Retail TouchPoints: Ebates Cash-Back Shopping Site Scores Double-Digit Sales Growth for Retailers
By Debbie Hauss
Through
a special arrangement, presented here for discussion is an excerpt of a
current article from the Retail TouchPoints website.
Macy’s, Kohl’s, 1800Flowers
and Sephora are just a selection of retailers
who are investing in cash-back shopping to boost online sales. The average
year-over-year growth for retailers who participate in the cash-back program
on Ebates.com is approximately 20 percent, according to Kevin Johnson,
president and CEO. Prior to the recession, Mr. Johnson adds, year-over-year
growth was consistently at approximately 50 percent.
“When the economy
recovers we expect to see this type of growth again,” said Mr. Johnson.
To participate, retailers commit to share a portion of their sales commission
with consumers. “It’s a win-win for the retailers and the consumers,” says
Johnson. Retailers benefit from increased sales and consumers who sign up
for a free membership receive cash back for all their purchases completed
through Ebates.
To date, more than 1,100
retailers have signed on with Ebates.com to reach more than eight million
shoppers enrolled in the program.
Since Ebates was founded in 1998, members have spent more than
$1.3 billion at participating retailers and have received more than $40
million in rebates. The average basket size for Ebates members
is more than $100, resulting in an average quarterly rebate check of $30,
according to Mr. Johnson, “But we regularly send out checks for thousands
of dollars” to shoppers who make larger purchases.
Cash-back awards vary
depending on the product category, Mr. Johnson said.
“Higher-margin products can give back as much as 26 percent; shoes and
magazines average 10-12 percent; clothing and accessories are in the 6-8
percent range; and consumer electronics and travel may return 2-4 percent.”
Most recent Ebates statistics
show that appliance retailers and department stores/mass merchandisers
are experiencing the largest sales increases. Year-to-date, Appliance sales
were up 209 percent and Department Stores increased 121 percent. Health
and Beauty also is a strong category, up 64 percent, and Clothing increased
41 percent.
While retailers are only
required to commit a voluntary percentage of their sales commission to
join the Ebates program, they also can participate
in paid promotions to bump up sales. Recently, 20 retailers who participated
in an Ebates holiday promotion averaged 90 percent
year-over-year growth.
Mr. Johnson attributes
much of Ebates’ success to quality customer service
and a strong partnership with the merchants. Retailers participating in
the Ebates program often offer exclusive deals
and special promotions to Ebates consumer members. “We
have a really good relationship with our retailer partners and in exchange
they provide exclusive deals to our members,” he said.
Discussion Questions:
What do you think of the potential of Ebates.com and other cash-back
shopping websites? Should retailers be more aggressively pursuing such
programs?
Retailers need to understand the total economics of this before committing themselves too deeply. First off, they need to understand how the economics with the cash back compare to other channels. Second, since the overwhelming majority of purchases researched online are still made in stores, there is a tradeoff between using online advertising (esp Search) to drive to the store, to my own website, or to sites like these.
Of course, if a consumer specifically goes to a cash-back shopping site, and I make money off the sales, then I want to sell to that consumer in that channel. But if they are just searching, for many products and the corresponding search terms, it may well pay to invest more to drive them into my store instead.
I’ve been an ebates member since 1999. I’m surprised that they aren’t more well-known. I doubt that there will be a huge surge of traffic to a site that has been established for 10 years unless they plan some increased spend on marketing.
With all of the options to go through frequent flier portals, UPromise, Bing cashback, MyPoints, and eBates, I’m not sure why someone would make a purchase without getting a rebate or other perk.
(Unless you are buying through Amazon, which never participates in these sites.)
Excellent point. Retailers should be careful that they are not substituting a search marketing arbitrage play for a real search marketing strategy. Their own expertise and resources (or lack thereof) may make it worthwhile, but it should not be a long-term substitute. To the extent such services have built their own loyal customer bases, then consider them as you would any other direct marketing opportunity such as a list rental or other program.