Most retail marketers are familiar with the concept of the retail apocalypse. Legacy retailers are increasingly losing ground to the one-click convenience, price transparency, and the endless assortment offered by Amazon and similar disruptors.
But it’s not all doom and gloom. Brick-and-mortar retailers like Sephora, Zara, and Nike are bucking the trend. So are e-commerce superstars like Bonobos, Warby Parker, and Everlane. These brands obsessively prioritize customer insights, and have invested in the technology to deliver a seamless customer experience across channels.
As the hottest season of the year for retail approaches, new research from customer analytics firm Custora (disclosure: my employer) has uncovered some surprising insights about what’s driving retail growth. The research looked at more than 40 of our retail clients to understand which metrics are most correlated with positive year-over-year revenue growth.
Customer acquisition vs average order frequency
The findings? For obvious reasons, high-growth brands invest significantly in acquiring new customers. It’s a sure-fire way to grow top-line revenue. But it’s actually relatively inefficient. In fact, a 1% increase in order frequency is 3x as impactful from a growth perspective as a similar increase in the number of customers acquired, and driving order frequency is often far less costly.
To put it differently: if the average customer buys once every 180 days, shortening that replenishment window to just 178 days can drive nearly 3% revenue growth.
That’s a pretty stunning discovery – and savvy retailers have taken notice. They’re increasingly investing in tactics like welcome series, hybrid subscription models and personalization across channels and devices to drive brand engagement and product discovery — all in the hopes of shortening inter-purchase time.
The impact of increasing average order value
Another powerful finding buried amongst the findings of the research will also be helpful to retailers looking to drive growth. Specifically, a 1% increase in average order value (AOV) is correlated, on average, with a 1.3% increase in revenue.
How, then, do retailers…