Cashback: definition, benefits and how does it work?

When asked how to combat inflation, one of the solutions can be summed up in a single word: cashback. While inflation generates a loss of purchasing power for consumers, cashback is a lever that can help increase it. And that's not all!

Cashback is a win-win strategy. Like consumers, sellers benefit from the many positive spin-offs of this model. But do you (really) know what cashback is? How does it work? And how can you effortlessly set up a cashback offer for your customers?

Follow the guide - all the answers are in this article!

Definition: What is cashback ? 

Cashback  enables consumers to recoup part of the amount spent on a purchase. In the form of credits, points or cash. 48% of French people report using at least one cashback program (source: Ipsos study 2024).

Most often, this partial reimbursement model is between 0.5% and 20% of the amount spent. A handsome reward for shoppers. With INSEE forecasting a 2.2% year-on-year increase in consumer prices (as of June 2024), cashback can help combat inflation.

Although this type of commission also exists in physical stores, cashback is developing mainly on the Internet. On e-commerce sites, marketplaces and specialized platforms linked to partner sites. Purchase after purchase, Internet users save money. Not to be confused with promotions!

What's the difference between cashback and promotion?

In the jargon of online shopping, it's not uncommon to confuse cashback with promotion. But these two strategies are quite different:

• Promotions are fixed before a purchase. Discounts are set by merchants during sales, Black Friday, or at other times of the year. The price of the product is therefore altered, for example by using promo codes.
• Cashback takes place after the purchase. This "return of money" is a refund. It does not alter the price of the product: the customer pays at the posted price, but benefits from a reward after the fact.

In short, cashback is a deferred reward, whereas promotion is an instant reward.

However, you don't have to choose between these two forms of reward. They complement each other. For example, on our Rakuten marketplace, buyers who are part of our loyalty program (Club R) can accumulate both:

• A discount in euros on their first order
• Cashback credited to their customer account, up to 20% reimbursed on every purchase.

Perfect for saving money and (finally) getting your money's worth.

How does cashback work?

71% of French people say they know how online cashback works (source: Webloyalty and Kantar study). What about you?

Cashback works like a promotional offer: the seller defines the percentage he wishes to reward on his various products, with each purchase. Companies can set up the system themselves, or use a network of e-commerce players.

On the consumer side, it's just as simple:

• The customer joins the brand's loyalty program.
• They make a purchase: cashback is mainly developed online, but also works in certain stores. On Rakuten, cashback works on new or second-hand purchases.
• After the purchase, the customer recovers a percentage of the total amount spent.
• This amount is added to the customer's cashback, or in the form of points.
• Customers can then use their cashback to finance future purchases!

Here are a few examples of possible cashback on Rakuten partner sites:

Cashback: what's in it for the customer?

This form of reward offers many advantages to shoppers. Here are just a few of them:

• Saving money: by recovering part of the amount spent, customers reduce the actual cost of their orders. For regular or high spenders, this is a great way to benefit from savings.
• Flexible use of rewards: depending on the site, cashbacks are paid out in the form of credits, points or euros. Internet users are free to choose how to use their rewards.
• Flexibility in obtaining rewards: conversely (and upstream), on some sites like Rakuten, it's possible to accumulate cashback from over 2,000 partner sites! The cashback can then be spent on Rakuten.
• Ease of use: a cashback offer can be activated in just a few clicks. It couldn't be simpler. Forget the days of collecting coupons and hard-to-remember promotional codes! Browser extensions like Rakuten's Club R can also automate cashback with partner sites.
• More thoughtful spending: with cashback, users can compare offers between different merchants before finalizing their purchases. Consumers take their time to think things through, and avoid compulsive shopping.
• Discovery of new sites: 63% of customers are happy to discover new e-commerce sites thanks to cashback (source: Syndicat National du Marketing à la Performance (SNMP) study).
• Increased confidence: when a cashback offer is made, buyers gain confidence in the website they are visiting. For 75% of those surveyed, cashback is a sign of confidence when shopping online! (source: study by the Syndicat National du Marketing à la Performance (SNMP))

Cashback: what are the benefits for merchants?

