We’ve broken down the average customer acquisition cost (CAC) in retail by a variety of different factors to create more accurate estimations of what a singular retail store would expect to pay to acquire a customer. The breakdown categories are:

• Store Location: Whether a store is located in a rural, suburban, or urban area will heavily determine the CAC for the store.
• Price Point: We’ve broken down retail stores into 5 different general price ranges to determine a CAC for each.
• Acquisition Channel: While not a category of a retail store, these are methods of advertising commonly used by retail stores and what CAC can be expected from each. 
• Month: Consumer spending is not constant year-round, meaning the month must be accounted for in calculated CAC.  
• Niche: A wide variety of retail stores exist selling different types of products. We broke down CAC by niche. If a store sells multiple types of products, CAC can be broken down by each niche the store sells in. 

 

Additionally, we have broken down each CAC by organic and paid. Organic methods include social media, SEO, and email marketing, while paid CAC includes paid social media ads, Google Ads, TV commercials, or other types of paid advertising. 

In paid advertising, dollars are traded for impressions, while in organic advertising, dollars are used to produce content which then earns impressions by being interesting to them. 

First, to calculate CAC, the following formula is used:

Customer Acquisition Cost (CAC) = Total Amount Spent on Marketing / Number of New Customer Acquired

 

Average Retail CAC by Store Location

The following table breaks down organic and paid CAC by the store location. 

Generally, in more highly populated areas, CAC will be more expensive due to a greater number of stores competing for attention. The reason organic CAC is not much higher than rural is the greater number of stores is made up for by the greater number of people. However, the cost to advertise and stand out will still be greater. 

On the other hand, rural areas are not highly competitive, but the customer pool is lower. Additionally, these stores will have less money to spend on advertising due to the lower customer pool. While these CACs are lower, overall, the rural stores are generally less profitable. 

 

Average Retail CAC By Price Point

This table breaks down the expected CAC by price point of the retail location.

Price points will cause the CAC to vary, as there is no logical reason why Louis Vuittion would be paying the same to acquire a customer as Dollar Tree. We’ve aimed to present realistic averages for organic and paid CAC across price points, but we understand that depending on the classification, mant stores may vary. 

This metric, while a useful average, should be calculated individually for retail stores taking into account their average basket value, revenue, location, and more. Due to retail’s physical location, expect a lower CAC than an online location. Additionally, brand recognition plays a part in how high or low the CAC is, especially as the goods get more expensive. 

 

Average Retail CAC By Channel

The following table displays retail CAC by acquisition channel.

The first three, social media, SEO, and email are organic acquisition channels. It is important to note that organic channels generally yield much lower CACs than paid channels. This will vary by the value of the products being sold. 

 

Average Retail CAC by Month

The following table and graph show the expected paid and organic CACs by month. 

 

These trends are bent around the times of year where consumer spending spikes, such as tax refund season, Christmas, and back to school. Additionally, you’ll observe paid and organic follow inverse trends at some parts of the year, like in January. 

Organic is reliant upon people actively searching for the product they are wishing to buy. In months like January, where consumer spending is down, less people will be actively searching for products to purchase. However, due to this, companies traditionally spend less money on advertising, which leads to lower CPMs (cost per 1,000 impressions) on the ad platforms. This lower cost can help stores bring in more customers even while the typical consumer is spending less. 

 

Average Retail CAC by Niche

Finally, this table breaks down the CAC by niche of the store. 

Generally, these figures follow a close correlation to how expensive the average bag value of the store is. Acquiring a customer for a book will nearly always be cheaper than acquiring a customer for a luxury good, for example. 

These can also change based on product price. A personalized product may not always be extremely expensive, in which case the organic and paid CAC ranges should be adjusted downwards to better reflect the price of the product. 

 

Lowering Your CAC

To lower your CAC, it is best to explore using organic digital advertising to earn customers, instead of repeatedly investing money into an ever more competitive landscape of paid media buyers. At Focus Digital, we specialize in helping businesses incorporate an SEO strategy to lower their CAC. To learn more, contact us on our Contact Us page. 

Sources:

Washington State Department of Revenue

Copypress

Statista