Britain and had saved a lot of money.
"If you change your habits to go there first and then do your shopping, it's a good way of getting excellent kickbacks. For bigger ticket items, or household expenses, there are generally some quite high incentives."
He said some advertisers argued that they were paying to get customers they would already have had. But Male said it was possible for cashback sites to target their offers, so that people who had not shopped with a retailer before received better deals.
WHAT'S ON OFFER?
There are a number of big international sites with millions of shopper members, including Quidco and TopCashback. But they can be tricky to use from New Zealand because rewards have to be paid out via PayPal. Others, such as Saivian, charge a membership fee.
Now, local site Cashco.co.nz is launching, aimed at Kiwi shoppers. Freecashback.co.nz is also earmarked for development.
Cashco founder Aaron Senden said he had signed up about 75 retailers, including Strawberrynet, Boohoo, Max and Asos, and more were coming. Shoppers could then shop in the way they normally would, and as long as they were signed in to the Cashco site, it would track any transactions they made and give them rewards.
Typical cashback offers range from 3 per cent to 8 per cent but some retailers have offered up to 20 per cent in special offers. "I had someone this morning who spent $670 at hotels.com and they are going to get 3 per cent in their Cashco account," Senden said.
"We're trying to make it as easy as possible. It's comparable to other loyalty programmes but there are far greater returns."
He said retailers liked the idea of paying only when a transaction happened, rather than traditional advertising models where they would pay for space regardless. Senden said cashback sites were the "next wave" of shopping sites, after Trade Me, which operated in the model of eBay and Grab One, which emulated sites such as Groupon.
WHAT'S THE CATCH?
University of Auckland senior lecturer in marketing Mike Lee said customers using a cashback site needed to be prepared to hand over their personal details in return for the rewards.
He said most cashback sites would use the data they collected on their customers and their spending habits to allow retailers to tailor discounts and specials according to their interests.
"The only business sense it makes is if the cash that is going to the customer to be on board is less than the money they get for being able to conglomerate what they hope will be masses of detailed data on what people spend."
Lee said few people would bother to read the terms and conditions of a cashback site. "You don't know who owns the company or what would happen to your data if it's merged or sold. It's not always completely transparent what is going to happen with your data in the long-term."
British consumer watchdog site Which? warned that members should be wary of sites charging fees - and that sometimes customers could get a better deal than that offered by a cashback site by negotiating with the provider directly, or making use of another, non-cashback promotional offer.
MAKE IT WORK FOR YOU
As with any rewards system, you should only take cashback deals on things you were going to buy anyway. A hotel booking with a 10 per cent cash back is a good deal if you were already planning a holiday but if you are going out of your way to get the deal, you just end up out of pocket.
Look for the best deal overall, not just the biggest cashback available.