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.