Shopify app Fondue CashBack has raised $10 million in seed funding, the company announced Monday (Sept. 19).
Based in Tel Aviv and New York City, Fondue’s app replaces coupon codes with brand-embedded CashBack.
“Brands are addicted to legacy discounting strategies like coupon codes, thinking it’s just the cost of doing business,” Oren Charnoff, CEO and co-founder, said in a news release.
“Fondue CashBack is more profitable than legacy discounting so brands enjoy a positive feedback loop of higher conversion, more profit, more LTV [lifetime value] — money they can reinvest back into sustainable growth.”
The company says it plans to use the funding to boost product development, expand its offline CashBack channel, and speed its go-to-market strategy in the face of growing demand. The company projects eCommerce sales will surpass $5.5 trillion this year, with double digit growth continuing year over year.
“Discounts are critical for driving conversions throughout eCommerce, and are reported to account for 17.9% of total sale revenue,” the release said.
“Navigate to any Shopify merchant and you’ll be pummeled with coupon code offers. These are great for the simple reason that they work, but they come at an increasingly prohibitive hit to margin,” said Dr. William Herlands, CTO and co-founder. “One of our merchant partners put it best: ’I give 15% codes to new shoppers, but that cuts my profit by over 40%. It’s impossible to grow profitably like that.’”
Consumers would rather get cash back than coupons, as PYMNTS noted recently in a conversation with Inmar Intelligence General Manager Sylvain Mansier.
See also: For Consumers at Checkout, Cash Back, Not Coupons, Is King
As coupon availability declines, he said, more brands have embraced digital promotions, whether that means discounts to loyalty program members, or the rising use of cash back, which he called a tool that doesn’t necessarily involve a retailer or loyalty program.
“It’s not a discount at the register — it’s basically a post-purchase price discount, and it comes in the form of cash back,” Mansier said. “Those are being more and more commonly utilized in combination with digital coupons.”
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