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Blog Soft Gorillas

13 July 2023
4 min read

Ecommerce Customer Retention: Understanding the Importance and Strategies for Success

Introduction

As an eCommerce business owner, you know that acquiring new customers can be expensive and time-consuming. You’re also probably aware that retaining your existing customers is actually more important for long-term success; however, many brands are only just starting to make retention a top priority. It’s time to dive into the world of eCommerce retention marketing. In this article, you’ll learn about the average eCommerce customer retention rate, important metrics to be mindful of, and strategies for improving retention. By the end of this article, you’ll have a better understanding of how to keep your customers happy, engaged, and coming back for more. Let’s get started!

What is eCommerce retention marketing?

eCommerce retention marketing is a strategic approach that focuses on retaining existing customers and increasing the frequency of their purchases. The ultimate goal of eCommerce retention marketing is to create long-term customer loyalty and reduce the need for constant acquisition of new customers. Retention marketing includes a variety of tactics and strategies, such as personalized email campaigns, rewards programs, social media engagement, and exceptional customer service. The idea behind eCommerce retention marketing is to provide a positive customer experience and build a relationship with customers that goes beyond just a one-time purchase.

Why is eCommerce retention marketing an important part of your overall business strategy?

Investing in eCommerce retention marketing is crucial for the long-term success and growth of your business. Here are some benefits that brands will feel when they successfully prioritize retention in their marketing program:

  1. Retaining customers drives repeat purchases and increases the lifetime value of each customer, providing a long-term return on investment for your business.
  2. Acquiring new customers is much more expensive than retaining existing ones, so focusing on customer retention helps build long-lasting relationships with customers, improve customer satisfaction, and increase customer loyalty, contributing to the overall success and growth of your business.
  3. A strong eCommerce retention marketing strategy can give your business a competitive advantage by differentiating you from your competition and creating a loyal customer base.
  4. By tracking the right metrics and regularly testing retention strategies, you can make data-driven decisions that improve the overall success of your business.
  5. Gross margin is the difference between the cost of goods sold and the revenue generated from sales. When customers are retained, they are more likely to make repeat purchases, which can increase gross margin and improve the overall profitability of a business.

By implementing effective retention marketing strategies, eCommerce businesses can increase customer lifetime value, reduce churn rate, and ultimately grow their business over time. eCommerce retention marketing is an important component of a comprehensive marketing strategy and can have a significant impact on the success of your business.

What is the average eCommerce retention rate by vertical?

The average eCommerce customer retention rate varies greatly by industry, or vertical. However, in general, the average customer retention rate for eCommerce businesses is around 30-40%. Some common eCommerce verticals and their average retention rates are as follows:

  • Fashion/Apparel: 30%
  • Beauty/Cosmetics: 35%
  • Electronics: 40%
  • Home Goods/Furniture: 30%
  • Food/Grocery: 35%

It’s important to note that these retention rates are just averages and can vary greatly based on the specific business, its target audience, and its retention marketing strategies. For example, a well-established luxury fashion brand with a strong customer loyalty program may have a higher retention rate compared to a smaller, up-and-coming fashion brand. Retention rates also vary depending on the business model. For example, subscription-based eCommerce businesses, such as monthly replenishment services, typically have higher retention rates compared to one-off purchases. Ultimately, the retention rate of an eCommerce business is a key indicator of its success and a valuable metric to track over time. By understanding the average retention rate for your specific vertical and regularly tracking your own business’s retention rate, you can make informed decisions on how to improve and grow your business.

How to measure eCommerce retention

Measuring eCommerce retention is essential to understanding the effectiveness of retention strategies and making data-driven decisions. However, a majority of brands are not tracking retention in a comprehensive way. Historically, retention metrics have been complicated to track, but we’re going to change that.

First things first, brands need to understand their customer retention rate. The customer retention rate is the percentage of customers who make a repeat purchase after their initial purchase. To calculate, divide the number of repeat customers by the number of initial customers and multiply by 100.

In addition, brands will also want to pay attention to the following metrics:

  • Repeat purchase rate: The percentage of customers who make a second purchase after their first purchase. To calculate, divide the number of repeat customers by the number of initial customers and multiply by 100.
  • Average order value (AOV): This metric tracks the average dollar amount spent each time a customer places an order on a website or mobile app. To calculate your company’s average order value, simply divide total revenue by the number of orders.
  • Time between purchases: This metric measures the average time between a customer’s first and second purchases. Tracking this metric can help identify trends in customer behavior and determine how long it takes for a customer to return.
  • Churn rate: The churn rate is the percentage of customers who stop doing business with you over a predetermined period.
  • Channel growth and engagement: These are two very important metrics to watch as they can tell you what channels are the most effective. Having a clear understanding of what channels are performing can help brands double down on what’s working and optimize or cut out what isn’t.

By regularly tracking these metrics, eCommerce businesses can gain valuable insights into their customer behavior and make data-driven decisions on how to improve retention. Additionally, it’s important to regularly test and iterate on retention strategies to continuously improve and stay ahead of the curve.

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