What Is Ecommerce Retention Rate? (and How to Improve It)

There are three ways you can grow your ecommerce business. You can attract more customers, increase your average order value, or get existing customers to come back and shop with you more often.

The third option - increasing your customer retention rate - is often the most effective growth method. Once you’ve already spent the cost and effort to attract them and gotten over the initial hurdles of trust and social proof, it becomes a lot easier to sell to existing customers than to go out and find new customers.

In this article we’ll show you what a good ecommerce retention rate is, along with various factors that you should take into account when comparing your rate to the overall average. We’ll explain why focusing on increasing retention is a winning strategy, and finish up with some tips to help you do it.

What is Retention Rate?

Retention rate is the percentage of your users or customers who continue to use your service or buy your products over a certain period of time.

Retention rate can be different depending on the type of business, along with the criteria you choose to set. For example, an app’s retention rate would usually be the percentage of users who keep the app installed over a period of time - 7 days, 30 days, 90 days, etc.

In ecommerce, retention rate is generally used to show the percentage of customers who make more than one purchase. It can also be called “repeat customer rate”.

How to Calculate Retention Rate

Using the definition above, you can find your retention rate by taking the total number of customers and dividing this number by the number of customers who made more than one purchase.

For example, if you had 100 separate customers make a purchase from your store, and 20 of those customers bought from you more than once, your retention rate would be 20%.

What’s the Average Retention Rate for Ecommerce Stores?

According to research from Metrilo, the average customer retention rate for ecommerce brands is 28.2%. Meaning 28.2% of ecommerce customers buy from a brand more than once.

This data varies by industry and product category. Among the various product categories looked at in the study, the following averages were found:

• Apparel: 26%
• Branded Food Products: 24.5%
• CBD: 36.2%
• Coffee: 29.6%
• Cosmetics: 25.9%
• Meal Deliveries: 29%
• Pet Products: 31.5%
• Sports Clothing: 33%
• Supplements: 29.1%
• Tea: 20.9%

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In this data set, Tea, Food Products and Apparel scored low in customer retention, while Sports Clothing, Pet Products and CBD Products all had higher repeat customer rates.

Other sources give a range of answers for what a good ecommerce customer retention rate is, from as low as 15% to as high as 38%.

How to Assess Ecommerce Customer Retention in Context

Like any metric, customer retention rate can be misleading if you look at it on its own, out of context.

For example, let’s say you have a 10% retention rate. This is far below the average ecommerce retention rate. But it might not be something to worry about.

You could sell products in a category where repeat purchases are very rare (i.e. people usually buy once, and have no need to buy another product).

You could have very low customer acquisition costs (CAC) and a wide target audience, meaning you can generate a lot of revenue and profit just from new customers.

You could also have a particularly high customer lifetime value (CLV), despite your low retention rate, meaning those customers who do come back tend to make a lot of purchases and spend a lot of money.

It’s important to assess retention rate in context. Some products or industries just aren’t naturally suited for return customers. Or you may have made a conscious decision to focus on other metrics, like lowering CAC, or increasing conversion rate and prices to increase average order value (AOV).

Whatever the case, it will still be beneficial to increase retention rate, but this one metric alone doesn’t tell the whole story of your business’ performance.

Why Retention Rate is a Powerful Metric

Though there are certainly other things that matter, a good retention rate is almost always a great sign for your business. It makes a lot of sense to make this one of your key focus metrics.

For most businesses, it costs a lot more to attract a new customer than to sell to an existing one. Experts believe it is 6 to 7 times more expensive to get a new customer than to retain those you already have.

It’s also believed that a 5% increase in retention can boost revenue by as much as 25 to 95%, as returning customers tend to buy more often and spend more than new customers. 

Then there’s the loyalty and word of mouth factor. Repeat customers tend to be loyal brand advocates, those who will tell their friends about your brand, write reviews for your brand, and deliver more benefits than simply their own spending.

How to Boost Ecommerce Customer Retention

It's never a bad idea to put effort into improving your retention rate. Here are some of the best ecommerce customer retention strategies to help you retain customers and build a higher CLV through repeat purchases.

