E-commerce companies often use cashback (money returned after purchase) and store credit (value stored for future use at the same store) as incentives to drive customer behavior. These rewards encourage shoppers to choose a platform and keep coming back, which is crucial in a competitive online market. Unlike one-time discounts, cashback and store credits can create a loyalty loop - customers receive value back from purchases, making them more likely to return and spend again. Major online retailers and brands have implemented these tactics to boost sales, improve customer retention, and increase customer lifetime value, all while carefully managing profitability.
Case Studies of Successful Implementations
Many leading e-commerce players and brands have effectively leveraged cashback and store credit programs. Below are several notable examples and their outcomes:
Amazon (Prime Rewards and No-Rush Credits)
Amazon's strategy integrates cashback with its Prime loyalty ecosystem. The Amazon Prime Rewards Visa card offers 5% cashback on Amazon purchases (for Prime members), effectively functioning as store credit redeemable on Amazon. This has helped lock in customer loyalty - Prime members now spend more than twice as much annually on Amazon as non-Prime customers ($1,400 vs $600 per year on average) source. Amazon also occasionally uses promotional credits (e.g. “No-Rush Shipping” credits for future Amazon purchases in exchange for slower shipping) to incentivize behaviors that save costs and drive repeat business.
Sephora Beauty Insider & Ulta Ultamate Rewards
In the beauty sector, points-based store credit programs have been extremely successful. Sephora's Beauty Insider loyalty program (which rewards points for purchases, redeemable as products or discounts) boasts 17 million members in North America, accounting for 80% of Sephora's sales source. Rival Ulta has 44 million members, and a stunning 95% of Ulta's sales come from loyalty program members source. These programs effectively issue store credit (points) for purchases and use tiered perks to spur higher spending and frequent shopping. The result is a loyal customer base that drives the vast majority of revenue for these brands. This demonstrates how store credit incentives (in the form of points and rewards) can massively boost repeat purchase rates and share of wallet.
Direct-to-Consumer Brands (True Classic, Lumin)
Smaller e-commerce brands have also found success switching from traditional coupons to cashback-style incentives. For example, apparel retailer True Classic replaced upfront discounts (which erode margins) with a cashback offer on next purchase. The result was a +4.6% improvement in profit margins and a 67% increase in revenue from new-customer welcome campaigns source. Similarly, skincare brand Lumin introduced a cashback-based welcome offer and saw a 32% increase in average order value along with a 74% jump in welcome series revenue source. These case studies show that offering a cashback or store credit on a future purchase can outperform a one-time discount - driving higher immediate sales and capturing customers for repeat business.
Affiliate Cashback Platforms (ShopBack/Rakuten)
E-commerce marketplaces have partnered with cashback reward platforms to acquire new customers. In one campaign, ShopBack (a cashback site) partnered with an online marketplace during Cyber Weekend. By boosting the cashback rate for a limited time, they achieved a 151% year-over-year increase in sales volume and drove a surge in new customers (the new customer acquisition rate was 33% higher than average during that 4-day event) source. This illustrates how cashback offers can attract incremental customers during key shopping periods. Similarly, Rakuten (formerly Ebates) has built a business around cashback referrals, proving effective at driving sales for thousands of retailers source. Academic research on such programs found that cashback payments not only prompt an initial purchase, but also increase the likelihood of repeat purchases and larger basket sizes on partner retailers source.
Wodbottom (Shopify Store with Store Credit Rewards)
Even smaller merchants can leverage store credit for loyalty. Athletic apparel brand Wodbottom implemented an automated store-credit reward system for repeat purchases. The initiative led to a 33% increase in repeat customer rate and a substantial ROI lift (over 500%) on their retention marketing spend source. In practice, customers who earned store credits through repeat purchases ended up spending far more than the value of the credit - an upsell effect that boosted average order values and revenue, validating the profitability of the approach.
(These case studies demonstrate that when executed well, cashback and store credit incentives have driven significant gains - from higher spend per customer to improved retention and profitable growth. Next, we analyze how these incentives influence customer behavior and business metrics.)
