For the last decade, high-volume digital advertising was the undisputed engine of customer acquisition and retail growth. Today, that foundational strategy is evolving. Increased marketing costs across channels, platform saturation, privacy laws, and broader economic shifts mean that the strategies that were once key to success now require a more strategic and long-term approach to drive growth.
Rather than simply throwing more budget at a crowded digital space, leading brands are using new market realities as an opportunity to explore and build a more durable and omnichannel growth model. With average customer acquisition costs (CAC)—a KPI for retailers’ strategic health—increasing up to 40% from just two years ago, it’s clear the industry is ready to innovate beyond the scroll.
Key Takeaways for Retailers:
- CAC has increased up to 40% in two years, forcing a shift from digital impressions to owned customer engagement
- Customer lifetime value (LTV) should be a core metric for brands and retailers
- Retaining a customer is five times cheaper than acquiring a new one
- Strategies like branded resale and loyalty programs are now core growth drivers, not secondary initiatives
Why are Customer Acquisition Costs Skyrocketing in E-commerce?
Three main factors have led to higher customer acquisition costs and strained retailers’ profit margins in recent years:
- Increased competition: A greater number of advertisers—particularly emerging direct-to-consumer brands—now compete for a finite number of ad slots. At the same time, customers have become more fatigued by online sales pitches and have limited attention spans. As a result, the average cost per website visit has increased by 9% over the last year, while conversion rates have dropped 6.1% year-over-year. This means investment in digital advertising is not going as far as it used to, making it more expensive to acquire customers.
- New privacy regulations: Major industry shifts in data privacy have fundamentally limited the ability of advertisers to efficiently target potential customers. Apple's iOS 14.5 App Tracking Transparency significantly reduced the data available for targeted advertising. Combined with GDPR's strict data privacy regulations in Europe, advertisers' ability to personalize campaigns has become limited, leading to decreased effectiveness and return on ad spend. This challenge is forcing brands to shift their focus away from rented audience data and toward building valuable owned data assets.
- Eroding brand loyalty and economic shifts: Consumers are more price-sensitive and less loyal than ever before. More than half of Gen Z Americans say they are less loyal to brands now than they were before the pandemic, a dynamic driven by economic shifts that made shopping more expensive. That dynamic is likely not going away any time soon. Tariffs and supply chain uncertainty have led to higher prices, and shoppers are weighing their priorities more seriously to determine whether products are worth their price tags, making brands’ initial conversion harder and more expensive to secure.
Four Strategies For Winning in the New Retail Economy
To succeed in this new environment, brands need to get creative when attracting new customers. Rather than paying for ads on social media and hoping for the best, retailers are engaging more directly with their customers using the following strategies, all built around a central goal: maximizing customer lifetime value.
- Loyalty and referral programs
Loyalty programs are a key way to boost LTV by incentivizing repeat purchases, which are five times cheaper than new customer acquisition.
Studies show that repeat customers account for just 21% of a brand’s customer base, but generate almost half of all total revenue. Retailers are leaning into their most devoted customers with programs that keep them invested in their brands. Loyalty programs incentivize customers to buy again by offering discounts on future orders or free products with purchase.
One version of this is trade-in programs, which fosters customer loyalty by offering store credit for new products once gently-used ones have been returned to the brand. Trade-in programs also promote sustainability by reducing waste and extending product life cycles. New Balance recently expanded its trade-in businesses to nearly 100 participating U.S retail locations due to the initial success of a pilot program that drew in new customers.
- Branded resale
Branded resale is a powerful, low-cost channel for both acquiring new customers and reinforcing existing customer loyalty.
As tariffs and supply chain volatility make shoppers especially price-sensitive, resale has proven to be an effective strategy for revenue generation.
Resale businesses create a fresh avenue for customer acquisition by offering consumers the products they love at a lower cost. According to Archive data, on average, 50% of customers who shop resale are new to the brand.
Prior to launching their own resale business, Dr. Martens found that 40% of their customers were already shopping secondhand on various third-party resale marketplaces. As Anna Wickes, Head of Recommerce at Dr. Martens, puts it, “Your brand is already being resold and repaired by customers. By offering this yourself, you gain [control over] customer connection, loyalty, data, and countless other benefits.”
Additionally, resale transforms a single transaction into a long-term partnership. Existing customers are incentivized to return or resell used items for store credit, guiding them back to purchase new products, reinforcing loyalty, retention, and growing LTV. Archive data shows that customers who shop both resale and mainline demonstrate two to three times higher LTV than full-price only shoppers.
- Personalization and trust
A strategic investment in personalization drives both efficiency and loyalty by making every customer interaction feel relevant.
In a world where digital ads are struggling to find their audience, tailored messaging drives both efficiency and loyalty. When executed effectively, strategies like individualized email greetings or birthday promotions can reduce customer acquisition costs by as much as 50% and lift revenues by as much as 15%, according to McKinsey research. In addition, shoppers tend to favor products that have been recommended to them from people they trust. About 7 in 10 consumers rely on recommendations from their own network, and 83% are more likely to purchase from brands that share authentic user-generated content.
- Customer activations
Customer activations are high-impact, in-person experiences that create buzz and allow brands to interact with shoppers directly.
Rather than dedicating the majority of their marketing budgets to online awareness, brands are investing in experiences that attract a loyal, engaged audience. Pop-up shops create a sense of urgency and excitement that’s hard to ignore. They also help retailers attract new customers, experiment with store layouts, and interact with their audiences directly. Meanwhile, limited edition products tap into a similar feeling, giving customers a reason to act fast and be part of something exclusive.
Turning Acquisition Into Lifetime Value
A brand's long-term health no longer relies solely on the amount of traffic it can drive to its website, it depends on an ability to make customer LTV a north star. This approach requires a focus on frictionless digital and in-store interactions, as well as a marketing approach that makes every interaction personal and relevant.
As a result, strategies that once felt like secondary initiatives, like loyalty programs and resale, are now core to a brand’s growth engine. By focusing on long-term customer relationships, brands thriving in retail today are shifting their investment from expensive, digital impressions to valuable, owned customer engagement.
Branded resale is perfectly positioned at the intersection of this strategic shift. Brands offering resale address the new acquisition challenge head-on, providing a lower-cost entry point for price-conscious shoppers. But the true power of branded resale is in its ability to generate LTV. Archive data shows that customers who shop both resale and mainline demonstrate two to three times higher LTV than full-price only shoppers.
Looking to acquire and retain customers while by integrating a branded resale program into your omnichannel strategy? Archive helps brands turn existing inventory into a sustainable, high-value acquisition and retention engine. Reach out to our team at info@archiveresale.com
