Overcoming the CAC Crisis: A Guide for E-Commerce Brands
March 8, 2022
If you’re a brand operator, you know the past two years have brought immense change in the e-commerce industry. Much of it is exciting — e-commerce’s share of total retail sales has nearly doubled, creating an opportunity for brands to capture this consumer spend.
But you’ve also probably noticed a more insidious trend. Despite the growing number of online shoppers, acquiring new customers is only getting more expensive.
At Canal, we’ve spoken with hundreds of brands who have experienced what we call a “CAC crisis”: customer acquisition costs climbing to unsustainable levels. Many brands, especially those that are reliant on paid ads, are now facing stagnant growth and negative unit economics.
In this post, we’ll talk about what’s caused the CAC crisis and what brands can do about it. If you’re looking to find new acquisition channels and reduce your reliance on paid marketing - keep reading, we have a solution for you!
1. Digital acquisition channels are saturated
Many brands have relied on Facebook and Instagram to drive the majority of paid customer acquisition — but their return on ad spend has dwindled over the past 18 months.
Why? These channels are oversaturated. It’s never been easier to start a digital brand - the number of Shopify merchants climbed 75% in 2020 - and many are buying FB and IG ads to acquire customers. In Q2 2021, the average price per ad across Meta’s services jumped 47%.
Some brands are turning to platforms like Amazon to reach new customers — but Amazon has a similar problem. The number of third party sellers keeps climbing (more than 200K new ones in 2020), and the platform prioritizes those willing to pay for placement and Amazon’s own products.This makes it tough for brands to break through the noise!
2. Consumers are increasingly difficult to track
This channel saturation has been compounded by another problem: Apple’s iOS 14. This may sound like a simple software update, but it has had a monumental impact on performance marketing.
iOS 14 requires apps to ask consumers for permission before sharing their data with advertisers. In the U.S., only ~15% are opting in — that leaves a huge audience that is suddenly much more difficult to reach with targeted ads.
Not only does this reduce the efficacy of ads, it also eliminates your ability to retarget consumers who have visited your site but didn’t make a purchase. And it makes it harder to accurately measure the performance of your ads, which is critical for deciding where to deploy additional spend.
And, it’s only getting harder: iOS 15, released in September 2021, allows Apple Mail users to prevent marketers from tracking their activity, and Google has also announced that it will be phasing out third-party cookies on Chrome.
3. Earned media opportunities are shrinking
As digital ad spend has become less efficient, many marketers are turning to a more traditional channel: PR. But you may have noticed that getting a journalist to write about your brand is harder than it used to be.
This problem is magnified in e-commerce. There were already few reporters in this space, and they’re now inundated with pitches about the recent wave of celebrity brands, e-comm aggregators raising billions, and the supply chain crisis — just to name a few topics that have dominated the zeitgeist.
Product launches or fundraising announcements used to be considered “newsworthy” exclusives. Now, unless your brand is widely known, this kind of news is unlikely to get covered outside of a broader trend piece.
How Canal can help you reach new customers and diversify acquisition channels
That may sound like a lot of doom and gloom, but there’s a light at the end of the tunnel! At Canal, we believe the best brands deserve more distribution — and we’re here to help you make it happen.
If you’re looking for the right tool to integrate your existing existing brand partners and suppliers, our free Shopify app lets you add your products to their catalogues, reach new customers, and maximize order value in a click. Canal routes orders for you, and our tools handle inventory syncing, price enforcement, and shipping pass-throughs. No more endless busywork with emails and CSVs.
The best part? You‘re not throwing money at oversaturated channels like Facebook and Instagram and hoping for results.