Cash-back sites add zing to online shopping

Online shopping is growing at a phenomenal pace in China with cheaper prices and growing confidence in online payment security systems propelling more consumers to make purchases with the click of a mouse.

While the shopping surge has fueled intense competition among online shops, it has also heralded the entry of cash-back sites that reward customers.

Typically speaking, cash-back websites are not shopping sites but a platform that navigates shoppers to the sites of online retailers. Customers can make their purchases on the retail site and get a percentage of the cost back as refunds.

Cash-back shopping is a relatively new entrant to the virtual world in China, aided largely by the success of sites like FatWallet.com and Ebates.com in the United States.

The trend is fast catching up in China with more buyers and retailers using the services of such sites.

Trawling through a typical cash-back site in China would take shoppers to online shopping sites of several retailers like the electronics-oriented B2C site of 360buy.com, the popular online shopping site of Taobao.com, the garment site of Vancl.com and many other retailers.

The cash-back business works on commissions and companies get paid for directing customers to online shopping sites.

The cash-back trend in China was pioneered by 51fanli.com in November 2006. Other prominent cash-back sites include xungou.com and haotao.cc.

Zhang Daohao, marketing director of 51fanli.com, says the cash-back business started to boom in June last year thanks to the aggressive promotions in the first half of 2010. The site has partnerships with about 280 B2C sites and has nearly 150 million registered members.

The website on average receives 22,000 orders every day and more than 1.5 million yuan (167,400 euros) is ploughed back as rebates to members every month.

Such has been the buzz about cash-back shopping that there have been several articles and posts on the websites and blogs about the subject.

Lu Yali, a 51fanli.com member from Shanghai, says she registered in May 2010 after one of her friends recommended the site.

Lu always goes through 51fanli.com to shop at her favorite online stores like Taobao.com and the Shanghai-based online shop yihaodian.com.

"Earlier, I always forgot to use the cash back website and directly went to the B2C websites for shopping. But now I am more familiar with the process and accustomed to start my shopping at the cash-back sites."

Lu has spent more than 4,000 yuan through 51fanli.com till January this year and received a rebate of about 450 yuan. "It costs me nothing and I am able to save money."

Purchasers can earn cash back rewards typically ranging from 1 to 40 percent. They can have the rebates transferred to their bank accounts or Alipay accounts, a third-party electronic payments service, in one to four days or choose to exchange the discounts for gifts, say 51fanli.com officials.

The growing popularity of cash-back websites is coupled with booming e-commerce and a new online business model - group buying, says Zhang Yanan, an analyst with Zero2IPO Co Ltd, a leading integrated service provider for the venture capital and private equity industry in China.

Such websites will continue to blossom with diversified business models and catch the fancy of venture capital and private equity funds, Zhang says.

Technology giant Tencent and portal website 163.com are also planning to set up their own cash-back websites.

At present, cash-back websites are not constrained to cooperate with traditional online shopping websites. They have also started to partner group purchase websites.

Jumei.com, a leading cosmetics group purchase website based in Beijing, is trying to attract new subscribers through an alliance with 51fanli.com.

Dai Yusen, vice-president of products with jumei.com, says his company will give a commission of at least 10 percent to 51fanli.com and once the purchase is confirmed, the commission will be shared with the customer who made the purchase.

"We share the profits based on the number of orders the website brings us," Dai says.

E-commerce is growing rapidly in China. The online shopping market reached 520 billion yuan in 2010, a year-on-year growth of more than 370 percent, according to research company Analysys International.

Figures from the China Internet Network Information Center show that the number of online shoppers increased by almost 50 percent to 160 million last year.