06 October 2016 15:09:13 IST

Banking on cashback

Yosha Gupta, founder of LafaLafa

Gurugram-based LafaLafa wants to give customers the best price for their purchases

Cashback is an emerging segment in e-commerce that draws from the phenomenon of online shopping, as people look to get more bang for their buck on these platforms. LafaLafa, a Gurugram-based company, looks to capitalise on this.

Through its mobile and web channels, LafaLafa helps customers shop online from 500 stores in India and Hong Kong. These include the likes of Flipkart, Snapdeal, Shopclues, Amazon, Paytm, Freecharge, Expedia and Hotels.com, among others.

Lafalafa was founded by Yosha Gupta. Gupta, who started her career with GE, has a decade of experience in the fintech industry, having worked in India, Hong Kong, Indonesia, China, Vietnam, the Philippines and Myanmar. She is a financial inclusion consultant with the International Finance Corporation, a part of the World Bank Group.

Idea of a savings platform

“In the time I spent in the mobile payments industry, the common theme was that to drive adoption we had to add offers to attract customers,” says Gupta, adding: “Loyalty, rewards, and payments are inextricably tied together, so while launching my start-up, I decided to approach it from the angle of loyalty directly.”

On the ground, there’s the customer problem they look to solve. A price-conscious customer has to visit price comparison websites, coupons websites, cashback websites, and check bank offers, reward point offers and the like, before undertaking any transaction. “Our idea was to combine this and offer it at one place to create the best savings platform for customers in India and maybe later expand to the rest of Asia as well, where the scope for this proposition is also huge,” she says.

In January, when Tata Sons Chairman Emeritus Ratan Tata invested in CashKaro, cashback and coupons start-ups got a huge validation. Gupta adds that the app has seen a million downloads in over a year, which has now enabled the start-up to negotiate exclusive deals and commissions with some e-commerce retailers.

Initial challenges

Like most start-ups, the initial challenges revolved around finding the right people, getting the right market for the product and developing the right marketing strategy. For this space in particular, the challenges included creating a differentiated product, and the fact that as LafaLafa works with hundreds of e-commerce companies, ultimately, they do not control the transaction or the delivery experience. “In such a scenario, giving customers a consistent experience becomes a challenge. We have to work hard on customer education and communicating the value proposition to users,” says Gupta.

There are also other issues, such as the speed and stability of the Internet — something inherent to India — along with the hassles of setting up a business, which needs one to jump through multiple hoops while registering. Gupta points out that these issues are, however, now getting the right importance and focus from the government and that things are improving.

Power of mobile

“LafaLafa was the first cashback start-up to recognise the power of the mobile in India. While we were one of the last to launch, we have captured a sizeable market share in a short time, and our growth trajectory has been much faster because of our focus on the mobile platform. The start-up's differentiation is also around its geo-expansion plans. We are fast also becoming an Asia-focused player — we recently launched in Hong Kong and have been chosen for a big grant from the Hong Kong government to expand our presence in the region,” the entrepreneur said.

Till date, the companyhas raised funds from angel investors in Hong Kong and then a seed round from 500 start-ups in Silicon Valley and Vectr Ventures in Hong Kong, followed by Facebook selecting the company as a part of its FB Start initiative. The Hong Kong government recently selected LafaLafa for a government grant (Cyberport Incubation programme) to expand its business in Hong Kong.

Future plans

Apart from its geo-expansion strategy, the start-up is working on improving customer experience and plans to go beyond just affiliate marketing to leverage the payments experience and build a much bigger business.

However, ventures like Lafalafa have their task cut out for them as e-commerce in India is undergoing rapid changes, with business models beginning to move away from discounting to enticing users with a better experience.

Add to this the fact that the cashback space is getting crowded. Goldman Sachs estimates Indian e-commerce will reach the $100 billion-mark in financial year 2020. A study by the Internet and Mobile Association of India (IAMAI) in 2015 estimated that affiliate sites — which include cashback firms — account for 15 per cent of e-commerce sales in India.

However, this growth is starting to face some headwinds. In May this year, the Competition Commission of India (CCI), after several complaints from traders and consumers, formed an in-house expert panel to ascertain whether discounts, cashback incentives offered on digital platforms by digital wallets, e-commerce websites on bill-payments, recharges, purchases and the like constitute predatory pricing. A report on that should be out soon.