How Does ShopBack Make Money? ShopBack Business Model In A Nutshell

  • ShopBack is a cashback reward scheme available in the Asia-Pacific region. The company was founded in 2014 with co-founders looking to profit from the cashback reward scheme in the Asia-Pacific region.
  • ShopBack operates a marketplace business model and earns most of its revenue from affiliate commissions. Industries with higher margins tend to earn higher commissions, with a percentage then shared with the customer in the form of a cashback reward.
  • ShopBack also sells prominent advertising positions on its website and mobile app in the form of a flat fee.

Origin story

ShopBack is a cashback reward scheme available in the Asia-Pacific region. The platform was founded by Henry Chan, Joel Leong, Derrick Goh, Lai Shanru, Samantha Soh, and Bryan Chua in 2014.

The idea for ShopBack was born one night when Chan and Leong were brainstorming entrepreneurial ideas in the car. The pair knew each other from their time at fashion retailer Zalora and were looking for ways to profit from the cashback rewards scheme – which had seen great success in the United States among other countries.

When ShopBack was launched in 2014, the entrepreneurs eventually settled on a year-round cashback model where shoppers could receive a proportion of their money back on purchases from specific retailers. The platform was slow to grow at first, with some consumers finding it difficult to believe they could receive money for something they were already doing for free. However, uptake began to increase as ShopBack made an effort to target price-conscious mothers and young professionals.

The platform disrupted the traditional advertising model that made companies such as Google and Facebook profitable, delivering better results for merchants at a lower cost. In an interview with Malaysian business publication Options, Leong described this advantage: “In the e-commerce space, merchants always want to diversify their online marketing spend, which is understandable. We are always able to offer better rates than Google or Facebook because we charge on a cost-per-sale model. With Google, for example, you get charged even if there isn’t a resulting sale.

Today, ShopBack operates in nine Asia-Pacific countries, including Australia, Indonesia, Malaysia, Philippines, South Korea, Taiwan, Thailand, Vietnam, and Singapore. Across this region, the platform has almost 30 million users who have driven $10 billion in revenue for more than 5000 participating merchants.

ShopBack revenue generation

ShopBack operates under the marketplace business model, connecting merchant sellers with buyers who are looking to receive cashback on purchases.

The company makes money via two strategies which are outlined below.

Affiliate commissions

The majority of ShopBack revenue is derived from affiliate commissions.

Essentially, merchants pay ShopBack a commission in exchange for sending them customers who are motivated to spend money. The company then shares a portion of this commission with the customer in the form of a cashback reward.

Consider a scenario where a ShopBack customer purchases a $120 pair of jeans. The participating clothing merchant must pay a 5% commission which is then shared between the customer and ShopBack.

Exact commission rates are undisclosed, but in an interview with McKinsey, Leong stated that the total commission depended on industry-specific margins. For example, online travel agencies with higher margins may pay a commission of 10 to 13% whereas general marketplaces margins are much lower with commissions as low as 1 to 2%.

Advertising

ShopBack also makes money by selling advertising spots on its website or mobile app. 

On the website homepage, for example, there are two prominent banner ads above the fold advertising various brands and promotional events.

The company is compensated by advertisers in the form of a fixed fee for the duration of the ad.

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