Ecommerce customer retention is a critical aspect of any successful ecommerce marketing strategy. Your existing customers are valuable assets, as they have already shown an interest in your products and messaging by making a purchase. With a little effort, you can turn these first-time buyers into repeat customers who contribute to a significant portion of your revenue.
According to Gorgias, repeat customers account for 44 percent of revenue and 46 percent of orders, despite representing just 21 percent of an average ecommerce brand’s customer base. However, customer retention is often overlooked in the ecommerce world. A survey from Omniconvert found that only 20 percent of ecommerce professionals have a dedicated budget for customer retention, while 63 percent allocate more budget to customer acquisition.
While it is important to attract new customers for growth, neglecting customer retention can be detrimental to your business. In this guide, we will explore how ecommerce retention rates work, what a good retention rate looks like, and strategies to boost your current retention rate.
What Is Ecommerce Retention Rate?
Ecommerce retention rate refers to the percentage of customers who continue to make purchases from your online store over a specific period. It is the inverse of customer churn rate, which measures the percentage of customers who stop buying from you.
A high ecommerce retention rate indicates that a significant number of your customers are making repeat purchases, contributing to your revenue targets. On the other hand, a low retention rate suggests that customers are not returning after their initial purchase, making it harder to achieve your revenue goals.
Key Retention Rate Ecommerce Metrics
While ecommerce retention rate is a crucial metric, there are other metrics that can help you analyze your ability to build long-lasting, profitable customer relationships. These metrics include:
- Customer churn rate: This metric measures the percentage of customers who stop buying from your store over a given period.
- Revenue churn rate: Similar to customer churn rate, this metric measures the revenue lost from customers who have stopped buying from you.
- Customer lifetime value (CLV): CLV is the amount of revenue you earn from a customer before they churn. It helps you understand the value of each customer over their „lifetime“ with your brand.
- Customer loyalty rate: This metric measures the proportion of customers who sign up for your loyalty program.
How to Calculate Ecommerce Retention Rate
Calculating ecommerce retention rate is relatively simple. However, you need three pieces of information before you can calculate it:
- The number of customers you had at the start of the time period you’re measuring.
- The number of customers you have at the end of the time period.
- The number of new customers acquired during the time period.
To calculate your ecommerce retention rate, use the following formula:
[(Number of customers at the end of time period – Number of customers acquired during time period) / Number of customers at the beginning of time period] x 100
For example, let’s say your ecommerce store had 1,000 customers at the start of the month and 750 customers at the end of the month. During that month, you acquired 500 new customers. The calculation would be as follows:
[(750 – 500) / 1,000] x 100 = 25 percent ecommerce retention rate
What is a Good Retention Rate for Ecommerce? (Benchmark)
If you’re analyzing your retention rate for the first time, it can be helpful to understand how other brands in your industry are performing. While it is not possible to access their backend data, there is benchmark data available that can give you a rough idea of how your retention rate compares to others.
According to a survey by Omniconvert, the highest proportion of respondents reported ecommerce retention rates between 16 percent and 30 percent. However, this benchmark data has a few limitations. Firstly, the range is quite broad, making it unclear where your retention rate falls within that range. Secondly, it is important to consider industry-specific numbers, as different industries may have varying retention rates based on their product purchase cycle.
For example, Metrilo analyzed data from its client base and found that the average ecommerce retention rate across multiple niches ranged from 20.9 percent in the „tea“ industry to 36.2 percent in the „CBD“ industry. However, even within the same industry, individual brands may have different retention rates based on factors such as product type or customer preferences.
Instead of relying solely on benchmarks, it is more important to focus on improving your current ecommerce retention rate, regardless of where it stands. By implementing effective strategies, you can increase your retention rate and encourage customers to make repeat purchases.
4 Strategies to Improve Your Ecommerce Retention Rate
Regardless of your current retention rate, there is always room for improvement. Here are four strategies to help you boost your ecommerce retention rate and turn first-time buyers into loyal repeat customers.
1. Limit the Impact of Stock Shortages
Stock shortages can have a significant impact on customer retention rates. According to a survey, 59 percent of consumers feel less confident about shopping with a retailer if they frequently experience stockouts. While it may be challenging to control every aspect of your supply chain, there are steps you can take to limit the impact of stock shortages.
