Ankita Rai, Financial Express
New Delhi, 30 August 2016
marketers such as coupon, cashback and deal sites often work as a match
made in heaven for retail/e-commerce firms when the latter take baby
steps into the business world. These sites drive traffic to e-commerce
players on commission basis, similar to the cost of acquiring a new
customer or a sale.
Till last year, affiliate marketers
benefitted a great deal from the e-commerce slugfest as e-tailers doled
out attractive commissions.
But in recent times, something
has changed as e-tailers focus on positive unit economics and relook at
their business models in light of new government norms and investor
pressure. With GMV being considered an ‘old school’ metric now,
e-tailers are rationalising affiliate commissions and looking for
quality customer traffic beyond deal seekers.
Take the case
of Snapdeal. According to industry sources, it has cut down on
commission paid to affiliate marketers by 50-60% for existing customers
from March this year.
For high volume categories like mobile
and tablets, it now pays 1% for the existing customers for upto a
monthly threshold of 2,500 transactions against the flat commission of
2.5% paid in August 2015.
In case of high margin categories
like clothing and accessories, the commission is down to 3% from 12% in
2015 for existing customers for upto a monthly threshold of 2,500
transactions. Snapdeal was unavailable for comment.
which was the darling of affiliate marketers due to its cashback
offers, has also stopped paying commissions for its marketplace this
year, with its focus shifting towards services such as ticketing,
mobile recharges, billing etc.
While Flipkart’s affiliate
commissions have remained the same, more or less in the last one year,
there is a shift in favour of new customers and apps. It pays 1.5%
commission on mobile phones for existing customers while and 2.5 % for
a new customer order.
This figure stands at 3.5% for mobile
apps. For high margin categories like fashion and lifestyle, the
commission for a new customer order in apps is as high as 15%. Flipkart
and Paytm didn’t reply to the emails seeking their comments on
affiliate marketing commissions.
Amazon India, on the other
hand, has a flat structure of advertising rates and pays 4% commission
for electronics. But top selling brands such as Xiaomi Redmi Note 3 or
MotoG4, do not qualify for advertising fees.
e-commerce players are moving away from coupon and cashback affiliates
in favour of price comparison, product review, aggregation and
blogging-based models. “We have discontinued business with cashback and
We want to enable customers to discover and
shop directly on Amazon without the need to come through
intermediaries,” explains Kishore Thota, director, digital marketing,
“While we still work with rebating sites for
enabling discovery of deals and prices, we have stopped any cashbacks
from being passed on to the end customer.”
players have changed the game for cashback-centric affiliate marketers.
“While wallet players may not be traditional affiliate partners, they
have certainly eaten into the affiliate pie,” says an e-commerce
expert. With GMV in the e-commerce space down by 20-25% this year
during the first six months, a similar impact is expected on the
affiliate industry. Does all this spell doom for couponing and cashback
sites and other kinds of affiliate marketers?
Focus on the bottomline
obtained from affiliates may be even more valuable than qualified leads
since affiliate sites already provide some context to the product (for
instance, product comparison websites or lifestyle blogs). However, the
e-commerce business has changed in the last six months.
is not surprising that e-commerce companies are relooking at
affiliates. Most of the traffic coming from affiliates is of bargain
hunters. Therefore, they are rationalising the commission as they are
trying to focus more on quality organic traffic and customer loyalty,”
says Pragya Singh, vice president at retail consulting firm Technopak.
price comparisons, deals and cashbacks were significant contributors in
the initial years, lately e-commerce players are seeing good traction
from individuals with social media accounts and from content sites who
have regular visitors/fans.
For example, the Amazon Associates programme allows individuals to connect with relevant products from articles.
is now working with only five partners in the affiliate space which
include CouponDunia, Komli and vCommission. “Till last year, we were
working with 15 affiliate partners. We now work with few partners who
have better capabilities of buying inventory, provide quality traffic
and are doing better customer segmentation at their end,” says Amit
Chaudhary, co-founder, Lenskart.