Impact on Customer Acquisition and Retention
Offering cashback or store credits can significantly influence customer acquisition (attracting new shoppers) and customer retention (encouraging repeat purchases):
Lowering the Barrier for First Purchase
Cashback incentives can entice first-time customers to buy because they see a portion of their spend coming back. For example, many brands use a “sign-up offer” such as “10% cashback on your first order” instead of a straight 10% off coupon. The advantage is the customer must complete a purchase (at full price) to earn the reward, creating a win-win. Data from DTC brands supports this - making a strong cashback offer in the welcome message lifted conversion of new visitors (e.g., Ridge saw email/SMS opt-in rates increase ~40% with a cashback offer) source. The promise of future credit persuades hesitant shoppers to give the brand a try, effectively acting as an acquisition tool.
Encouraging Repeat Purchases
Store credits are specifically designed to drive repeat visits. Once a customer has credit tied to a store, they have a built-in reason to return. Studies indicate that 68% of customers are more likely to return for another purchase after receiving store credit source. The psychological effect is powerful: shoppers perceive unused store credit as “money on the table” that they don't want to waste, which pushes them back to the site. Even cashback given as actual cash (not just store-specific credit) has been shown to boost repeat behavior. Research on millions of transactions found that for each $1 of cashback a customer received, their likelihood of making a future purchase increased, and they spent additional money (about $0.32 extra for each $1 reward, on average) source. In short, these incentives create a loyalty loop, where the initial reward hooks the customer into coming back and buying again.
Increasing Customer Retention & Loyalty
By fostering repeated interactions, cashback/store credit programs strengthen customer loyalty over time. Retained customers tend to buy more often and spend more than new customers. Industry data shows repeat shoppers are extremely valuable - repeat loyal customers spend 33% more than new ones, and can account for 65%+ of a company's revenue source. Loyalty programs that reward ongoing purchases (whether via cashback or points) therefore directly boost retention metrics. For instance, Amazon's Prime credit card and rewards help it retain subscribers year after year (Prime's annual retention rate is around 93%) source, thanks to the bundled benefits). Similarly, membership-based rewards at Ulta and Sephora have created “sticky” customers who habitually return to accumulate and redeem rewards. In one survey, 79% of consumers said they are more likely to choose a retailer that offers a loyalty program source - showing how such incentives play a role in retention and preference. Overall, cashback and credits encourage customers to stick with one brand to maximize their benefits, thereby lifting retention and repeat purchase rates.
Customer Lifetime Value and Incrementality
The ultimate goal of these incentives is to increase customer lifetime value (CLV) - the total revenue a customer brings over their relationship with a brand - and to do so profitably by driving incremental behavior (additional purchases that might not have happened otherwise). Key findings on how cashback and store credit impact sales growth, CLV, and loyalty include:
Higher Spending per Customer
Loyalty rewards tend to make customers spend more in the long run. Members of retailer loyalty programs generate 12-18% more revenue per year than similar customers who are not members source. This uplift comes from higher purchase frequency and higher basket sizes. For example, when customers receive a cashback reward, many treat it as a “bonus” to spend on their next visit. In a study of a cashback rebate program, researchers found a feedback loop: “The more money consumers get back, the more likely they are to go back and shop and spend more.” source. The effect is that a cashback not only triggers one sale, but also increases the total future spend by the customer, raising their lifetime value. In practice, loyalty program members have significantly higher CLV than non-members - in Sephora's case, the 80% of sales coming from Beauty Insider members suggests those customers have much greater lifetime spend than casual shoppers.