For example, you can redirect customers to similar products when their first-choice items are out of stock, as Zara does. Additionally, you can consider implementing pre-order functionality on your website, allowing customers to reserve or pay in advance for products that are currently unavailable. By showing customers that their business is important and offering alternatives, you can mitigate the negative effects of stock shortages on customer retention.
2. Deliver Personalized Experiences
Consumers want to be treated as individuals, and personalized experiences can significantly impact their likelihood of becoming repeat buyers. According to a study, 60 percent of consumers are likely to become repeat buyers after encountering a personalized shopping experience. Fortunately, personalization does not have to be overly complex.
Simple personalization techniques, such as updating product price and size information based on the customer’s location, can go a long way in enhancing the shopping experience. Butterfly Twists, a ballet shoe brand, demonstrates this by automatically adjusting product information based on the customer’s location. By streamlining the shopping experience and making it easier for customers to purchase from you, you can increase the chances of repeat purchases.
3. Nail Your Post-Purchase Communications
The post-purchase experience plays a significant role in customer retention. After making a purchase, customers often want reassurance that everything is progressing smoothly. If they do not receive any communication, they may become concerned and less likely to make future purchases.
To address this, effective order confirmation emails can help boost ecommerce retention rates. According to Silverpop, transactional emails, including order confirmations, have an average unique open rate of 45 percent, which is significantly higher than other email types. Order confirmation emails should provide a summary of the order, explain what happens next, and offer support if customers have any questions.
Bestseller, a clothing brand, provides an excellent example of an effective order confirmation email. By summarizing the order, providing clear instructions, and offering support, the email reassures customers and encourages repeat purchases.
4. Help Customers Make Sustainable Choices
In today’s world, consumers are increasingly concerned about sustainability and ethical business practices. By aligning your brand with these values, you can attract and retain customers who share the same values.
While you may not have the resources of a brand like Patagonia, you can still demonstrate your commitment to sustainability. Whether it’s reducing your carbon footprint, using sustainable packaging, or supporting relevant causes, showcasing your efforts can resonate with customers and encourage repeat purchases. However, it is important to follow through on your sustainability promises, as 34 percent of consumers actively research brands to ensure they are genuinely committed to sustainability.
3 Examples of Ecommerce Retention Email Marketing
Email marketing is a powerful tool for customer retention, with many small businesses using it to drive repeat purchases. Let’s explore three real-world examples of brands leveraging email marketing to boost their ecommerce retention rates.
1. Chairish: Reward Long-Standing Customers
Rewarding long-standing customers can foster loyalty and encourage repeat purchases. By offering discounts, free shipping, free gifts, or other promotions to mark key milestones such as anniversaries or birthdays, you can make customers feel valued and appreciated.
Chairish, a vintage and contemporary furniture marketplace, demonstrates this strategy by offering a discount code to customers on their anniversary. This gesture of appreciation can help retain customers and incentivize them to continue shopping with the brand.
2. Bloom & Wild: Post-Delivery Follow-Up
After making a purchase, customers often have questions or concerns about their order. By proactively addressing these concerns through post-delivery emails, you can alleviate any doubts and provide helpful information.
Flower delivery company Bloom & Wild sends a post-delivery email that addresses common questions customers may have. By explaining why the flowers might look different and providing care instructions, the brand ensures customer satisfaction and increases the likelihood of repeat purchases.
3. Johnny Cupcakes: Loyalty Program Updates
Loyalty programs are an effective way to increase ecommerce retention and drive repeat orders. By regularly updating customers on their loyalty program progress, you can keep them engaged and motivated to unlock more rewards.
Clothing brand Johnny Cupcakes sends regular email updates to loyalty program members, showcasing their progress and motivating them to earn more rewards. This communication keeps loyalty members informed and encourages them to continue making purchases to unlock additional benefits.
Boost Your Ecommerce Retention Rate With Drip
Personalization and effective segmentation are vital for improving customer retention. Drip, a powerful marketing automation platform, can help you achieve this by pulling in data from various sources to communicate with customers on a 1:1 level at the right time.
With Drip, you can leverage customer data to create personalized experiences and targeted email campaigns that drive sales and boost customer loyalty. By optimizing your email marketing strategy with Drip, you can improve your ecommerce retention rate and create a loyal customer base.
Ready to boost your retention rate? Sign up for a 14-day free trial with Drip and start improving your customer retention today!