 "Making the most of cashbacks")
A mobile phone that costs Rs 50,000 is available on an e-commerce website for Rs 42,000. Another website is offering Rs 10,000 cashback on it.
So, it effectively costs Rs 40,000, provided you pay through a particular mobile wallet. Which is the better option?
Paying through the mobile wallet can save you Rs 2,000 more than the first e-commerce website. But, the money remains in your wallet for you to spend in future. Whereas in case of the first e-commerce website, it is a direct of saving of Rs 8,000 upfront. If the mobile wallet is an open wallet, you can use it to pay utility bills, cab services or at any store or website that will accept it. But, if it is a closed wallet, you will be able to use it only on those e-commerce websites, stores, brands, etc, which have a tie-up with the wallet.
Mumbai-based Sangeeta Irani, who has her own public relations company, regularly shops on Paytm and avails of cashback discounts of 10-40 per cent. The money saved goes into her Paytm mobile wallet account, which she then uses to pay for cab rides, recharge her DTH, etc.
The only problems she has faced so far were more to do with the quality and packaging of the goods she has purchased, which might be better on other e-commerce websites, she admits. "I purchased a Corelle dinner set, which costs Rs 12,000, for Rs 7,000. At an offline retailer, I might have got a discount of only Rs 2,000 or so. But, as the packaging was not good, some pieces were broken and I had to return it. The refund took some time,'' she says.
As a precaution, Irani does not keep above Rs 3,000-4,000 in her mobile wallet at any point of time. While purchasing from Paytm, she uses the mobile wallet for smaller amounts; for bigger purchases, she uses her credit card. "Always remember to use the code while shopping or else you will not get the cashback,'' she says.
Entities such as Paytm offer cashbacks to attract buyers and retain them. As compared to those offered on banks' credit or debit cards, the advantage of a cashback through your mobile wallet is that it is immediate. You get the money back into your wallet as soon as the goods are shipped, often in only a couple of days.
"For customers, the advantages are instant gratification and, two, the money can be used the way you want to. For us, it is the advantage that customers come back to our platform,'' says Saurabh Vashistha, vice-president, Paytm.
Paytm recently had a series of cashback offers up to 100 per cent on different categories. The first was on fashion, sports and kids (toys); followed by home and kitchenware and then electronics.
In case of open wallets like Paytm, you can even transfer the money back to your bank account or debit or credit card.
You will not be able to do so with closed wallets.
While cashbacks and discounts are an effective way to reduce the cost of products, users should first read and understand all the offer conditions.
In case you have not done the Know Your Customer (KYC) vetting for your wallet, you can only get a highest of Rs 10,000 as cashback. That is the maximum you can maintain in a non-KYC wallet according to regulation. This means if you are entitled to Rs 13,000 as cashback on a purchase, you will get back only Rs 10,000 if you have not completed the KYC. The remaining Rs 3,000 will be credited to your wallet only the following month, says Vashistha.
Always compare the price of the goods to see if the discounted price after the cashback is actually lower or not, advises Manish Chopra, co-founder, Little, an app-only marketplace for deals in the online-to-offline (O2O) space. Using the app, customers can get discounts in online stores, restaurants, spas, theatres and on services such as laundry.
"If the cashback is being offered after marking up the price, it is not a real discount. So, don't blindly buy only because of a cashback offer. Also, it is better if you get a cashback on your current purchase, rather than a discount for your next one. For, you will then be forced to return to that same merchant or to the same website for your future purchase,'' he says.
Sometimes, the cashback might be only for the first time you purchase from a particular merchant or for using a wallet for the first time. Or it might be only for certain customers. Vashishta says, "Some merchants might offer cashback only for their regular customers. It is possible to structure selective cashback programmes. Or, if a utility company wants to encourage customers to pay bills online, it may offer cashback for those paying online for the first time. The idea is that once people get used to the convenience, they will continue to use it.''
Feature and ease of convenience is what Oxigen, another mobile wallet service, hopes will attract and retain customers in the long run. Rachna Prasad, its marketing head, says, "cashback is a win-win from a customer point-of-view. But, we offer it selectively. We know we cannot continue it for a long time. So, we don't do it on a blanket basis. Currently, we are offering cashback on first-time usage for recharge and for movie tickets with PVR.''.
Virender Gupta, head of PayUmoney Wallet, agrees cashbacks are more of a strategic promotion for merchants and there could be a cap in terms of frequency and amount.
"Users get cashback into their wallet on paying with PayUmoney on certain merchants. This is in the range of two to 20 per cent and for only select partners. For all other merchants who use the PayUmoney check-out, we offer a one per cent discount on the transaction value,'' he says.
Fine print
If the cashback comes back after a long while, say a month or so, of if you have to give proof of purchase such as invoice number, etc, it acts as a deterrent, says Pratap T P , co-founder and CMO, Qwikcilver, an information technology company that offers end-to-end gift and stored-value card solutions for retail customers. "Sometimes, cashback might be for a percentage of total spends but with a cap on the total amount. Or one might need to spend a certain amount. One should watch for such conditions,'' he says.
For instance, Qwickcilver has partnered with about 150 brands across categories like apparel, lifestyle, electronics and travel to offer reward points in its Woohoo app and Woohoo online store. However, these points can be used only to purchase those brands. In such cases, the reward points are useful only if the app or website has tie-ups with a large number of partners.
