The Art of Leveraging Repeat Business: 2023 Customer Retention Metrics in eCommerce

20% of brick-and-mortar businesses will fail the year they open. Almost half are gone after five years. Those are pretty bleak numbers, right? Well, what if I told you that the numbers are even worse for eCommerce? In eCommerce, that number is 90%. That’s not over the first five years, though. Believe it or not, 90% of new eCommerce businesses fail within their first 120 days! Yes, you read that correctly: most eCommerce businesses don’t last more than four months. This level of difficulty means you can’t afford to focus on the wrong things. One of the most misunderstood topics crucial to success is customer retention rate. Customer retention metrics in eCommerce can reveal a lot if you know what to look for, and increased customer loyalty can have untold benefits that you may not expect.

Working with an experienced team of experts in customer retention optimization, as we have here at Future Holidays, can have a huge effect on your chances of success. Strategies like using visually engaging and intuitive design to create digital experiences that delight customers and Klaviyo email marketing campaigns that deliver the right message to the right person at the right time can increase customer retention and provide far-reaching benefits.

Let’s go over the customer retention rate basics. Then we’ll cover how to calculate it and share some relevant customer retention statistics like average customer retention rate by industry. Finally, we’ll provide some strategies to leverage the customer retention metrics from your eCommerce store to ensure long-term success.

What Are Customer Retention Metrics in eCommerce?

eCommerce customer retention metrics measure the percentage of customers your business manages to keep over a given timeframe. So, if you start August with 100 customers and by the first of September, 20 of them have moved to a competitor, your customer retention rate for the month is 80% because you kept 80 out of the 100 customers you started with.

That is a very simplified example. However, in reality, you’re also likely to gain new customers over the measured period. To get an accurate customer retention rate, you’ll have to account for those customers and remove them from the calculations.

How Do You Measure Your Customer Retention Rate?

Customer retention rate can be calculated with a simple formula. It looks complex at first glance, but once you understand all the variables, it’s really quite straightforward. The customer retention rate formula is as follows:

[(E-N)/S] x 100

Let’s break down the variables.

• E: The number of customers you have when the chosen time period ends
• N: The number of new customers acquired over the selected timeframe
• S: The number of customers you started with at the beginning of the time period you’re measuring

So, let’s use our previous example. You started August with 100 customers and ended with 80. Assuming no new customers, the formula would be:

• [(80-0)/100] x 100
• [80/100] x 100
• 0.8 x 100 = 80 percent

Customer Retention Rate by Industry

Every industry is different. Some have more competition than others. Many industries typically use subscription pricing. A few have particularly picky or restless customers. All these factors will affect customer retention metrics in eCommerce. That’s why there can be huge variations in the average customer retention rate by industry.

For example, media and professional services have an average retention rate of 84%. Hospitality has much fewer repeat customers, with a retention rate of only 55%. However, eCommerce overall averages 28.2%. That also varies by eCommerce industry. For example, pet products have high retention at 31.5%, while cosmetics only average 25.9%.

Since there are reasons why an entire industry may have especially high or particularly low retention rates across the board, it’s best to use your industry’s average as a benchmark for success. This will help you keep the right goals in mind by starting with a realistic target.

Benefits of Repeat Customers: Facts & Statistics

Did you know that prioritizing repeat customers is one of the single most profitable things you can do for your business? Here are some customer retention statistics to demonstrate why customer retention is so important, even more so than customer acquisition:

• Customer retention costs a fifth of the price of customer acquisition.
• Despite making up only 21% of overall customers, repeat business accounts for almost half of revenue (44%) and orders (46%).
• They’re worth 300% more than new customers.

Strategies for Increasing Your Customer Retention

Since repeat customers are such a massive benefit to your business, maximizing your customer retention rate should be a top focus for your marketing strategy. The customer retention metrics for your eCommerce store can help you measure your success. Average customer retention metrics in eCommerce (and in your specific industry) can then provide benchmarks to compare them to.

Great! But how do you actually increase your customer retention rate? Here are some strategies that work:

Know Your Audience

When you want your products to meet or exceed expectations and delight your customers, you need to know who they are and what they want. Creating detailed buyer personas helps you fully understand your customers and their needs to ensure your products and marketing are aligned with them.

The more value your products provide, the more likely customers are to return. The more clearly your marketing speaks directly to your customers, the more they’ll be convinced by it. For example, if you sell exercise equipment and your marketing appeals to people looking to bulk up, it won’t be effective for an audience looking to slim down.

Provide a Positive, Seamless Experience

This starts with your marketing and website and never ends. Make sure you don’t overpromise in any of your email, SMS, or website copy. Always choose to overdeliver instead. Make realistic claims and provide accurate descriptions of products. Make your site simple to navigate, make products easy to find, and make checkout a breeze.

Once you have a sale, stay in contact with customers and guide them through delivery. Then, stay in touch with personalized email campaigns that speak to your buyer personas. Recommend products they may like based on past purchases, provide discounts, and make follow-up purchases easy.

Do whatever it takes to make your customers’ lives easier and make them happy. After all, happy customers are loyal customers.

Use Email Marketing Strategically

There are many ways to do this. You can use emails to:

• Announce new products, sales, and events.
• Send milestone emails to make customers feel like part of a community.
• Share information on your involvement in causes they care about.
• Send personalized emails using automation and segmentation.

The possibilities are endless! Your email strategy can be tailored to your goals, and email marketing tools can help you plan and automate your email strategy.

Leverage Customer Retention Metrics in eCommerce for a Sales Boost

Customer retention is an amazing way to boost sales and increase long-term success. All the strategies listed above can help you do that. However, finding a way to successfully unify them into one overarching business plan can take some advanced tools and expertise.

Future Holidays specializes in helping eCommerce businesses like yours optimize their conversion rates. We use innovative design and creative digital experiences via strategies like email marketing and website marketing to increase customer retention and customer loyalty. Want to learn more about leveraging and improving your customer retention metrics in eCommerce? Contact us today.