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Cashbacks vs Discounts Shopify Checkout Strategy

Minimalist vector illustration of a shopping interface divided into two sections

In today’s competitive e-commerce landscape, incentives like discounts and cashbacks are key to increasing conversions and enhancing loyalty. But which delivers better cost-effectiveness, profit margin protection, and long-term value?

According to the 2025 Wallid Strategic Report, the answer isn’t either/or — it’s knowing when to use each strategically.

Conversion Power: Real Stats on What Works

Key Stats from the Report:

Average global e-commerce conversion rate: 2.5%–3.75%
Discounts can boost conversions by up to 10% during sales events (e.g., Black Friday)
Cashbacks drive:
  • 3.4× higher conversion rates on average
  • 46% higher AOV (Average Order Value)

Insight

Discounts create urgency and remove price friction — great for first-time purchases.
Cashbacks appeal to value-seeking shoppers and perform better with high-value carts, leading to more profitable conversions.

Profit Margins & Psychological Value

While discounts reduce the checkout amount immediately, cashbacks:
  • Are treated as marketing costs
  • Are often unclaimed (leaving money with the merchant)
  • Offer higher perceived value without hurting margin as much

Example

On Cyber Monday 2024, U.S. shoppers spent $13.3B.
High-ticket items did well with 30–39% discounts.
However, cashback campaigns led to more repeat purchases and lower returns.

Loyalty, Repeat Orders, and Customer Trust

Loyalty isn’t just a metric. It’s a growth engine. With cashback:

  • 22% increase in return customers
  • 18% higher spend on repeat visits
  • 46% say cashback influences brand choice

Unlike discounts, cashback creates a sense of investment in your store — especially effective with Shopify payout timelines and direct bank transfers.

Loyalty and Retention: Long-Term Value

Cashback loyalty data:

  • +22% return customers with cashback programs
  • +18% average spend on repeat visits
  • 46% of cashback users say it influences their brand choice

Insight

Discounts fuel a “deal-seeker” mindset (users chase the next lowest price)
Cashbacks create brand investment (“I have credit to use”), boosting Customer Lifetime Value (LTV)

Profit Margin Math

Incentive Example Profit Impact
Discount 20% off $100 Revenue = $80 → Immediate margin hit
Cashback $20 cashback Treated as marketing → Better for margin
Cashbacks allow you to retain more profit per conversion, especially with non-card payment methods like Wallid’s pay-by-bank.

Strategic Use Cases: Which to Use When?

Use Case Discount Cashback
Urgent Sale / Flash Offer
Cart Abandonment Recovery
Loyalty Building
High AOV / Repeat Buyers
Margin-Sensitive Products

Implementation Tip: Use Smart Checkout Tools

Platforms like Wallid.co allow Shopify merchants to:

  • Offer instant cashback at checkout
  • Avoid card processing fees
  • Enable personalized incentives based on user behavior

Final Word: Use Both — But Smartly

Instead of picking sides:

  • Use discounts to trigger immediate conversions.
  • Use cashbacks to drive repeat business, protect margins, and grow LTV.
  • Think of cashback not as a cost, but a brand investment.

Frequently Asked Questions

Q1: Are cashbacks more profitable than discounts for e-commerce stores?
A: Yes. Cashbacks are treated as marketing costs, are often unclaimed, and preserve more margin compared to discounts which reduce revenue immediately.

Q2: When should I use discounts instead of cashbacks?
A: Use discounts for time-sensitive campaigns or when trying to reduce cart abandonment quickly. They work best for new customer acquisition and urgent conversions.

Q3: How do cashbacks improve customer loyalty?
A: Cashbacks make customers feel invested in your store. 46% of shoppers say it influences their brand choice, and cashback users are 22% more likely to return.

Q4: What is the average increase in order value with cashback?
A: On average, cashback promotions lead to a 46% increase in AOV (Average Order Value), especially with high-ticket items.

Q5: What tools can I use to offer cashback without card fees?
A: Platforms like Wallid.co allow you to offer instant, AI-personalized cashback incentives using pay by bank checkout, reducing processing costs and increasing conversions.
checkout optimisation pay-by-bank for Shopify