It’s no secret that acquiring new customers is expensive - 5 times more expensive than getting a returning customer to shop with you, to be specific. Understanding your customer acquisition cost, or CAC, empowers you to make decisions about where to allocate your budget.
It also gives you a sense of where you sit among your peers, helping you determine if you are paying too much in ads, have a conversion problem, or need to shift your focus towards retention. So what’s the average customer acquisition cost for eCommerce?
We’ve put together a chart outlining the average eCommerce customer acquisition cost by industry, ranging from auto parts to CBD, fashion, food and beverage, jewelry, and more. At the low end, eCommerce brands are paying roughly $53 per customer. At the high end, over $90.
After digging into the data to help you see how you stack up we’ll share strategies to bring your CAC down, including setting up a Shopify loyalty program and Shopify referral program with Rivo, the platform built for retention. But first we need to help you figure out your CAC.
Calculating Customer Acquisition Cost (CAC)
This is among the most widely used metrics for any eCommerce business. So why is customer acquisition cost important? Simple - it tells you how much you need to spend to bring a new customer into your ecosystem. It gives you insight into how efficient your marketing spend is.
A high CAC is associated with low profit margins, whereas a low CAC suggests you might not be spending enough to acquire customers who will generate long-term revenue. The calculation for CAC is straightforward:
Customer Acquisition Cost = Total Marketing and Sales Spend / Total # of Customers
Say you spent $1,000 just on Facebook ads and generated 50 sales. You’d have a customer acquisition cost of $20 - which as you’ll see below, is pretty good by industry benchmarks!
You can use CAC to look at how your ad spend and sales dollars are generating a return, not just on a day-to-day basis but over a certain period, be it a month, specific promotion window, or a year. But one thing to keep in mind is that CAC takes into account all spend, including:
- Advertising Spend: Costs for paid search, social media ads, display ads, influencer sponsorships, etc.
- Marketing Team Salaries: Wages for the team running your marketing campaigns.
- Software and Tools: CRM, email marketing platforms, automation tools, and analytics software.
- Creative Costs: Content production, graphic design, video production, and branding.
- Promotions & Discounts: If you offer first-time buyer discounts, free shipping, or other incentives to new customers, this needs to be included.
- Sales Team Costs: If you have sales reps closing deals, their salaries and commissions contribute to CAC.
Failing to take all these moving pieces into account would result in an underestimation of your true acquisition costs. It’s also a mistake to look at CAC in isolation. That $20 CAC we mentioned above sounds great if you sell a $100 product - you're profitable right away.
What if your product costs $3, though, and customers only purchase from you one time? Your business model is unprofitable at that point. You need to take CAC in accordance with your product prices and your customer lifetime value (LTV).
We’ll talk more about how you can use this metric to smooth out the customer acquisition journey in just a moment. First, let’s see how you stack up. What’s the average customer acquisition cost for eCommerce?
What’s the Average eCommerce Customer Acquisition Cost?
Based on our experience working with thousands of Shopify brands, we’ve found the average eCommerce customer acquisition cost falls somewhere around $70. But we want to get a bit more specific about the average customer acquisition cost for eCommerce based on industry:
Advertising Specialty / Promotional: $64 – Businesses selling branded merchandise or promotional products have relatively low CAC, as word-of-mouth and repeat customers play a big role.
- Automotive Parts - $78: Higher costs stem from the niche audience and in turn, more targeted marketing strategies.
- Beauty / Personal Care - $61: Strong brand loyalty helps offset CAC in this niche, but influencer marketing and paid social ads increase costs so it’s a bit of a wash.
- Cannabis / CBD - $72: Strict advertising regulations make acquiring new customers more expensive compared to other industries.
- Consumer Electronics - $76: High competition and price-sensitive customers lead to increased spending on PPC and other digital acquisition methods.
- Household Goods - $58: Broad audience and frequent repeat purchases keep CAC relatively low.
- Fashion / Apparel - $66: Visual-heavy marketing and influencer collaborations drive costs, but strong retention balances out acquisition expenses.
- Food & Beverage - $53: Subscription models and repeat purchase behavior contribute to a lower CAC in this space.
- Furniture - $77: Big-ticket items are going to have more touchpoints and longer buying cycles, driving higher acquisition costs.
- Jewelry - $91: Luxury branding and premium positioning mean businesses spend more to acquire high-value customers.
- Medical - $87: Compliance requirements and specialized targeting drive up CAC.
- Sporting Goods - $67: Seasonal demand and diverse product categories influence acquisition costs.
- Toys / Hobbies / DIY - $59: Community-driven marketing and social engagement help maintain moderate acquisition costs.
How do these CAC figures stack up to other industries outside of eCommerce, though? They’re really low. For instance, the CAC in SAAS (software as a service) can be as high as $700 whereas CAC for B2B companies is over $530.
But like we said earlier, CAC is just one piece of the puzzle when it comes to figuring out how sustainable your business model is. So let’s compare and contrast customer lifetime value vs customer acquisition cost below.
How Customer Lifetime Value (LTV) Comes Into Play
CAC tells just a small part of the story. You need to factor in customer lifetime value (LTV) for a better understanding of whether or not acquiring a new customer is profitable. LTV looks at the total revenue a customer generates throughout their relationship with your brand.
