Part
01
of one
Part
01
How have customer acquisition costs risen in the last five years for Michael Kors, Coach, Ralph Lauren, and Adidas?
OVERVIEW
Hello and thank you for contacting Wonder with your question about customer acquisition costs over the last five years. As noted, we searched for information on the updated company list that included Burberry, Gap, Nike, and Urban Outfitters. After an extensive search effort, I have determined that the information you requested is either not available for three of these companies or three of the companies did not experience increased customer acquisition costs over this time period (due to no such information existing in their 10-K reports). Burberry is traded on the London Stock Exchange and had no 10-K reports filed with the Securities and Exchange Commission (SEC). Urban Outfitters was the only company that reported increased costs of customer acquisition over this time period and those costs occurred only in the last three years (2013-2016).
METHODS
As requested, I searched for 10-Ks for Burberry, Nike, Gap, and Urban Outfitters. I found 10-Ks for all companies except Burberry. The only 10-Ks that included information about customer acquisition costs were those from Urban Outfitters. The information on 2015 numbers for Urban Outfitters had to be calculated from numbers in the 2016 and 2014 reports because there was an issue with the information in the 2015 report. I calculated the increase in cost as the relative difference in costs between the 2015 numbers reported in the 2016 report and the 2014 numbers from the 2014 report ($809.5 M in these costs for 2015 - $734.5 M in 2014 = $75 M/ $734.5 = 10.2%). The numbers for 2013 and 2014 are the same, so these are questionable as to their accuracy, but they are the information that was reported.
Continuing the search, I looked for annual reports from companies that were not 10Ks as well as company press releases, but these reports and press releases did not provide numbers that were applicable to your question.
The next phase of the search was a general search on Google for key terms and acronyms that other Wonder analysts had recommended. The results here were intended to be used to triangulate an answer for your question by determining the marketing budgets of these companies over the specified time period and determining the number of customers acquired over each year.
After an extensive search, I determined this information was either not available or not accessible for Burberry, Gap, and Nike, but Statista is a website that may have additional information behind their pay-for-access screen for Burberry. There is an alternative reason this information was not available for Gap and Nike and that reason is that Gap and Nike may not have experienced increased costs related to customer acquisition, which is why that information is missing from their 10-K reports (unlike Urban Outfitters who only reported customer acquisition costs in years when those costs increased).
RESULTS
Burberry is traded on the London Stock Exchange and therefore may have different regulatory filing requirements than those in the US as indicated by the fact that the SEC did not have any 10-K reports on file for Burberry. I reviewed Burberry's annual reports and these also did not contain information on customer acquisition costs. The only place where this information may be accessible on the internet is through a pay-for-access site. The only relevant information I found for Burberry was qualitative, which was not information that was requested, but given the paucity of information available for Burberry I have included it. Burberry expressed increased efforts through a new customer service model aimed at increasing conversion and customer retention, which may hint at the potential for increased spending in the area of customer acquisition.
I reviewed the SEC reports for Nike for 2010, 2011, 2012, 2013, 2014, 2015, and 2016 as per the request. There was no information on customer acquisition costs for reports in any of these years and there were no press releases from Nike that included this information.
My search of Gap's 10-K forms showed the same lack of information on customer acquisition costs as Nike's forms. There were no reports of customer acquisition costs for 2010, 2011, 2012, 2013, 2014, or 2015. There was only a mention of customer acquisition in their 2016 report and this only said they would "continue to invest in strengthening brand awareness and customer acquisition" for the 2017 fiscal year. Additionally, there were no press releases or other reports where there was information on customer acquisition. Gap reported costs for strategic actions in 2015, but these actions were not related directly to customer acquisition rather they were related to being more competitive in the global market.
Urban Outfitters was the only company that had any mention of increased costs of customer acquisition in their 10-K reports. There were no mentions of customer acquisition costs in the 2010, 2011, and 2012 reports for Urban Outfitters. Beginning in 2013, however, Urban Outfitters starting reporting that they had increased costs associated with customer acquisition. The reports for 2013, 2014, and 2016 all state customer acquisition costs had increased, but did not distinguish the increase in these costs from increases in costs for selling, general, and administrative costs. The 2015 report has the same information as the 2016 report and the years reported in the 2015 report are 2016 numbers over 2015 numbers, so I triangulated the 2015 information as explained in the methods section (above). Regardless, the total increases reported for customer acquisition, sales, general, and administrative expenses for Urban Outfitters in 2013, 2014, 2015, and 2016 were $77.3 M (11.8% for 2013 and 2014 as reported), $75 M (10.2%) for 2015 (as triangulated in the methods section above), and $38.8 M (4.8%) for 2016. There has been an overall decrease in the total amount spent, but the reports indicate an increase specific to customer acquisition costs. The overall decrease, then, is likely attributable to decreased selling, general, and administrative costs that are lumped in the total costs given in the reports.
CONCLUSIONS
There are at least two possible conclusions to draw from the results reported for Gap and Nike. The first possibility is that customer acquisition costs have remained stable for Gap and Nike over the 2010-2016 period, which is why they are not mentioned in the 10-K reports. Urban Outfitters only reported increased customer acquisition costs, but not stable costs, so that may indicate that only increased costs are reported. The second possibility is that Gap and Nike have had changes in customer acquisition costs that have not been reported. Given the available information, there is no way to know for sure which possibility is true. Additionally, there was no information for Burberry, so the same possibilities for Gap and Nike also may be true for their customer acquisition costs over this time. The remaining information needed to answer your question was not available, but the information presented here should provide some helpful insights.
Thank you for contacting Wonder with your request and please let us know if we can help in the future.