The age of rising CAC
Discussing how winning a customer is becoming difficult due to increasing Customer Acquisition Cost (CAC)
A few days back I happened to attend a fireside chat where Prabhkiran Singh, CEO & Co-founder of Bewakoof.com shared his experience by being one of the oldest in the D2C markets & he mentioned how today CAC (Customer Acquisition Cost) has risen to impractical levels & how its because the tech companies are getting funded & bewakoof.com is competing for the same ad inventory with everybody else.
It makes more sense if you follow the below tweet & see that the total Annual Active Customers with spending power on the internet in India is just about ~50 million to ~70 million. Everybody is fighting for a piece of the same cake.
The proof of this working is right here. Google's ad revenue has jumped by ~70% this year.
Chamath Palihapitiya says & here in this tweet see how Vijay Shekhar Sharma from PayTm agrees that 40% of all funding goes to Google & Facebook. That's a massive massive number.
Here is a video where you can see Big Bazaar founder Kishore Biyani & Nykaa founder Falguni Nayar, discussing the CAC & comparative cost of running an online vs offline business. Here Falguni Nayar readily admits that first-time CAC is ~30%, but let's keep in mind that all industries are not created equal. The Personal Care industry is probably the fastest-growing segment in the D2C space & hence their CAC is on the lower side. Also, Nykaa is a marketplace & not exactly a D2C brand.
So all that being said, there is no point in crying over the increasing costs. What matters is what you do with this info. And here is the most pertinent question, who is building the distribution engine for this new world?
Got any inputs? Please reach out to me on Twitter & let's discuss. My handle is @krishnaa404