With the cost of customer acquisition and CPM increasing, efficient use of advertising dollars is a chief concern for fashion brands. In the last year, there’s been significant growth in the adoption of affiliate marketing by companies, thanks to the vehicle’s lower cost and efficient return on investment.
According to data from Partnerize, an affiliate marketing software company, the apparel sector increased its affiliate marketing spend by 22% in April year-over-year. Accordingly, the average order volume for affiliate sales was up by almost 20% year-over-year in the same period. And the data suggests that increased adoption of affiliate marketing won’t slow anytime soon. According to Gartners annual CMO spend survey, 65% of CMOs are increasing their affiliate marketing spend this year. At the Glossy Fashion & Luxury Summit in June, affiliate marketing and its effectiveness were common themes for discussion.
Its pay for performance, said Maura Smith, CMO of Partnerize. The model is inherently efficient. The return on ad spend is generally around 12-to-1 for affiliate [marketing]. And because its so efficient, it can help offset the costs of other channels that are more expensive.
Running ads on TV, for example, can be very costly in the four- to five-figure price range and the results are not easy to track. But those expensive top-of-funnel marketing opportunities are still valuable. By offering a strong return with a high level of traceability, affiliate marketing helps make those more expensive, bigger swings possible. Typically, the average commission rate for affiliate marketing is 6-7%.
According to data from Partnerize, the majority of affiliate marketing revenue growth is driven by content-focused publishers like Buzzfeed or Vogue, as opposed to coupon or value-focused publishers like RetailMeNot. The former drives more than 50% of its revenue from new customers. But increasingly, influencers are growing to make up a much larger percentage of affiliate partners.
Affiliate marketing has its limits, though. Smith said that it works best for larger, more established brands. Partnerize CEO Matt Gilbert said any brand with under $1 million in annual revenue isnt ready to invest in affiliate marketing in a significant way.
Amy Riordan, svp of ready-to-wear brand Sachin & Babi, said affiliate works best when focusing on a specific audience.
Sachin & Babi uses affiliate marketing very strategically, and we see it as an opportunity to get in front of a sophisticated customer that does their due diligence, when it comes to investing in their wardrobe, Riordan said. We also see great value in the publishers that are destinations for fashion, beauty and wellness as they lend credibility to the partners they chose to feature. Riordan treats affiliate marketing as a top-of-funnel growth channel and closely monitors returns, adjusting the companys investment as needed.
Others have seen significant success with affiliate marketing as a growth channel. Brianna Mobrem, president of Clique Brands, said affiliate sales have grown significantly on the companys site Who What Wear, increasing 230% over the course of 2021.
The best approach, Smith said, is to diversify the publishers the brand works with. Its not smart to have 10 different partnerships with very similar publishers or content creators all targeting the same customer, she said.
Generally speaking, the best affiliate programs are diversified, she said. A mix between top-of-funnel publications like Buzzfeed and ones that are closer in the journey to purchase like RetailMeNot is ideal, Smith said.
Each partner is contributing something different to traffic and revenue generation. Its better to be well-diversified than over-indexed.