Online Shoppers Lured By New Incentive Programs

A new type of company is attempting to attract online shoppers by providing them with incentives, such as cash, mutual funds and contributions to non-profit organizations, when they shop on Web sites with affiliate programs.

These new companies do not provide the shopping themselves, but create links to multiple e-tailers that have affiliate shopping programs. When shoppers click through to the shopping sites, they generate commissions to the new sites that are returned in the form of incentives.

Most leading e-commerce sites, including Amazon.com, eToys and Priceline.com, have affiliate shopping programs.

The New Airline Miles?

These programs have the potential to change the way that incentive-savvy shoppers route themselves on the Internet. Instead of going directly to the online stores, shoppers will route themselves first to the incentive site to click through to the appropriate e-tailer.

When the shopper clicks through, the store is accessed through a special URL that tells the store where the shopper has come from and causes a cookie to be written to the shopper’s PC. If a purchase is made during that session, the store then knows to pay a commission.

Who Are They?

This new world of incentive sites includes newcomers such as ebates.com and SaveDaily.com, as well as Web veterans like well-known online rating service BizRate.com.

BizRate entered the game recently by setting up a program that pays cash back directly to shoppers. Commissions range from five percent of purchases made at hardgood stores to as high as 25 percent at stores with high margin items like online greeting cards.

Ebates.com, which also has a cash back program, was started in 1998 by two former Deputy District Attorneys from San Mateo County, California, Paul Wasserman and Alessandro Isolani. Ebates.com is backed by Foundation Capital. While the cash commissions are similar to BizRate’s program, ebates.com will also pay a small commission if shoppers refer friends who join the program.

SaveDaily.com was started in May 1999 by Eric A. Solis, a former Vice President with Merrill Lynch. Financing partners include mutual fund company Berger Funds and financial powerhouse Ing Group. SaveDaily.com does not pay cash rebates, but instead invests the commissions in mutual funds.

Tip of The Iceberg

There is no doubt that these incentive companies are going to sprout like mushrooms this year because of the relatively low cost of developing such incentive-based Web sites versus the potential gains if the sites catch on.

There is a question, however, of whether this trend is going to last, or just be another disappointment associated with the entire affiliate shopping phenomenon.

Big Promise, Low Sales

While affiliate shopping was promoted as having huge promise for both online stores and their affiliates, actual performance seems to have been very disappointing. While the stores with affiliate programs have generated a lot of free advertising by having their names posted on affiliate sites, sales generated by shoppers clicking through from affiliates have been weak.

The only positive, so far, has been that since e-tailers do not charge to join their affiliate programs, nobody has been hurt in a significant way. The online incentive sites could change the picture by generating some real shopping traffic.

Will Shoppers be Attracted?

The bottom line is whether or not shoppers will be attracted to these new incentive programs. Is generating a cash commission of a few percent enough to get the shoppers to join a program, even if it is free, and then get them to actually use it instead of going to the store directly?

While nobody knows the answer to this question, it is a safe bet that we will find out quickly by seeing multiple launches of such incentive programs during the new year.