Why Do Retailers Do Cashback Deals?

witsa on 11/09/2025 - 23:25

Don't get me wrong - Cashrewards (RIP), Shopback, TopCashBack - I've used them all and I probably saved thousands of dollars from them over the years.

Still - it's kind of inconvenient. I generally figure out what I want first by browsing the site like normal, then I open up an incognito session so the referal doesn't get blocked adblocking or privacy extensions, then I log into the cashback site, go to the retailer via their link, then I find the product I want and buy.

I'm not sure if I'm just being overly cautious because I know sometimes the referral doesn't register. But it's to the point where if I'm only saving a few dollars, I won't even bother.

I guess the question is, what is in it for the retailer? If they wanted to offer a sale / deal, why wouldn't they just offer the discount on their site? That way, it's nice and easy for me - I can just browse their site and buy what I want. Instead, I've got to go through a middleman and purchase it without ever being 100% certain the discount will actually register.

What's more strange - the discounts can be really large as well. Several of the VPNs regularly offer 100% cashback through cashback. So not only are they giving it away for free, the cashback company must also get a commission, so they're paying for people to use it. I'm sure if the only reason they're doing that is to gain customers, they could easily just advertise it for free on their website - why would they need the cashback company?

Just curious really - hoping someone like tightarse or someone in the business can answer?

General Discussion Cashback

Comments

  • jv on 11/09/2025 - 23:27
    +8

    what is in it for the retailer?

    sales…

  • zoombie on 12/09/2025 - 00:28
    +2

    Potential new customers - if you just run a traditional sales, you need to communicate this via traditional channels like email, ads, or sms. Email and sms are for existing customers, ads can bring in new customers but can be very expensive.

    CB sites have their own set of customers, some of whom might not be aware of your brand name, so by offering cash back, you can potentially bring in new customers with no upfront cost (assuming pure commission).

  • parcus on 12/09/2025 - 00:51

    Just another form of generating new leads, same reason so many retailers wilfully pay ~6% to Afterpay and the like, tag it under the marketing budget.

  • AustriaBargain on 12/09/2025 - 00:53
    +1

    It influences consumer behaviour. If you'll go into a new shop just because you'll save 10 cents per dollar on values up to $10, then that's a bargain. Probably one of their cheapest acquisition costs ever.

    • BigTed on 12/09/2025 - 11:00

      Exactly this.
      If I can book a hotel on booking.com, agoda, expedia, or whatever other sites - and the hotel is the same price on all of them, but one is offering 5% cashback - which one do you think I am going to choose?

  • tekisei on 12/09/2025 - 01:13
    +1

    Discounts are there to drive more sales.

    For regular retailers, their normal customers will buy stuff off their website without a discount. So if they advertised the cashback deal as a % off on their website, they would lose even more money since they would be giving this category of customers a discount for no reason.

    The cashback deals targets people like us who would otherwise never purchase anything from their website without a massive discount. But yes, they make us jump through hoops (or rather, they don't care if we need to jump through hoops) so that their normal customer would think that it was too difficult or dodgy to try it even if they heard of it.

  • payless69 on 12/09/2025 - 08:25
    -1

    Proof that you can more money from the stupid:

    To me cash are banknotes that I can feel and spend at my discression.

    Rebates have zero in common with cash!

  • Bon Marche on 12/09/2025 - 08:39
    +1

    I may be wrong, but if a retailer discounts an item, then there is less revenue and less profit. If a retailer uses shopback etc, the discount can be claimed as a marketing expense, hence more profit.

    • leiiv on 12/09/2025 - 09:17

      Why though? An expense is still an expense and a revenue is still a revenue. Both cases will end up with the same profit.

    • ihbh on 12/09/2025 - 09:20

      Whatcha talkin' bout Willis?

  • ihbh on 12/09/2025 - 09:17
    +2

    Lead generation and price discrimination (economics term) - without discounting headline price.

  • CashMachine10 on 12/09/2025 - 10:24

    Induced demand, faster turnover of stock, data collection. Many more reasons

  • Cluster on 12/09/2025 - 10:51
    +2

    Same reason why coupons and discount codes are issued: to allow for variable pricing.

    You get as much money as possible from the customer who doesn't want to search for a discount.

    You also get the cost sensitive customer who will spend time looking for a code/coupon/cashback, and they'll be attracted to the business because they think they're getting a bargain.

    It's a sales tactic over 100 years old. Cashbacks are just a slight variation on it.

    With VPNs and 100% cashbacks the key point is the service is incredibly cheap to offer on a per customer basis. And here's the kicker: usually your subscription automatically rolls over to charging you money, or the VPN almost harasses you into subscribing after the free period is over. Plus you're used to the service, so will now pay a very high price for it.

  • SHIFT KEY BROKEN on 12/09/2025 - 11:32

    Most of these programs are regular affiliate programs offered by the retailer, where the retailer pays the cashback site for sales that they direct to the website. The cashback sites then pay you (the customer) a portion of the kickback they receive.

    The retailer does it to get people onto their website or service, with the idea that some people will stick around (how many people use those VPN services after the discounted trial). Unlike say TV broadcast ads, the retailer can see a close tie between "we paid $X for marketing" and "we sold something for $Y", so it feels appealing to them.

    The affiliate does it for the kickbacks. Affiliates could be a cash back site, an aggregator (like Ozbargain itself), or a Youtube video.

Login or Join to leave a comment
Login Join