With savings for shoppers and increased sales for merchants, Shopback is intent on ruling Southeast Asia
Everyone loves a good deal but, occasionally or often, depending on who you speak to, not without first treating it with a good dose of skepticism.
Singapore startup Shopback, which offers cash rebates to online customers when they buy goods from merchants listed on its website, is familiar with that distrust.
“I will call it consumer confidence level. As much as we [consumers] are kiasu (Hokkien, a Chinese dialect, that translates to ‘afraid to lose’), we also want to make sure [that we are not cheated],” says Joel Leong, who is one of Shopback’s six Co-founders.
Even Leong’s parents have questioned him over how the startup can be profitable if it constantly pays people who use its service within a framework that is commonly known as a cashback rewards scheme.
“We get a lot of emails through customer service. My parents even ask me, ‘Then how [do] you make money? You give people money, then you earn what?’” says Leong. “But once they [the users] understand the [business] model, [they will understand that] we are actually like the sales agent for the merchants…then sharing the commission with them [the users],” says Leong.
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Shopback currently has about 500 merchants, with the likes of Lazada, Zalora, RedMart, and Taobao all listed on its website.
By setting up an account with Shopback and logging on to it before transiting to a merchant’s website to make one’s purchases, shoppers can reap savings generally of up to 30 per cent of an item’s selling price through cashback, according to Leong.
The sum that shoppers receive in the form of cashback generally constitutes 75 per cent of the total amount that Shopback gets from the merchant. The remaining 25 per cent is what Shopback keeps as revenue.
The division of the cuts that go towards the consumer and Shopback respectively can vary, however, depending on the merchant and the merchant’s popularity with consumers.
But Shopback’s priorities at the moment lie not in its profit margins but in acquiring as many users as it can, Joel says.
“If I need to cut my margins a bit to get more customers, I’m more than happy to do that. It’s a growth mentality for us now,” says Leong.
This hunger to grow its user base stems from a belief that it will help the company become the market-dominant force in Southeast Asia.
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“Being Number One in the market gives you an outsized advantage, especially in the digital world. There are a couple of reasons for this: The mind share you gain and the margins given to you by the merchants,” says Leong. “The margins that are given to you — as the Number One guys — [by the merchants] are definitely going to be different from the rest [other cashback websites] because you bring much more volume and orders.”
With Ebates, a global giant in online cashback shopping founded in 1998, entering Singapore last year, MilkADeal Cashback in Malaysia, and recent news of Jakarta-based cashback mobile app Snapcart’s US$1.6 million pre-Series A round, Shopback, even if it holds a substantial lead, is wary of competition from other players in the region.
According to SimilarWeb, a digital analytics tool, there was an average of 152,000 estimated monthly visits to Shopback in the five months between June and October 2015. For Ebates’ Singapore website, the same period yielded just an average of 12,000 estimated monthly visits.
In November 2015, when Shopback held Singles Day and Cyber Monday promotions in tandem with its merchants, estimated monthly visits to the site shot up to 310,000. Ebates Singapore only saw 15,000 estimated visits for November 2015.
“It doesn’t mean we should rest and lay low. Why can’t we become 20, 30, 40, or 50 times bigger than them?” says Leong, who proceeds to share a lesson in maintaining market leadership. “A lot of times, when we see leaders fall, it’s when they stop growing, so growth to us is important.”
This hunger Leong articulates in desiring to pull away from the competition is not without reason. A recent article in The New Yorker explores the winner-takes-all phenomenon in Silicon Valley illustrated by the successes of the likes of Uber and Google and the deaths of companies like Richard Branson’s ride-sharing startup, Sidecar.
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To grow its market share, Shopback is on a drive to educate people about the cashback model as well as how to use its website. The way Leong sees it, once people get the chance to use Shopback, they will be convinced of its value and help spread word about it, thereby fuelling more growth.
“The good thing is that we’re giving away free money. What we see is that once people get the money [in the form of cashback] for the first time, they not only become fervent users, but they tend to be fervent referrers as well,” says Leong.
Shopback also turns to physical booths at events such as the annual SITEX, a consumer lifestyle IT event, in Singapore, to reach out to potential users.
“There were people who were middle-aged and had never really shopped online before. We said, ‘We want to show you how this works. You can actually buy your NTUC Fairprice [a supermarket chain in Singapore] goods online,’” says Leong. “We need to teach them what this is about, and then they will gravitate towards it. If they don’t know that there is something like that, there is nothing they will gravitate towards.”
Besides these offline channels, Shopback also uses blog posts as a means to spread the word about what it does.
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Value to merchants
The greater the number of users Shopback acquires, the higher the potential sales merchants listed on Shopback can also get.
Shopback’s utility to these merchants therefore allows them to earn commission fees from them.
“When e-commerce first started, merchants thought it was the same [as running a physical store]. They set up their website and expected shoppers to visit. And then they look at Google Analytics and it’s a flat line and they don’t understand why,” says Leong. “The problem is that people don’t know about them [the merchants’ websites] so our goal is very simple: to bring traffic over to our merchants and, through this traffic, generate orders for them.”
While the merchants incur a cost — through the commission they pay to Shopback — for getting this traffic, Leong claims that this cost is lower than other forms of traffic acquisition like traditional paid marketing. On top of that, the cost is only incurred after the merchant makes a sale.
“It’s much cheaper to acquire customers or orders without having to pay for clicks or views. They [clicks and views] lead the customer to your site but whether they convert [to sales or orders] is a different story altogether. The beauty of this model is that [it] only charges you [the merchant] when it matters most, which is when you get an order,” says Leong.
As such, both Shopback and the merchant benefit in this symbiotic relationship catering to the shopper, who can be undiscerning at times about the differences between the two.
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Going beyond the call of duty
As a middleman between the shopper and merchant, Shopback sometimes has to deal with complications relating to orders, such as shoppers’ dissatisfaction with their food orders or payment methods.
“When they [shoppers] buy from the merchants, they don’t see them [the merchants] as separate [from Shopback]. They see us [Shopback and the merchant] as the same entity so they will call customer service [on Shopback’s side],” says Leong, who goes on to describe examples of such instances. “There was an interesting one where, in the end, we just helped her [a Shopback user] order the pizza…using her account.”
Ultimately, Shopback is in the business of promoting e-commerce as a lifestyle for people, which explains the centrality of education to the business.
Having hailed from Zalora, where he was Regional Head of Partnerships for Southeast Asia, the 28-year-old Leong says that the Rocket Internet school of e-commerce provided him (and four of his five other Co-founders) with the perspective of a merchant and the foundations for building a startup.
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“It made us more confident of being able to start our own business because we saw how a startup grew,” says Leong. “Our goal was really to assemble people who had sort of done it before. Not that we weren’t going to make mistakes but the number of mistakes made would be less.”
But they also knew that their group had to possess a variety of talents.
“We formed a team where everyone has different skillsets: merchants and partnerships, fundraising, graphic design, UI/UX (user interface and user experience), SEO (search engine optimisation), campaign management, and technology,” says Leong.
Using a pop culture analogy in describing the founding team, Leong says, “We like to call ourselves ‘The Avengers’ [a fictional group of superheroes with diverse powers] lah.”
With the sort of tenacity that Leong displays, this looks like a team not to be trifled with.
Also Read: Shopback nabs US$600,000 in funding led by East Ventures
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