Blog Soft Gorillas

23 July 2023
4 min read

Ecommerce Customer Retention: Importance and Strategies for Increasing Retention Rate


In the world of ecommerce, customer retention rate is a crucial metric that can determine the success or failure of a business. Focusing on retaining existing customers rather than constantly acquiring new ones can lead to higher revenues and long-term growth. In this article, we will explore the importance of customer retention rate in ecommerce and provide strategies for increasing it.

What is Customer Retention Rate?

Customer retention rate is the percentage of customers that a company retains over a specific period of time. It is a key performance indicator used to predict revenue and growth in an enterprise. A higher retention rate than customer acquisition rate indicates that a business is successfully retaining its customers, while a lower retention rate suggests a decline in users.

How to Calculate Customer Retention Rate

To calculate the customer retention rate, you need to know the total number of users at the start of the period (A), the total number of users remaining within that period (B), and the total number of new users acquired within that period (C).

Retention Rate = [(B-C)/A] x 100

For example, if you had 400 subscribers at the beginning of the first quarter and 380 subscribers remaining at the end of the quarter, the retention rate would be:

Retention Rate = [(380-0)/400] x 100 = 95%

Importance of Customer Retention Rate in Ecommerce

Customer retention rate is vital for several reasons. Firstly, a high retention rate reduces the need for constantly acquiring new customers, resulting in cost savings for the business. Additionally, customers who are loyal to a brand are more likely to recommend it to others, thus generating organic growth. Moreover, converting existing customers is more cost-effective than acquiring new ones.

Strategies for Increasing Customer Retention Rate

To increase customer retention rate in ecommerce, it is important to focus on providing a great user experience and maintaining open lines of communication with customers. Here are some strategies to consider:

  1. Personalization: Tailor your products and services to meet the unique needs and preferences of your customers. Use data analytics to understand customer behavior and create personalized recommendations.
  2. Customer Reviews: Encourage customers to leave reviews and testimonials about their experiences with your brand. User-curated reviews have become a trusted source of information for modern consumers.
  3. Communication: Stay in touch with your customers through various channels, such as email newsletters and social media. Keep them informed about new products, promotions, and special offers.
  4. Exclusive Rewards: Offer exclusive rewards and benefits to your loyal customers. This can create a sense of exclusivity and encourage repeat purchases.
  5. Excellent Customer Service: Provide prompt and efficient customer service. Address any issues or concerns that customers may have in a timely manner.

Average Ecommerce Retention Rates

The average ecommerce retention rates can vary depending on the industry. According to data and research, the overall retention rate throughout a customer’s lifecycle is not constant. However, a retention rate of over 35% is considered excellent in the ecommerce business. With a 5% increase in retention rate, a business can boost its income by 25% to 95%.


In conclusion, customer retention rate is a critical metric for ecommerce businesses. By focusing on retaining existing customers instead of constantly acquiring new ones, businesses can reduce costs, increase revenue, and foster long-term growth. Implementing strategies such as personalization, customer reviews, effective communication, exclusive rewards, and excellent customer service can help improve the customer retention rate and drive success in the ecommerce industry.


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