How Smart DTC Brands Turn First-Order Losses Into Long-Term Profit

Struggling to break even? You're not alone. But here's how to overcome costly acquisition and scale.

Author

Pietro Saccomani
March 13, 2025

Ever feel like the deck is stacked against you?

Making a consistent profit on new customer acquisition has always been a challenge. And every month, it seems, something else comes along to increase the difficulty level.

  • Saturation on media platforms like Meta and TikTok

  • iOS changes and cookie deprecation

  • Tariffs

  • Looming closure of the Section 321 de minimis loophole

It’s increasingly harder to tweak the math in your favor.

But some brands must be winning… right?

What these brands “get” more than brands that are doing 7-8 figures and barely making payroll is that the real money doesn’t come from the first sale.

It comes on sale #2, #3, #4…

Dependable, high-margin repeat sales lessen the burden of acquisition costs and allow your business to stay in business (and grow).

This is the playbook for how sustainable 8+ figure brands operate.

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Retention is where the margins are

Acquisition is expensive, and always will be.

It just costs more to convince someone new to your brand to buy from you, especially today, where we are bombarded with ads from every direction – in your news feed, driving to work, and even in AI-coded flight simulators.

The future of digital advertising???

Despite the recent crunch in paid media, this is nothing new.

It’s simply a fact of business and the paid advertising game. Do you think HexClad made $10m+ in profit as a direct result of their Super Bowl ad spot?

No, acquisition (or brand marketing) is not supposed to drive your profit (outside of brands selling low-frequency, high-AOV products, which have no choice but to rely on first order profits).

The real money comes from retention.

The math is just better.

  • For returning customers, you’re not paying per click or per sale. It’s basically a flat cost and then the rest is all profit.

  • Take email for example; you pay for Klaviyo, Omnisend, etc – but costs don’t scale as your sales do.

  • With a mobile app, you pay ~$500 per month to maintain your app, plus basically nothing for push notifications. It takes very little to cover this cost, and after that, you keep all the profit from app sales.

  • SMS is more expensive per message than email & push; but the economics are still far better than paid ads).

Plus, returning customers convert easier, and spend more.

Once you’ve got past the barrier of the first sale, and someone trusts you, trusts that you’re not going to scam them or send Temu-level knockoffs, their wallet all of a sudden opens a lot easier.

The profit from repeat sales is exponential, while acquisition is merely incremental.

There's a hard floor to how low your acquisition costs can go.

But the upside to retention revenue is virtually uncapped. A loyal customer might purchase 5, 10, or 20+ times over their lifetime with your brand.

And you keep a greater percentage of each subsequent purchase.

It's not retention vs acquisition—it's retention and acquisition

This is not an argument for retention over acquisition.

It’s an explanation of the role that retention plays in your financials.

Retention is your profit center; acquisition is your growth engine.

Working together, they create the flywheel that powers just about any successful brand.

  • Acquisition fuels retention. Every new customer = more emails, SMS subscribers, and app downloads.

  • Retention drives profitability. The profit from repeat sales makes up for the cost of acquisition and the slim margins on the first sale.

  • Profit from retention gets reinvested into acquisition. You can afford to spend more on paid ads, scaling new customer acquisition, which feeds retention, and so on…

This cycle repeats and scales infinitely.

Reducing CACs and increasing first-order profitability is great, don’t get me wrong.

But the high-leverage play is to focus on how to get more 2nd, 3rd, 5th, 10th purchases.

This is how you scale to 8, 9 figures (and beyond).

The top 3, high-ROI retention plays (and how to get the most out of them)

At the core of every profitable retention engine are three channels; and honestly, these channels are all you really need to generate enough retention revenue to stay winning.

Here are actionable plays to start getting more out of these channels for your own brand.

1. Email

You’re doing email marketing already (if not, stop reading this, go to Klaviyo – or even Gmail – and send an email, like now). But you’re probably not getting as much out of it as you could.

Email is the low-hanging fruit. Sure, visibility is getting tougher, inboxes are getting more crowded, but the cost is so low, you’d be silly to ignore it.

Here’s how to get more out of it.

  • Optimize your opt-ins. Most of your site visitors won’t buy on the first visit. Capture their email so you can sell to them later.

  • Send more emails. If only 1 in 10 emails gets opened, do you want to send 1 per week or 7 per week?

  • Test relentlessly. Subject lines, send times, offers. Track what moves the needle and double down.

