Fashion brands are still obsessing over Lifetime Value (LTV).
Here’s why that’s a dangerous mistake.
๐ง๐ต๐ฒ ๐ฒ๐ป๐๐ถ๐ฟ๐ฒ ๐๐ง๐ ๐ฒ๐ฟ๐ฎ ๐๐ฎ๐ ๐ฏ๐๐ถ๐น๐ ๐ผ๐ป ๐ฎ ๐ณ๐น๐ฎ๐๐ฒ๐ฑ ๐ฝ๐ฟ๐ฒ๐บ๐ถ๐๐ฒ ๐ณ๐ฟ๐ผ๐บ ๐๐ผ๐ณ๐๐๐ฎ๐ฟ๐ฒ: ๐๐ต๐ฎ๐ ๐ฐ๐๐ฟ๐ฟ๐ฒ๐ป๐ ๐ฐ๐๐๐๐ผ๐บ๐ฒ๐ฟ ๐ฏ๐ฒ๐ต๐ฎ๐๐ถ๐ผ๐๐ฟ ๐ฟ๐ฒ๐น๐ถ๐ฎ๐ฏ๐น๐ ๐ฝ๐ฟ๐ฒ๐ฑ๐ถ๐ฐ๐๐ ๐ณ๐๐๐๐ฟ๐ฒ ๐๐ฝ๐ฒ๐ป๐ฑ๐ถ๐ป๐ด.
It worked for Netflix. It worked for Salesforce.
It doesn’t work for fashion.
The Flawed Premise: Fashion is Not Software
Here’s the fundamental problem: software has contracts; fashion has transactions.
When a SaaS company calculates LTV, they’re measuring secured future cash flows. When a fashion brand calculates LTV, they’re speculating on future human behavior.
That customer who bought a coat in November? You have no idea if they’ll ever come back. You can’t tell the difference between someone who’s dormant and someone who’s moved on (this is called “unobserved death” in the data).
SaaS companies operate with 80%+ gross margins. Fashion is far more complex; it’s not a piece of software.
Yet brands still use the SaaS benchmark of “3:1 LTV:CAC” based on revenue, not contribution profit. That’s how you burn cash while celebrating “unit economics.”
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Here’s what people miss: LTV in fashion isn’t a metric that predicts the future.
It’s a snapshot of the past.
Every time you launch a new collection, there’s a real chance it will flop.
Seasons aren’t as stable as they used to be; micro-trends rise and fall within a single quarter.
A customer acquired during a viral trend often exhibits low-affinity behavior.
They’re buying the look, not the brand. Once the trend evaporates, they don’t return. But your LTV model still projects three years of purchases that will never materialize.
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Let’s talk about the “COVID distortion”…
During the pandemic, people bought way more online. Brands looked at 2020-2021 data and mistook temporary behavior for permanent shifts. They projected those retention rates forward into perpetuity and over-leveraged themselves.
When the world reopened in 2022, those customers disappeared. The money never came back.
The case studies prove it:
โณ Allbirds (stock down 90%+)
โณ Farfetch (insolvency)
โณ Stitch Fix (active clients down 20% YoY)
โณ Rent the Runway (asset depreciation killed the subscription model).
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Why this matters now:
With interest rates at 5%, future cash flows must be heavily discounted. A customer who generates profit in Year 3 is worth far less today than in 2020.
Velocity beats volume.
The metrics that actually matter:
โณ Contribution Margin: Did you make money on this order?
โณ Payback Period: How fast does this customer return their CAC? (target: under 60 days; ideally the same day)
โณ Cash Conversion Cycle: Are you financing growth with debt or cash?
Fashion is not software. It’s a trading business.
Stop building forecasts on data that’s already expired.