Sell High-Quality Products and Provide Great Customer Service

First of all, get the fundamentals right. Customer loyalty comes from doing the basic things right.

Happy customers will be more likely to come back and buy from you again. You make customers happy by selling good products and providing a high level of customer service.

Create a Loyalty Program

A loyalty or rewards program is a great way to entice people to come back and make multiple purchases.

Just see how many places utilize loyalty programs for evidence of how effective they are. From Amazon to Starbucks to punch cards on your local coffee shop, almost everyone you shop with is competing to get you on their loyalty program, because they know that the incentive of eventually earning discounts or free stuff will make you want to shop with them again and again.

Set Up Post-Purchase Marketing Campaigns

You shouldn’t stop marketing once someone converts and becomes a customer. In fact, it makes sense to step up your marketing, as someone is more likely to buy if they already trust you and have bought from you in the past.

Set up automated marketing campaigns (e.g. email, SMS, push notifications or retargeting ads) to push cross-sells, up-sells or restocks to existing customers, using the info from their previous purchase to personalize each campaign specifically for that customer.

Save Customer Info for Low-Friction Login and Checkout

Make it as easy as possible for customers to become repeat customers. When they buy from you the first time, you can give them the option to save their login and payment information to allow them to check out fast, with minimal friction.

Offer Returning Customer Discounts & Subscription Deals

Incentivize people to buy from you multiple times. A lot of stores offer discounts for first-time customers, but returning customer discounts can be even more effective, as encouraging people to buy multiple times can lead them to become loyal customers who buy over and over again, spending a huge amount over their lifetime as a customer.

You can do the same with subscriptions for consumable products (e.g. supplements, beauty products). Make it cost-effective for someone to set up an automatic subscription and a lot of people will choose that option and become regular customers.

Schedule Emails or Notifications Near Expected Restock Dates

For consumable products that aren’t on a subscription, estimate the length of time someone’s likely to need a restock, and send reminders close to this time via email, SMS, push etc.

Hitting a customer with a restock notification at just the right time makes it easy for them to buy with you again.

For particularly competitive product categories, you might want to offer an incentive, such as a discount, if they restock with you.

The idea is to help them build a habit of buying from you each time, to where they become a loyal customer who always comes to you each time they run out of this product.

Build a Mobile App

Finally, launching your own mobile app is a phenomenal way to boost your customer retention rate.

Customers who download and buy from your app are far more likely to become repeat customers than those who shop on your website. That’s because your app remains on their phone, and in their consciousness, even after the purchase is over.

Even better, you’ll be able to send push notifications to these users to invite them to come back, open the app and shop again. Push notifications have 2.5x higher open rates than email, higher click-through rates than email and SMS combined, and a lower cost than both SMS and email.

With their affordability, personalization, trust and convenience, push notifications are the perfect tool to reach out to customers with promotional offers, restock reminders and content that helps make them loyal, repeat customers. And you only have full access to mobile push notifications with an app.

Want to Boost Retention Rate, Conversion Rate and AOV By the End of the Month?

MobiLoud can boost your retention rate, along with mobile conversion rate and average order value, all in less than a month.

We do this by helping you turn your ecommerce website into a mobile app, published in the app stores and able to be downloaded to your customers’ mobile devices.

This lets you start turning regular customers into hyper-loyal repeat customers, who use the app to shop with you over and over.

It takes minimal investment to launch your app, and as long as your site is already mobile friendly, there’s very little work left for you to do. You’ll just talk to a product manager, sign up, and wait while we turn your mobile website into a professional, high-quality app.

Many successful ecommerce stores, including Rainbow Shops, John Varvatos, ONLY and more, have used MobiLoud to create their apps, with incredible results.

Try it out now - if you like what you see, book a free, personalized demo with one of our team members to get a closer look at the process.

In a month’s time, you could have your own mobile app launched and published in the app stores. If you want to improve customer retention rate for your online store, this is the best thing you can do.