2. Mobile Apps

Your mobile app is a direct channel to your customers that isn't filtered through social platforms or email providers, and doesn’t come with a cost per sale.

It can be a great source of high-margin sales, with just a little work to promote it. Not all your customers will use the app, but those who do end up being your power users.

  • Make your app easy to find. Promote it in welcome emails, on your site, in your post-purchase flow.

  • Send more push notifications. Like email, most of your notifications won’t end in a click, let alone a sale. But they’re free to send, and if just 1 in every 10 notifications ends up in a shopping session, it’s a win for you.

3. SMS

SMS is a high-impact channel when used correctly. It’s just higher cost, so you can’t be as liberal with it as with email and push.

  • Identify SMS-responsive customers. Some people hate texts, some people love them. Find out which of your customers fall into which bucket.

  • Use SMS for urgency. Restocks, flash sales, abandoned carts—these drive action fast.

  • Avoid SMS for low-urgency messages (the cost can stack up fast).

Final takeaway: build your flywheel or die trying

First-order profitability is great when you can achieve it, but it's becoming increasingly difficult to maintain.

And even if you do crack the code for profitable Meta ads, relying on profitable acquisition to keep your business running is like a treadmill.

It only works as long as you keep your legs moving (or in this case, as long as you keep paying the beast).

Think acquisition for growth, and retention for margin.

Make them work together and fuel each other, and you’ve got the recipe for the next DTC darling.

Your move

Which of the three retention plays above are you underutilizing right now?

Pick one and start executing today.

The brands that survive and thrive are the ones who build retention machines that turn first-time buyers into lifetime customers.

Dive Deeper On Our Blog

We’ve been exploring profitability in DTC (specifically through retention marketing) from a number of angles in our blog. If you want a deeper understanding of the relationship between retention and margins, check out the following articles (or bookmark them for later):

Quick Hits

We’re what ‘s worth your attention from around the ecom & DTC world this week.

MobiLoud at DX3 Canada

A week ago, the biggest retail, DTC and ecommerce event in Canada wrapped up, and we were lucky to be a part of it.

Nihal and Eric manned a booth alongside other big players in the North American retail game, talking about retention and loyalty and hearing what’s working, what’s not, and the exciting projects some innovative brands have in the works.

Check out Nihal’s experience in the link below, and stay tuned to his page for more insights in the weeks to come.

The 7 Landing Page Elements that Convert

Struggling with high CAC? It could just be that your landing pages aren’t good enough.

Thankfully, there are brands out there willing to share all their secrets for success.

Ankit from Obvi gives an incredible breakdown of a successful landing page, with a 7-part framework for landing pages that are almost guaranteed to drive results.

Give Your Customers the VIP Treatment

The key to driving higher retention and LTV is to give a VIP experience to your top buyers.

These buyers – the top of the top, your loyal fans – should be treated as such, not treated like just another click from an Instagram ad.

As Rabah says: “Your best customers don't want another discount code – they want to feel like VIPs.”

This is a great talk on retention, and why brands need to pay closer attention to customers who display genuine loyalty to the brand.

The Brand Redefining Email Marketing

This edition of the Operators Newsletter brought to my attention a brand with the most unique email marketing game I’ve ever seen.

birddogs flips the script on traditional ecom emails; they’re comic strips – crude, fun, with in-jokes and a whole universe filled with strange characters and storylines.

These are emails that customers are actually excited to receive and open (and I’ll bet they convert, too). Come for the story, stay for the shorts.

Check out the newsletter (linked below) to see more about what makes their emails so good (and sign up for their list too, like I did).

3 Low-Lift Retention Wins

Increasing retention doesn’t necessarily come from huge projects that take months to rollout.

Even small initiatives can have a significant impact, especially with retention (as retention gains compound over time).

From improving your post-purchase experience to trying out plain-text emails, Eli Weiss (Yotpo) breaks down a few simple, low-lift things to try out that could add a small but meaningful amount to your LTV, without a huge investment.

That’s all for this week.

Same time next week we’ll be back with another dive into CX and retention marketing best practices, to help you build and grow a sustainable, winning brand.

We’re also getting ready to drop the first episode of our podcast, where we’ll talk with DTC and retail leaders about what’s really working for them in CX, retention and loyalty.

Hit reply if you have any thoughts what you’d love to see in a future deep dive… or if you’re with a brand or agency and would like to share your experience on the podcast!

Until then —

Pietro and The Retention Edge Team