ShopBack feels the pinch as voucher revenue dips 50% in FY23

SHOPBACK Group, a Singapore-based cashback and rewards platform, posted US$87.7 million in revenue for the financial year ended March 2023, a 20 per cent year-on-year decline.

The Temasek-backed startup’s voucher revenue fell by more than 50 per cent over the same period.

The company’s losses before tax also widened by 29 per cent year on year as one-off employee and M&A expenses affected growth. In contrast, ShopBack had seen a slight improvement in losses for FYE 2022 compared to the previous financial year.

Founded by former Zalora executives Henry Chan and Joel Leong in 2014, ShopBack gives its customers a fraction of their money spent each time they shop with its partner merchants.

Vouchers to drive growth

Vouchers “remain a significant and growing part of ShopBack’s business in selected markets,” a company spokesperson told Tech in Asia. The firm declined to comment further on which markets these are.

It explained that the decline in voucher revenue was primarily due to “differential accounting treatments” for inventory and consignment vouchers.

According to the company, revenue from vouchers purchased on inventory is recognized on a gross basis. This is higher than those sold on consignment, where revenue is recognized on a net basis.

In FYE 2023, ShopBack sold more vouchers on consignment as compared to inventory, which led to lower top-line figures.

However, the company did not comment further on this.

ShopBack earns voucher revenue from commissions of sales, which it does so in two ways: selling digital vouchers on behalf of merchants and selling them directly to users.

For direct sales, the company purchases digital vouchers in advance and sells these to customers through its own rewards and discovery platforms. ShopBack recognizes the amount collected from the users as voucher revenue, with purchase price paid to merchants as “cost of sales”. It bears the inventory risks for unsold vouchers in such instances.

In contrast, the commissions earned from selling digital vouchers on behalf of merchants represent the difference between the amount collected from the users, net of cashbacks, and the predetermined purchase price that is payable to the merchant.

The company also added a new revenue source by entering the buy now, pay later (BNPL) segment after its acquisition of Hoolah in November 2021, although this remains small compared to overall revenue.

Launched in FYE 2023, the BNPL business posted a revenue of US$3.4 million for the year.

ShopBack cited the “impairment of goodwill arising from the Hoolah acquisition”, along with talent acquisition, as the main reasons behind its growing losses. It currently employs 850 people globally.

One shutdown, one expansion

While it closed its pay-later business in Thailand, ShopBack has started testing the waters in Europe.

The company decided to scale down PayLater in Thailand in early 2023 to focus its efforts on expanding its online rewards business in the country.

Last year, the firm rolled out cashback services and vouchers in Germany as it “sees an opportunity to bring its mobile-first cashback rewards experience to shoppers” in the country.

However, these initiatives will only show up in the following year’s financial statements.

Aside from Germany, the company is currently present in 11 markets globally including Singapore, Australia, and Indonesia.

ShopBack said it has aspirations to bring its “value proposition to shoppers across the world”. It has made a commitment to venture into a new market each year.

The company added that it has sufficient cash reserves to sustain its operations for more than three years, assuming its cash used in operations remains at a level similar to that in FYE 2023.

Getting market-ready

In December 2022, ShopBack raised US$30 million to prepare for “public markets readiness”. This amount brought its total series F funding round to US$200 million.

While the company told Tech in Asia that it does not have a definitive IPO timeline at the moment, it said it is developing “world-class corporate governance practices” in preparation for listing.

“The group continues to be optimistic about its growth prospects in 2024 and beyond, and is performing on track against its growth and profitability targets,” ShopBack added. TECH IN ASIA