Cashback is also a virtuous circle for merchants. The benefits are as follows:

• Attracting new customers: as we've just seen, 63% of consumers discover new sellers thanks to cashback. Furthermore, 42% of French people consider cashback as a decisive factor when choosing an online retailer (Ipsos study 2024). When a site offers competitive cashback, it's easier to capture consumers' attention and encourage them to make a purchase, thus boosting sales.
• Retain existing customers: 71% of e-tailers consider cashback to be a powerful tool for acquiring and retaining customers. Rewards keep customers coming back for future orders. Bingo, it's an excellent lever for customer loyalty and retention!
• Improved brand awareness: by relaying cashback offers on platforms or via marketing campaigns, the company attracts attention... And increases its brand awareness and visibility. Perfect for reinforcing brand image in the face of other market players.
• Competitive edge: speaking of market players, cashback rewards are an effective strategy for standing out from the crowd. Competitors who don't offer this type of reward are instantly less attractive!
• Increase in average shopping basket and frequency of purchase: e-retailers who have implemented cashback report a 10-20% increase in their average shopping basket, and a 2-fold increase in frequency of purchase (source: study by the Syndicat National du Marketing à la Performance (SNMP)).
• Increased conversion rate: this increase is around +5% with cashback. A significant lever for growth! (source: SNMP)

For relevant advice on improving your strategy, read our article Marketplace: A practical guide to boost your e-commerce business.

Example of a cashback program: Rakuten's Club R

At Rakuten, we've made cashback one of our top priorities. To enable consumers to save, and sellers to acquire and build loyalty.

Our cashback program is called "Club R":

• 13 million members
• 900 € purchasing power on average
• 40% higher average shopping basket than non-members

Through this free, no-obligation loyalty program, members receive up to 20% cashback on every purchase... whether on products bought from the Rakuten marketplace or from the network of 2,000 affiliated partners (including Booking.com, Nike, Lego, Apple...).

The cashback is financed by Rakuten, and takes the form of Rakuten Points. According to Fevad (2021), we are the most generous e-commerce program in France!

So, are you convinced by this win-win system for both your brand and your customers? Now all you have to do is implement it.

How to deploy a cashback strategy easily with Rakuten France?

Would you like to invest in cashback, but don't know where to start? Follow the guide:

1. Join the Rakuten marketplace

Start by creating your Rakuten account by filling in this form.

After registering, simply complete these 4 steps to start selling on our platform:

• Activate your Rakuten E-Shop using the code sent to you in your confirmation e-mail, then configure it.
• Import your products onto the platform.
• Customize your shipping costs.
• Activate payment for your sales by completing the KYC procedure.

Then, your ads will be eligible for the 5% cashback, financed by Rakuten. The only exception? Products covered by the Lang law of August 10, 1981, which imposes a single price on new books in order to protect the industry.

2. Create additional cashback campaigns

By becoming a Rakuten seller, you can manage your development strategies on a personalized basis. You can offer up to 20% extra in Rakuten Points, available only on your offers. Feel free to boost your growth!

If you activate additional cashback campaigns, you can offer your customers additional discounts without affecting the face price of your products. Ads with additional Rakuten Points discounts are automatically promoted on the most attractive positions on our platform. Here's an example The high-traffic Rakuten Deals page.

This additional cashback service works on a performance basis. You only spend what you generate. An economical choice for you, and one that your customers appreciate. In fact, shoppers are more interested in offers that multiply the points they earn in their cashback.

Imagine: you offer a 10% discount in points on a day when Rakuten is offering 20%. Your customers (Club R members) benefit from a double advantage and 30% cashback! The results? They take action without hesitation.

3. Calculate your budget

Before rushing into the cashback exercise, don't forget to calculate your budget.

Let's take the previous example. On a Rakuten Day, when Rakuten finances 20% of the platform, you offer an additional 10% commission in points.

A Club R member selecting a €200 product in your store will receive :

• 10% x 200 = €20 thanks to your Rakuten Points campaign
• 20% x 200 = €40 thanks to Rakuten Points financed by Rakuten

Your customer will receive a total discount of €60!

To define your budget, you need to calculate a percentage of business volume that will be generated over a set period. For example, if you set up a 10% points campaign on a selection of products, you'll need to calculate the volume you'll generate and apply 10% to it.

It's up to you to set the discount percentage to suit your budget. You can also adjust it at any time. And if in doubt, ask your E-commerce Consultant for advice: he'll help you define the best budget and strategy to boost your growth.

4. Analyze the performance of cashback campaigns

A cashback strategy doesn't stop when you deploy it. Keep track of the results over time!

In fact, your ads benefiting from additional Rakuten Points are automatically highlighted on the most attractive sites on the Rakuten platform, including the Rakuten Deals page. These ads are also promoted on product sheets, on your e-shop and on our various acquisition levers.

Your mission (if you accept it) is to monitor the performance of these campaigns, on the different sites. Analysis can be done in real time. From your Rakuten seller space, you have everything you need to manage your budgets, identify the most effective offers and optimize your ads.

On your marks, get set... Launch cashback, analyze, optimize, then do it again.

To win over new customers, retain old ones and increase your average shopping baskets, discover Rakuten cashback. Our 13 million Club R members are waiting for you. What are you waiting for?