Sales Growth and Repeat Purchase Frequency
Incrementality data shows that cashback/store credit campaigns drive genuine new purchases. The ShopBack case (Australia) demonstrated that a temporary cashback increase yielded a 40%+ spike in new customer orders during that promotion source. Those were incremental sales gained via the incentive. Similarly, an analysis of millions of cashback transactions observed that a $1 increase in cashback leads to about 0.02% higher probability of an additional transaction by that customer and a notable uptick in their weekly spending source. While 0.02% may sound small, across tens of thousands of customers and multiple $1 increases, it accumulates to a significant lift in repeat sales (the researchers noted this accounted for ~10% of the total promotion's impact) source. For store credits, the “lock-in” effect can be even stronger: customers must return to use the value. Retailers report that offering a credit instead of a refund can raise the likelihood of that customer buying again by 20% or more source. These additional purchases driven by the incentive contribute directly to sales growth that likely would not have occurred otherwise, proving the strategy's incrementality.
Loyalty and Engagement Metrics
Well-executed cashback/credit programs not only boost transactions but also deepen engagement. Customers become more engaged with the brand's ecosystem - checking the site or app for their rewards, exclusive offers, or bonus opportunities. For instance, gamified point systems (like tiers, challenges to earn extra credit, birthday rewards, etc.) keep customers interacting beyond just purchases. The success of Starbucks Rewards (though not e-commerce, it's a digital-heavy program) shows that giving store credit in the form of points/stars drives frequent usage and lock-in (Starbucks' loyal app users visit far more often than others, illustrating high lifetime value). In e-commerce, metrics such as repeat customer rate, average order value (AOV), and purchase frequency all tend to improve under loyalty incentive programs. As noted, True Classic saw AOV and conversion metrics rise when switching to a cashback model source. Likewise, 61-68% of consumers spend above and beyond the value of a store credit or gift card when redeeming it source. This means if a customer has $30 of store credit, many will buy something worth more (e.g. $40 or $50), effectively increasing the basket size and making the incentive pay for itself. On average, shoppers spent about 33% more than their gift card's value during redemption source - a direct boost to revenue. This kind of incremental spending improves the lifetime profitability of each customer who uses the program.
In summary, both cashback and store credit incentives can drive incremental improvements in customer value - more frequent purchases, larger orders, and longer retention - which translate into higher lifetime value. However, these benefits only accrue if the program is managed to truly encourage additional behavior (rather than just giving away margin on purchases the customer would have made anyway). Next, we outline best practices to structure these programs for maximum profitability.
Best Practices for Structuring Cashback and Store Credit Programs
Designing an effective cashback or store credit incentive program requires balancing customer appeal with sustainable economics. Below are some best practices and insights for structuring these incentives to maximize profitability:
Align Incentives with Product Cycle
Consider your product price and purchase frequency when choosing the type of incentive. For low-priced, frequently purchased goods, small store credits on each purchase can excite customers to accumulate and return often. The fun of earning credit repeatedly boosts engagement. In contrast, for high-ticket or infrequent purchases (e.g. electronics), a one-time cashback may be more enticing - the cashback amount will be significant enough to feel rewarding, and customers aren't shopping often enough to accumulate credits gradually source.
Use Cashback to Protect Margins (vs. Discounts)
If your goal is to offer a promotion but you worry about eroding margins or diluting your brand with heavy discounts, cashback can be a smarter alternative. Unlike an immediate discount, cashback is typically given after the purchase (often as a rebate or store credit), meaning you still book the full revenue upfront. This delay and conditionality helps ensure the customer commits to the purchase at full price, improving profit per order. It also reduces “coupon leakage” and bargain-hunters simply exploiting discounts source.
Make Rewards Easy to Redeem and Timely
To maximize the impact on loyalty, reduce friction in using the rewards. Customers should be able to see their cashback or store credit easily in their account and apply it at checkout without hassle. Studies show that one of the most important factors in loyalty program success is ease of redemption source. If cashbacks are too delayed (e.g. many credit card programs pay out after a month or more) or store credits are hidden or expire too quickly, customers may lose interest or trust.
Leverage Tiered Rewards and Personalization
To maximize customer lifetime value, many programs incorporate tiers or personalized offers. For instance, you might give higher cashback percentages to premium tiers or on high-margin product categories. Amazon's card does this by giving 5% on Amazon purchases (to Prime members) but lower on others - focusing the richest reward where it most wants to drive loyalty. Similarly, you can surprise and delight customers with bonus store credits for specific behaviors (birthdays, referring a friend, trying a new category, etc.). These tactics deepen engagement.
