Here's why cashback websites are the new hot topic in Singapore

It is no secret that Singaporeans are amongst the most voracious shoppers in South-East Asia. Despite age-old complaints about the high costs of living, our shopping malls see a throng of eager shoppers every weekend.

According to Trading Economics, "Consumer Spending in Singapore averaged S$15,760.97 million from 1975 until 2015, and reached an all-time high of S$33,338.10 million in the first quarter of 2015."

Online consumers are a growing group. Since 2009, online spending figures have risen from less than US$1 billion to US$3.6 billion in 2014, based on statistics from The Establishment Post. The most resourceful of these online shoppers, with age range 20 to 40, are looking to cashback websites for additional saving options.

Cashback websites are simple to understand: they partner with merchants and bring online shoppers to merchant websites to shop, receiving a commission with each purchase. Out of this commission, a certain percentage is returned to shoppers as cashback to keep consumers coming back.

The only change for consumers is the point of access to the desired shop page - after that it is just the wait for money to be credited back to them.

Smart nation, smart shopping
Singapore is a lucrative market for cashback websites; online shopping has been going on strong for more than a decade now and even older generations are getting used to shopping electronically. This national shift in shopping pattern marks one of Singapore's major shifts towards a smart nation.

That said, technology comes with boons and banes. Although online shopping increases convenience and saves costs in the long term, cases of credit card fraud and online scams are common. Such instances of cybercrime are on the rise, putting many Singaporeans on guard against new and unestablished sites.

While consumer wariness makes it difficult for cashback sites to establish a foothold, this is a high-stakes game. The first cashback site to make it big in Singapore will be able to gain lucrative market dominance in the South-East Asia easily, so cashback companies are determined to show results that will attract heavyweight investors.

Education is the key strategy to combat consumer wariness. Many companies are doubling efforts to make website layouts as simple as possible to suggest clarity and transparency. Prominently displayed video tutorials, reviews and visual guides are some of the educational methods employed.

12% cashback can sound too good to be true, so cashback firms are trying to assuage concerns by providing extra measures like 24-hour helplines to attend to confused shoppers.

Localisation is key
Educational efforts are paying off and cashback sites are growing in popularity here. Apart from local cashback websites, cashback companies from abroad are also flocking to Singapore to fight for the dominant share of the market.

For local cashback sites to compete against larger overseas giants, it is imperative for local cashback websites to engage in localisation.

Singaporeans are savvy shoppers with high expectations and challenging demands. Being local gives Singaporean cashback sites an edge over overseas cashback companies as they understand local consumer mentality, and know what stores Singaporeans like shopping on.

In contrast overseas cashback sites usually base their merchant offerings on their homeground merchants rather than the local shops, meaning there is lesser local variety for Singaporeans to shop.

Understanding and selecting cashback websites
Aside from localisation, these other factors are also crucial differentiating factors between cashback sites that determine their popularity in the market:

1. Percentage of cashback and merchant variety
Percentage of cashback is the most important consideration for shoppers. Different cashback sites may collaborate with the same merchant but offer different cashback rates, so shoppers should research to check which site can help them save the most based on which online shops they tend to frequent.

2. Possible membership fees
Some cashback sites may want shoppers to pay a membership fee to join their website. Although these cashback sites may promise higher cashback percentages, the likelihood is that many of these shoppers do not eventually activate their account, ending up paying for the membership fee but not getting cashback. This is why cashback sites are able to offer higher cashback percentages to their active shoppers.

3. Minimum cashback value
Nearly all cashback sites have a minimum cashback value that shoppers must hit before cashing out to prevent shoppers from creating multiple accounts to take advantage of signup rewards. Minimum cashback value can range from $10 to $50, which shoppers should take into account before signing up.

4. How quickly shoppers will be paid cashback
To protect the cashback companies against scams or losses from returned or defective products, cashback websites implement validation periods to ensure that purchases have not been returned. The validation period can take between one month and two months, so shoppers must be prepared to wait for their cashback.

Not all cashback sites are created equal; shoppers should definitely invest some time researching on cashback sites that are best suited to their shopping habits. In the long run, cashback sites will yield substantial savings for online shoppers.

With both companies and consumers standing to benefit, it is likely that cashback sites are here to stay.