March 02, 2021

Post-COVID Customer Development

Your annual repurchase rate will determine how your brand will emerge out of COVID.

Many of you possess annual repurchase rates < 25%. Your COVID-bump will end when COVID simply becomes a persistent irritant. There will be a ton of pent-up demand for in-person activity. Some of your new customer acquisition gains may continue, most of 'em won't, and with a low repurchase rate your business will revert to a "new normal" quickly.

Annual repurchase rates between 25% and 40% will experience a different dynamic. Their gains will not be temporary, but they won't be lasting either. Expect a year of "compound interest" paired with contraction. In other words, as new customers revert back to a "new normal", you'll see a contraction in sales. However, all of the customers you acquired pay you back compound interest for a year (+/-), offsetting some (or all) of the sales loss from reduced new customers.

Annual repurchase rates between 40% and 60% will have 2-5 years of compound interest that offsets the sales losses from fewer new buyers. This is a fabulous place to be. My simulations show that these brands will be able to fund all sorts of innovation if they budget their profits wisely.

If you are a rare e-commerce brand with annual repurchase rates beyond 60%, you'll be printing money for years because of COVID (assuming your new customer counts thrived as a consequence).

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