What’s the best way to build a take-back program? Should you offer cashback—or a discount toward the next purchase?
In this clip from the ReCommerce Podcast, Tuomo Laine (CEO of TWICE Commerce) breaks down how large retailers like IKEA and Best Buy are using store credit and loyalty systems to drive product returns, customer retention, and circular inventory flows.
Key insights:
- Cashback vs store credit: who should use what
- Why cashback works for aggregators but not retailers
- How store discounts support loyalty, repeat purchases, and material recovery
- The untapped value in remanufacturing and recycling materials at scale
Tuomo: There are a few larger retailers who then for their product category and the way how they operate, it might make more sense instead of promising cashback. You kind of promise a discount from a next purchase. So I think IKEA does that. I believe if I don’t remember wrong, I think Best Buy does that. So I think that is a way where from the business perspective, the kind of take back program becomes a way of retaining customers and kind of pushing and incentivizing the customer towards their next sale.
Karri: Yeah, and I guess that can be in terms of like credits and so on.
Tuomo: I think that’s something that I believe that over time will scale even more because then we’ve now discussed the idea that you acquire back a product that you can sell as it is or repair, refurbish it and then sell it. But for some players, it might even be just acquiring back the material. If they are highly integrated in their manufacturing chain, then they can kind of use that as a material to re-manufacture, for example, I don’t know, fabrics and so on. And with electronics, there is real value in many of the components. So if you are recycling the batteries or valuable metals, there is actual retail value that the retailer can then have an extra revenue stream on.
Karri: And that sounds like quite a maybe not easy way but kind of logical way even for linear retailers to actually jump into the circular commerce if the incentive is kind of aligned with their current business. So it might be giving them 20% discount on their next purchase where they actually have enough margins to still make money on it.
Tuomo: Yeah, definitely.
My gut feeling is that if you’re an existing retailer or maybe direct-to-consumer brand, cashback probably isn’t the way how to start for it. How to start reselling it. It should be this kind of discount towards your next purchase or some other loyal credit points or whatever your kind of loyalty system is. There’s two things that you can achieve there. There’s the fact that you have retention, you can establish a relationship where the customers end up visiting your store virtually or physically more and more. And then you can achieve the fact that you get the stuff back so you can decide whether you recycle it or what you do with it. But you can establish this flow almost like a serviced flow and ongoing relationship.
Now cashback I think works for aggregator brands that then acquire their supply from kind of constantly acquire supply almost from like new consumers. So if you were to now enter the let’s say phone refurbishment business and you need to establish a brand. So your brand is that we buy and sell or we buy old iPhones and we sell them as repaired, good as new. Now there you might have to promise a cashback program because then your kind of buying customers or the seller wouldn’t probably like why would I have a discount in your brand that I’m not even sure whether I’m yet going to buy anything from.
But if you’re Walmart you can be pretty sure that the consumers likely are going to buy something from you over the next year.
Karri: So it’s already a little bit about the brand trust and kind of the existing relationship with that and might be challenging for new entrants to come there and promise credits for something.
Tuomo: You need credits to I don’t know to almost retail store and you don’t even have an idea what to do yourself.