As you know, I've been telling you about three mega-trends that impact our businesses.
- Merchandise Productivity
- New Customer Acquisition Difficulty.
- Avoiding Tolls.
This graph actually illustrates the power of marketing productivity. Catalogers only have one advantage over most e-commerce businesses. Catalogers have a paper-based relationship with customers - and this paper-based relationship allows the cataloger to greatly increase the likelihood of a second purchase.
Because e-commerce businesses don't have the marketing advantage of paper between a first and second purchase, new customer acquisition becomes even more critical. Annual repurchase rates for first-time buyers are low - requiring a constant flow of new customers to keep the business growing.
So when customer acquisition becomes a challenge for e-commerce brands, you can expect growth to slow, quickly, especially if annual repurchase rates are (on average) below 45%.
This is why new customer acquisition, especially in e-commerce, is so critically important. For most businesses, merchandise productivity gains allow more new customers to be acquired at a lower cost, helping the business avoid paying tolls to prop the business up.