Adam Sharon-Zipser.
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Adam Sharon-Zipser, Elephant Room Managing Director.
Tariffs and broader economic pressures are reshaping brand operations, with visible impacts on conversion rates and average basket sizes. Whilst some brands have avoided direct tariff exposure, adjacent macro factors, such as rising gold prices in the jewellery sector, are tightening consumer demand and creating ripple effects across other categories.
The most pronounced indicator is a decay in new customer conversion rates across the board. However, this decline is partially offset by a lift in new customer average order value (AOV), suggesting that whilst fewer consumers are converting, those who do are spending more per transaction. This dynamic is further compounded by cost-per-click (CPC) increases of 10–15% across major performance platforms, squeezing acquisition efficiency from both sides.
Brands are increasingly reliant on retention audiences, that is, the customers they already have, to meet revenue targets, but this has become a crowded and competitive space where multiple players are vying for the same consumer dollar.
Product strategy and market positioning
This shift in consumer intent has prompted brands to explore diversified production strategies and develop more accessible product ranges. The goal: convert more net-new customers whilst finding intelligent ways to enhance customer lifetime value (LTV).
As core entry price points steepen, brands are building alternative pathways to acquisition. For example, our client Bed Threads has launched a cotton range at a lower price point alongside its core linen collection; while fashion label Aje has introduced 'Studio', a more affordable diffusion line positioned below its premium range.
These moves reflect a strategic recalibration. Brands are no longer relying solely on their hero products to drive growth but instead creating tiered offerings to capture demand across different audience segments.
Geographic expansion and technology enablement
Simultaneously, many brands are pursuing international expansion, coinciding with Shopify's release of advanced 'Markets' capabilities. This suite of tools enables brands to operate a single store globally whilst maintaining region-specific price books, localised store content and merchandising rules, split inventory allocation, and automated tax compliance per geographic region.
Shopify's market consolidation signals a broader trend: technology is pulling fragmented systems back to the centre, driving operational efficiency, pricing control and international consistency at scale.
Across categories, the tension between pricing, product and demand is playing out in real time. Every brand is deploying its own lever, whether price protection, assortment strategy or geographic diversification, to offset this macro volatility.
All of these shifts ultimately influence media strategy and performance, creating new baselines for efficiency and spend allocation. With new customer acquisition costs rising due to both higher CPCs and lower conversion rates, brands are forced to continuously recalibrate their approach, balancing the higher quality but smaller volumes of new customer acquisitions against intensified retention plays and evolving channel mix.
As brands navigate this recalibrated landscape, the imperative shifts from spending more to spending smarter. This starts with honest interrogation of platform contribution to determine whether channels like Google’s brand terms for example are genuinely delivering incremental value or simply cannibalising conversions that would have occurred organically.
It extends to understanding how upper-funnel and brand investment compounds into downstream performance, improving new customer conversion rates and revenue per session in ways that remain poorly measured in most organisations.
Brands should also diversify their channel mix into emerging, less saturated environments like ChatGPT's nascent ad platform, where high-intent auctions offer early-mover advantage before inevitable cost escalation. And finally, creative remains the most underleveraged performance lever winning brands are adopting with structured frameworks that segment by pillar, format and type, enabling faster ideation, clearer briefing and systematic testing to reduce fatigue whilst maximising the probability of identifying high-performing combinations.
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