E-commerce has increased the number of customers in India who prefer buying branded products. This is mainly due to the discounts buyers get on online platforms in the form of cashbacks. Have you ever thought why these companies provide cashbacks rather than providing direct discounts? Today, we are trying to put some light on this through the recent example of Coolwinks.
Founded in 2016, Coolwinks is an online eyewear store based startup which sells prescription glasses and sunglasses from various brands at affordable prices. The business model of Coolwinks is to provide better vision to millions of Indians with quality eyewear.
Coolwinks recently sold products at as low as Rs 5 per piece. Yes, you are that right, 2 sunglasses of Coolwinks were bought by many Indian online customers just at the effective final price of Rs 10. Now, this happened as buying 2 products at 800 each with applying SUN20 discount code at Rs 1510. It was all ok till this, but an additional cashback of Rs 1500 was available using Paytm as the payment method. Similar cashback was available using PhonePe and Paypal payment methods too.
This again takes us back to the question- why Coolwinks didn’t sell it directly at Rs 10? For knowing this we have the explanation below in main points.
Layality of customers
Companies mainly offer cashbacks for attracting customers. While other companies are spending millions on marketing, online companies gain the loyalty of customers through these cashbacks which is very expensive to earn for a new brand in this competitive market.
With cashback, Coolwinks wants to ensure that their customers will stick to the company for future purchasing.
Now when people bought products from companies with Paytm as payment wallet, it uses an affiliate system by which the company earns some commission from Paytm after the purchase is made.
The numbers game
Such cashbacks are also given because of the numbers game that brands play. A normal customer won’t buy sunglasses worth Rs 1500 but if he gets cashback plus discounts, there is no hesitation in buying the same product. This helps companies to make high revenue by which they attract venture capitalists to invest in them.
Very low advertising expenses
These cashbacks are the main expense of offering products at so low final price doesn’t need much spending on marketing and advertising. Instead, if the product quality is good, people help in the growth of brand by telling others about it which costs nothing to the company.
So, in short, it is also about creating high revenue. More revenue means more valuation which attracts more investors.
We feel this would have given you some idea about why companies offer cashbacks instead of selling the same thing on discounts. Do share your comments about this.