Monitor ROI and Breakage
It's crucial to track the economics of your incentive program. Key metrics to watch include the redemption rate (what % of cashback or credit issued is actually redeemed) and the incremental lift in sales or retention attributable to the program. Some breakage (unredeemed rewards) is normal and actually benefits the bottom line - any store credit not redeemed is pure profit retained.
Keep the Customer Experience Positive
Lastly, structure these incentives with an eye on long-term brand loyalty. Cashback and store credits should feel like gifts or bonuses, not obligations or gimmicks. Fine print that frustrates (such as overly restrictive conditions) can backfire. Also, consider combining monetary rewards with other loyalty perks (exclusive access, free shipping, VIP customer service) to create a more holistic loyalty program that builds an emotional connection, not just a transactional one.
Cashback vs. Store Credit: Customer Preference and ROI Comparison
When choosing between offering cashback versus store credit (or points) as a reward, businesses should weigh customer preferences against the potential return on investment.
Customer Preference
Multiple surveys indicate that many customers prefer cashback (cash rewards) over point-based rewards. In one study, 63% of consumers said they favor cashback rewards instead of points source. This is largely because cashback is straightforward and instantly valuable - money back in your pocket (or account) is clear and flexible.
Influence on Loyalty and Repeat Behavior
Store credit has a structural advantage in driving repeat purchases at the issuing retailer: the reward itself must be spent with that retailer, effectively guaranteeing another visit. Cashback, if delivered as actual cash (or a credit card statement rebate), does not guarantee the customer will return to the same store source.
Business ROI and Costs
Cashback (especially if paid in actual cash) is a direct cost to the business with no guarantee of additional revenue. It's essentially a rebate on the initial sale. This can work well to boost conversion of high-margin sales or as a marketing expense, but the company must ensure the increased sales volume offsets the payout. Store credit, on the other hand, is often less costly in practice: it keeps funds internal and often leads to incremental sales.
Brand Engagement
Another consideration is the type of customer experience you want to cultivate. Cashback is very transactional - it appeals to the rational, deal-seeking side of consumers. Store credit and points can be made more experiential. Through tiers, badges, and communities (e.g., VIP tiers like Sephora VIB/Rouge), a points program can deepen emotional loyalty to the brand.
TLDR
Cashback and store credit incentives have become powerful tools in e-commerce strategy, driving customer acquisition, higher repeat purchase rates, and greater lifetime value when executed correctly. The case studies from industry leaders and emerging brands alike show that these incentives can yield substantial gains - from double-digit increases in revenue and order values to deep penetration of loyalty program sales (80-95% of revenue in the case of Sephora and Ulta) source. Key to their success is understanding customer motivations and aligning the program structure accordingly: using cashback to entice and reward shoppers in the short term, and using store credits or points to lock in long-term loyalty and habit.
Sources
- Case study data on cashback campaigns and new customer acquisition - Commission Factory (Awin) source
- Postscript.io case studies on DTC brands using cashback vs. discounts source
- Rise.ai case study (Wodbottom) - store credit rewards ROI and repeat rate source
- WeSupply Labs on store credit boosting repeat purchase likelihood source
- Tuck School of Business research on cashback and future spending (Journal of Marketing Research) source
- PaymentsJournal / GCVA study on gift card overspend statistics source
- Flits & AnnexCloud on repeat customer spending and revenue contribution source
- Zinrelo Loyalty insights on revenue lift from loyalty members source
- Consumer surveys on loyalty reward preferences - BonusQR (citing Loyalty Report) source and WhiteLabel Loyalty source
- Amazon Prime and loyalty performance - StrategyCorps (Amazon Prime spending) source
- Sephora and Ulta loyalty program impact - LoyaltyLion/AnnexCloud and media reports source, source
- Comparative analysis of cashback vs points - Flits blog source and Marsello guide source
- News of eBay Bucks program changes - eBay community post source