A high CAC isn’t necessarily a problem if LTV is significantly higher. For instance, say you spend $70 to acquire a new customer (the average customer acquisition cost for eCommerce) but they generate $500 in lifetime revenue - it’s a no-brainer.
But if that same customer only spends $90, your margins shrink and you have to wonder if there’s something wrong with the type of customers you’re acquiring, your product, your pricing, or your retention efforts.
The goal is to strike a healthy balance between CAC-to-LTV, with a ratio somewhere around 1:3 at the bare minimum. This means for every dollar spent on acquiring a new customer you generate 3x that in revenue.
This is to say that you don’t just have to focus on bringing costs down - you can try to earn more money from each customer you acquire. This is typically far more feasible anyway. Implementing strategies to increase customer loyalty is easy with Rivo.
More on that in a moment. In the meantime, we’re going to look at a few ways you can bring your eCommerce brand’s CAC down to a healthier level, giving you more wriggle room with profitability.
Strategies for Lowering Your eCommerce Brand’s CAC
If you feel you’re spending too much on acquiring new customers there are a few ways you can lower your CAC, from improving conversion rates on your website to tweaking your marketing efforts. Try these strategies to optimize CAC and boost profitability from the first sale.
Optimizing Conversion Rates to Maximize CAC Efficiency
Every dollar spent on customer acquisition should be working as hard as possible. Driving traffic that doesn’t convert into paying customers is just a waste of ad spend, no matter what your agency tells you.
Conversion rate optimization (CRO) looks for ways to improve your website for better results. There are a number of ways you can do this, and the simplest is improving the checkout process. Any friction at the final yard is going to cost you sales. Guest checkout, autofill, and multiple payment options are a must.
You could also look at landing pages to see if they’re falling short in some way or another, be it loading speed or the content on the page itself. You might need to do a better job communicating USPs or structuring CTAs.
Try A/B testing pricing and offers to see if you can get a marginal lift in conversion rate. Small tweaks in messaging, pricing structures, or discount strategies can move the needle. Taking your conversion rate from 2% to 3% makes a massive difference in CAC.
Testing and Refining Marketing Channels
Maybe the problem isn’t on your website. Rather, it’s a traffic issue. The best brands don’t spread themselves too thin, they double down on what works and ruthlessly cut out what doesn’t.
We recommend you track CAC by marketing channel - zeroing in on how well Facebook/Instagram, Google, TikTok, and influencer marketing perform. Spend more on your best segments and less on those that don’t deliver as high a return.
Or, if you have some room to test new strategies, try tweaking the underperforming marketing channel with new content, angles, or audiences. Give it a chance if you can, as every channel has its place in one way or another.
Reducing Paid Ad Dependency
Relying too heavily on Google Ads, Facebook Ads, or TikTok Ads can be risky. That became all too apparent in the wake of the Apple iOS 14 Privacy Update that made it more difficult to retarget users through Facebook and Instagram ads.
Brands who were only bringing new customers in through this marketing channel went belly up almost overnight. Look for other ways to acquire customers profitably, including:
- SEO and content marketing: Ranking for high-intent search terms attracts free, long-term traffic on autopilot. These customers tend to convert better than ad traffic, too.
- Email marketing: Converting website visitors into subscribers and nurturing them with automated sequences keeps them engaged without ongoing ad spend.
- Referral programs: Encouraging customers to refer friends can lower acquisition costs while increasing trust in your brand.
These are considered more organic growth channels which means they cost a bit less, so you can stay profitable and keep growing even if paid ad performance takes a plunge.
Leveraging Retention to Lower Reliance on New Customer Spend
There should be a healthy balance between how much you focus on customer acquisition vs retention. But most brands could benefit from skewing their resource allocation more in favor of retention. Rather than trying to lower CAC, try raising LTV!
It’s more cost-effective to sell to customers you have already acquired since there is a much higher level of trust there. If you have Shopify customer accounts set up, there’s even less friction as well.
Building a customer loyalty program is a quick and easy way to raise LTV. You can offer loyalty points, VIP perks, or subscription incentives to keep customers engaged for the long haul. Use post-purchase email flows with tailored recommendations and special offers for best results.
A well-structured loyalty program turns one-time buyers into repeat customers, reducing your need to constantly chase acquisition. You can get off that hamster wheel by lowering churn.
Rivo’s loyalty and referral platforms integrate seamlessly with your Shopify storefront to maximize retention, increase repeat purchases, and lower acquisition costs by keeping customers engaged long after their first purchase. See how it compares to other solutions:
Or, request a demo today for a one-on-one walkthrough of what the right loyalty program can do for your brand. It’s time to take the next step towards building a profitable growth engine without increasing ad spend!
Closing Thoughts on the Average Customer Acquisition Cost for eCommerce
Knowing the average eCommerce customer acquisition cost gives you a better sense of how well you’re doing at acquiring new customers relative to the rest of the field.
But while understanding the average customer acquisition cost for eCommerce is important, don’t forget that it needs to be taken with a grain of salt. Your LTV influences just how much you can spend to profitably acquire new customers, as it factors in total revenue per customer.
Still, it’s worth trying to lower CAC through conversion rate optimization and marketing refinement efforts. But if you want to stop chasing new customers and start nurturing existing ones for better brand sustainability, look no further than Rivo.
Whether you’re trying to set up a Shopify loyalty program or a Shopify referral program, we’re here to help with an intuitive, customizable platform that drives revenue and strengthens loyalty. Learn more today!
