How does Shopback make money?

By   |   Verified by David Boyd   |   Updated 23rd September 2021

How Shopback makes money
  • ShopBack offers a cashback rewards program for online shoppers.
  • Consumers can earn up to 30% cashback rewards when shopping at ShopBack merchant partners.
  • Your app or browser simply tracks online purchases at merchant partners, automatically allocating the cashback to your account.

Founded in 2014, Singapore-based ShopBack offers consumers the chance to earn cashback rewards on their purchases with participating retailers. Since its first round of seed funding in 2015, the company has experienced rapid growth, especially in the southeast Asian market. As of January 2021, the website has over 20 million registered users in 9 countries.

ShopBack has partnerships with hundreds of large retailers, both domestic and international, incentivising consumers to use its platform.

But is it too good to be true? Can you really get cashback just for shopping through their website? And if you can, how can they make enough money to stay in business? This article explains it all.

What does Shopback do?

Shopback’s main selling point is that its users can get up to 30% cashback on their purchases. Shopback’s cashback feature incentivises people to buy more and in larger volumes. Shopback collects a commission from its affiliates for every product they sell through Shopback. It then gives some of the commission it receives right back to the consumer, creating that ‘cashback’ feature.

The retail platform has a wide variety of products, ranging from fashion and beauty to travel and electronics. Its most notable partnerships are with brands in the tech, fashion, health and beauty, children's, food and travel industries.

The company’s current focus is onboarding more partners that are familiar to consumers. Its long-term goal is to increase transaction volumes made by users.

How does Shopback work?

Shopback is a service providing consumers with a way to earn cashback rewards on their purchases. The company teams with retail partners, incentivising them to join the network through increasing sales volumes with its user base.

Consumers can earn up to 30% cashback rewards when shopping with certain partners. Shopback is easy to sign up for and use, with a simple step-by-step method for using the service:

  1. Sign up for the Shopback platform and register your account. You need an account to access the service and receive cashback for your purchases. It only takes a few minutes to register, and you're ready to start earning cashback from your shopping.
  2. Download the app from the Google Play Store or Apple App Store, and install it on your mobile device. Shopback also provides a browser extension.
  3. Search for your favourite brands and deals offering the best cashback rewards.
  4. The app or browser tracks all the purchases you make online, allocating the cashback to your account on the platform.

After you finish shopping, your cashback amount reflects in your Shopback account dashboard. It can take a few days for the transaction to clear and your cashback funds to show up in your available balance.

Once the balance reflects in your Shopback account, you can withdraw it for use in financing anything you want. Shopback will transfer your outstanding cash balance directly to your nominated bank account or PayPal account.

To qualify for a withdrawal from Shopback, you need a minimum balance of $10 in your Shopback account. Shopback currently works with more than 1,500 retail partners, including top international brands. Earn cashback on your purchases and make huge savings in your online shopping with Shopback.

Some of the retail partners in the Shopback network include the following companies.

  • eBay
  • The Iconic
  • Booking.com
  • Amazon
  • Target
  • Dyson
  • Apple

How Shopback makes money

Shopback makes the bulk of its revenue from merchant fees it collects from its retail partners. That's because Shopback brings a considerable amount of business to its merchant partners. In exchange for increasing its order volume, the merchant pays ShopBack a fee, facilitating cashback to the consumer.

The company doesn't disclose its merchant fees. However, we assume that it charges merchants a transaction percentage of the total amount, similar to the way credit cards operate. We expect that figure to be anywhere from 2% to 5%. It's also likely that Shopback collects a fixed flat rate fee for all transactions. Typically, companies peg this charge at approximately $0.30.

It's important to note that Shopback doesn't make anything from the consumer. It doesn't charge membership fees to the platform, and it collects no fees for any transactions the consumer processes using its cashback system.

That's a great deal for the consumer, but it can add fees to the merchant. However, Shopback claims that merchants who add the service to their checkout experience a surge in new orders and greater order volumes.

Future growth engine

Shopback continues to dominate the southeast Asian marketplace. However, the company has plans to expand into the Chinese and Japanese markets as well as Europe and the United States. Unlike many other fintechs, the company claims it wants to focus on its core business model rather than branch out into different verticals. Shopback wants to dominate its current market and increase its user base and merchant partners in the coming years.

The company realises the bulk of its growth comes through new users and merchant onboarding. Both business functions are vital to its growth, and the C-suite acknowledges this as the company's primary growth focus.

Competitors

Shopback has plenty of competition from other cashback websites like Kickback and Cashrewards in Australia. Coupon websites also compete with discount offers. In addition, rewards programs like the Qantas Shopping Mall compete for user loyalty.

Cashback credit cards like those on offer from American Express are complimentary to Shopback and the cashback website model in general and are not considered a direct competitor.