Nestore's blog

Why are acquisition costs increasing?

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According to Prune Aubry and Florie Ducamp Albert, the two founders of We are Jolies, their customer acquisition costs doubled between March 2021 and March 2022. And the brand is no exception. Like them, victims of the explosion in acquisition costs, many DNVBs have seen their financial health in danger, to the point of forming a collective called We are lucioles to alert the government to their situation. A year after their open letter, the situation remains unchanged: no concrete action from the government and brands looking for new models .

How can this be explained? First of all, many DNVBs have launched in recent years. There were around 350 before the COVID crisis, compared to no fewer than 600 in France in January 2022, according to the DNG group. This is increasingly fierce competition and market saturation, which automatically impact their customer acquisition costs.

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Added to this are the rising costs of raw materials and transport , not to mention the evolution of GDPR, which has only made the situation worse. The cause? Customer data is increasingly difficult to obtain, less visibility into their online behavior, and a blind approach for many brands. In this context, in search of a new lease of life, they are trying to diversify their acquisition channels . And for many, the pop-up store arrives a bit like the Messiah.

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Pop-up stores as an alternative to soaring acquisition costs

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Usually, when we talk about acquisition cost, we're referring to the online customer acquisition cost. However, we also find its , allowing us to compare the two. (You know, at Nestore we like to compare, test & learn, and all that, it's our hobby !)

The pop-up store as a customer acquisition channel

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A new way to acquire customers is therefore to go through physical retail, and in particular pop-up stores.

The point of sale acts as a medium . It allows brands to meet their customers, but also and above all to tell their own story. A true showcase for a brand , the store allows messages to be transmitted and very specific targets to be reached. On the condition, of course, of betting correctly on its commercial location and its in-store value proposition. But let's get back to our basic subject: the pop-up store as an acquisition channel .

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According to Rémy Bendayan, CEO of digital marketing agency Datashake, “Some DNVBs are doing badly, they don’t even pay our bills anymore. But the ones that are doing best are those that have stores.”

So, launching into physical retail to counter the increase in online customer acquisition costs turns out to be a good idea:

• Minimized financial risks and better cost control;
• Optimized targeting in the field thanks to customer data collected online (demographics, etc.);
• “Free” impressions thanks to natural street traffic;
• An optimized conversion rate thanks to trained sales staff;
• New, more qualified and engaged customers.

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But be careful not to rush into things. Retail is also a real profession, and it can be learned. Once again, pop-ups are the solution!

Its ephemeral format allows you to approach retail with greater agility to test a concept, a location, a target or a product and identify the approach that best suits your brand.

This is how we see the pop-up store as a more profitable and efficient acquisition channel for brands with better cost control and an enriched customer experience , with high added value.

The pop-up store: better customer acquisition

The challenge of acquiring new customers is as much quantitative as qualitative. The Holy Grail? Acquiring as many customers as possible with the lowest acquisition cost. And the ultimate Holy Grail? Acquiring qualified customers who will be engaged and loyal to the brand.

To achieve this, thanks to the experience offered in-store, the pop-up store allows you to increase the lifetime value of your customers and turn them into true brand ambassadors.

The pop-up store as an acquisition channel for better lifetime value

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With an enriched customer experience and journey, pop-up stores allow brands to attract a more valuable customer base than online : more qualified, more loyal, and more engaged, they're also a cozy nest for brand growth. That's right! Acquiring a new customer costs between 5 and 25 times more than retaining an existing one.

In short, your customers are valuable. So, if you're going to pay to win them, you might as well focus on the right ones.

To measure the value of a customer base, we are therefore interested in the level of loyalty , but also in the average basket (generally higher in physical stores than online), or even in the frequency of purchase . Take these indicators, combine them intelligently and you get the lifetime value of your customers (LTV). In other words, the LTV is equal to the product of the frequency of purchase of customers, their average baskets and their average lifespan within the brand (period during which they continue to buy the brand).

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When analyzed using brands that have visited our stores, the LTV of customers recruited through pop-up stores is on average 22% higher than that of customers recruited online. So, naturally, if we reduce the lifetime value of the customer thus recruited to the actual cost of their acquisition, the result is a reduction in the brand's acquisition costs.

Pop-up stores: a strategic response to rising customer acquisition costs

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In addition to their purely monetary value, which is calculated using lifetime value, your customers can be true ambassadors who contribute to the influence of your brand. A pop-up store is therefore an excellent way to turn your customers into standard-bearers . Indeed, there is nothing like meeting them in person to strengthen your relationships with your customers. This will allow you to create a bond with them, so that they become true ambassadors for your brand.

Additionally, pop-ups offer the advantage of allowing you to regularly and easily refresh the customer experience you offer. Your store then becomes a meeting place between your brand and its target audience. Customers recruited in physical stores also become media outlets for sharing and even selling the virtues of your brand.

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So we'll keep telling you, the pop-up store is a great alternative to the rising costs of online customer acquisition since the cost of acquiring customers in a physical store is lower, and the customers you gain in a physical store will have greater value. All that's left is to do it!

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