]The firm offers up to 20%
commission to the affiliates and, in fact, has increased its commission
over time. “We are capitalising on the situation. We are 90% a private
label entity,” he explains.
With affiliate marketing being
the “cheapest medium after email” investing 10% of overall marketing
spends in it is a no-brainer for Lenskart.
e-commerce players who are at a slightly more mature growth stage,
discounts can’t be the main driver anymore. “Now price is less of
driver,” says Nitin Agarwal, AVP, marketing, ShopClues.
of the traffic coming through cashback and coupon sites is from tier II
and tier III cites. Only those affiliates are doing well overall which
are adding some value beyond deals and discounts.”
The big picture
business environment for affiliate websites is becoming tougher with
time. “With fewer sites to send their traffic to, margins may be
reduced, business thresholds for higher margins may be moved up,
payment thresholds may also go up to reduce administrative effort and
expenses, and the period for expiry of a referral may be shortened,”
says Devangshu Dutta, chief executive, Third Eyesight.
affiliates are upbeat about their business models and see consolidation
in e-commerce space, cutting down of deep discounting and focus on
quality traffic as a boon for the ecosystem.
added cashback as a feature in April this year and believes cashback
and coupon will continue to work well in the space because it’s human
nature to save.
For every commission it earns, the portal
keeps 30% and pays rest as cashback. “The economics of transactions has
to make sense. If a retailer is losing money or has very low margins on
a transaction, it cannot afford to pay us high commissions,” says
Sameer Parwani, founder and CEO, CouponDunia.
discounting norms won’t impact coupon and cashback players. If
retailers reduce discounting, they have more room to pay for our
commissions and the cashback part will see an increase.”
cements his argument saying that once the e-commerce player cuts back
on discounts, the only way for consumers to look for the best offers is
Then there are others like Rohan
Bhargava, co-founder of cashback site CashKaro who say that the
e-commerce focus on profit is good for affiliates. Due to investor
pressure, e-commerce companies may have cut down on affiliate
commissions but this could be short-term.
“In certain cases
we have seen a rise in commission like in Healthkart’s case. Niche
sites are doing well while commission has been steady for players like
Flipkart and Amazon for the last one year,” he says. He further states
that the beauty of cashback is, the discount happens after transaction
and therefore, doesn’t impact GMV. But not everybody agrees with him.
Kumar, founder, FreeKaaMaal.com, says the cashback model is totally
incentive-driven and doesn’t add any value and at the end of the day,
affliates also need to be profitable.
Currently, a large chunk (80-90%) of the revenues earned by cashback sites is going back to the users.
offset this, these companies need to increase the transactions
manifold. But that is not possible anytime soon,” he says. “If you look
into the traffic trend of cashback sites, 90% of the traffic is repeat
users. This is contrary to deal sites where 50% traffic is new users.”
focus on profitability is also forcing affiliates to adopt better
business models. Currently, two models exist: charge on per pay basis
and per customer visit (PCV). The industry is moving towards the latter
as the risk is minimal.
The price comparison and product
discovery platform MySmartPrice attracts 10 million unique consumers on
its platform every month and claims to do three lakh transactions per
month. “Annually close to 660 million unique customers transact on our
site,” says Sulakshan Kumar, co-founder, MySmartPrice. “We help
e-commerce get two to five times increase in daily GMV volumes during
the sale season.”
Industry experts say affiliates will soon
be as big as e-commerce sectors. In developed economies, 15 to 20% of
the sales come from affiliates. In India it is less than 10%. The
affiliate industry in India is less than Rs. 1,000 crore.
the US, online branded apparel stores such as Nike work a lot with
coupon and cashback sites because their margins are good. But
horizontal players prefer price comparison, deal and review sites. This
trend is yet to catch up in India,” Kumar adds.
The new government rules on e-commerce marketplaces and discounting have actually made players go back to the drawing board and relook at their financial models.
“Changes in affiliate commissions are a byproduct of this. Affiliates are part of the e-commerce ecosystem and cannot be seen in isolation,” sums up Anil Talreja, partner, Deloitte.
(Published in Financial Express)