4 Ways to Improve Your eCommerce Store’s Customer Retention Rate

eCommerce business prioritizing customer retention rate growth strategies

Most online stores focus their marketing on gaining as many new customers as possible. It’s a natural step to grow your business and revenue. But don’t forget about existing customers who might want to come back to your store for more in the future.

According to Shopify, returning customers account for 40% of the average eCommerce store’s revenue, despite the fact that they only make up about 21% of the customer base. Loyal customers are profitable, so measuring and knowing how to increase your customer retention rate should be a core priority for online stores in 2023 and beyond.

What Is an eCommerce Customer Retention Rate?

Put simply, your customer retention rate is the percentage of existing customers that buy from you again during a specific time frame (usually annually). It’s a simple formula:

If your store had 1,000 customers last year, and 200 of those customers made a purchase more than once, your customer retention rate was 200/1,000 = 0.20 or 20%.

The more customers you convince to come back in that time frame, the higher your eCommerce retention rate rises.

The average eCommerce retention rate hovers around 28% for any given year. However, your niche might have different benchmarks. Retention rates for high-performance sports apparel hover around 33%, while tea products typically see lower loyalty at a 20% retention rate.

Keep in mind the nuances for subscription-based eCommerce businesses, as well. In that scenario, every customer who remained subscribed with you for the entire time period is part of the retention calculation, with your goals turning towards minimizing churn.

Why Does Your eCommerce Retention Rate Matter?

Yes, you need new customers to grow your customer base. But we could make an argument that retaining your existing customers is just as important. And the data backs that up:

Yes, acquiring new customers matters. But you need to devote at least part of your resources to retaining your existing customers. So, measuring your retention rate can help you ensure your efforts consistently accomplish your goals in that respect.

4 Ways to Increase a Customer Retention Rate in eCommerce

Happy customer thinking about an additional purchase and boosting a company's cusotmer retention rate

The why, of course, is only part of the equation. Understanding how you improve your eCommerce customer retention rate matters just as much. These four tactics can help you get there.

1. Build Your Post-Purchase Flows

Post-purchase flows are among the most important email marketing pieces in eCommerce, and they have the potential to have a massive impact on your retention rate. The more you can reinforce customer satisfaction after the purchase, the more likely they’ll be to come back.

Post-purchase flows can include multiple components:

  • A purchase confirmation that includes exact details about costs and product details
  • A shipping tracker with exact information about when customers can expect their products
  • Product tutorials that help your new customers get the most out of their purchase
  • A request to leave a product review, which can increase brand loyalty on its own
  • Coupons for future orders that are exclusive to new or repeat customers

Most of these flows should run through automation processes on your email marketing backend. But the most important part is the strategy behind it. Once you know what emails to send and when to send them, automating them can implement a reliable process that is almost guaranteed to increase your conversion rates.

2. Create a Customer Loyalty Program

Don’t assume that happy customers will automatically come back to you for future purchases. They might still be motivated by price, which is where a loyalty and rewards program enters the equation.

In the right rewards program, the more customers buy from you, the more discounts they will receive. It might start with free shipping but can go as far as free products for continued loyalty. Your audience will love it; more than two-thirds of customers will join a loyalty program if one is available.

You can build either a purchase loyalty program, which rewards each purchase your customers make, or a point-based rewards program in which every action a customer takes that helps your business (like sharing a social media post) increases their point total. The goal remains the same: more brand interactions, leading to more purchases and, ultimately, more repeat revenue.

3. Learn From Your Current Customers

Why do people buy from you? What do they like about your products, and what part of your brand most resonates with them personally? You might have assumptions about these questions, but don’t be afraid to ask your customers directly.

Through surveys and individual interviews, you can learn the points of your business and communications that are most relevant to your audience. You’ll also gain insights into what sorts of incentives would encourage them to buy from you again. Now, you can adjust your messaging and channels to ensure that everything you do is geared not just toward that first purchase but toward a long-term relationship with every customer.

4. Strategically Encourage Repeat Orders

If you sell disposable products, think through their lifespan. How long, for example, does your average customer need to go through a package of coffee or a bar of soap? When would they appreciate a gentle email reminder that it’s time to re-order the product to avoid running out?

Questions like these help you build email, website, and promotional strategies designed to encourage repeat business. You can also offer unique incentives, like sales coupons exclusive to repeat customers, to encourage that action.

And, of course, you can take this concept even further. Consider starting an eCommerce subscription program in which repeat purchases happen automatically. That takes some time to build. But it can have a massive positive impact on your customer retention rate and revenue growth.

Build a Better eCommerce Strategy With Future Holidays

Shifting the focus to retaining existing customers can take some time and effort. Fortunately, you’re not on your own. With a reliable partner like Future Holidays, you can build the campaigns you need to keep growing your customer base and enhance the retention rate within that base. Ready to learn more? Contact us to start the conversation today.