The hype around customer retention in eCommerce is justified, and our real-time benchmark report shows an increase in customer retention rates as a general trend in the industry.

Did the eCommerce world need a pandemic to understand the importance of customer retention?

Maybe.

For sure, keeping repeat customers loyal is even more critical during times of uncertainty. Regardless of unpredictable external factors, customer retention should be a top priority at any given time. 

Numbers don’t lie. Under any circumstances, in the long term, retaining existing customers is more profitable for any eCommerce than acquiring new ones. Better retention rates positively impact the Customer Lifetime Value, which predicts the net profit a customer is expected to generate for your business.

Before we get into analyzing retention benchmarks, let’s stop for a theory pill to make sure we’re talking the same language.

Customer Retention reflects your company’s ability to retain customers over time and includes all the efforts you’re making to transform newly acquired customers into repeat customers.

The metric that helps you measure how successful your retention strategies are is Customer Retention Rate, and the formula used to calculate it is:

CRR = (E – N) / S x 100

E = the number of customers at the end of the defined period

N = the number of customers acquired during the defined period

S = the number of customers at the start of the defined period

Now that we’ve made this clear, let’s dive into analyzing customer retention from different angles based on the data captured from our Real-time Customer Lifetime Value (CLV) Benchmark Report (which, by the way, is ungated and includes over 30 crucial eCommerce stats). 

Last Year Retention Rate vs. Lifetime Retention Rate

First, let’s look at how the Retention Rates changed in 2020 compared to the lifetime values by looking at this KPI from different angles: by country, by industry, by company size, and by shop age. 

Last Year Retention Rate vs. Lifetime Retention Rate by Country

In 2020, we saw an increase in customer retention rate among stores in all countries with some exceptions like Japan, where the lifetime value was higher than the CRR value in 2020, or France and Columbia, where the CRR stagnated. 

If you have a business that sells internationally, you might want to look into the performance of your loyalty programs across different countries.

Last Year Retention Rate vs. Lifetime Retention Rate by Company Size

Small size stores by revenue registered a 3% increase in Retention Rate compared to enterprise stores, which increased their value by 6%. 

As a small eCommerce store, you don’t have the same resources to manage all the challenges that come your way. Still, there’s never too early to design a performant customer retention strategy while trying to increase your market share too. After all, you want to keep these newly acquired customers in the long term, right? And as CLV means sustainable growth, you have one more reason to invest in retention.

Last Year Retention Rate vs. Lifetime Retention Rate by Industry

It looks like 2020 was a good year for our pets and stores in this category, with an 8% increase in CCR. 2020 was also a good year for Beauty and Fitness stores, with a 7% increase, so the stores that help customers feel good in their skin did an excellent job in terms of retention. But, if we think about stress eating in 2020, maybe they should also give some credit to the Food and Drinks category, which ranks second in this chart. 

Each industry has its challenges, but if you want to grow your business, you need to find ways to win customers’ trust and design your retention strategies around their needs and wants. 

Last Year Retention Rate vs. Lifetime Retention Rate by Shop Age

By looking at this graph, we can see that stores become better at retaining customers as they gain more experience in the market. Between years 7 and 8, we see a drop in retention that might suggest a higher risk of becoming disconnected from what customers expect from a store.

Revenue from New versus Returning Customers

We can’t talk about customer retention performance indicators without comparing the revenue generated by new customers and the one generated by returning customers.

Revenue from New and Returning Customers – Lifetime

This graph shows that, as years pass by, your store should generate more revenue from repeat customers. It might take up to 4 years to tilt the balance towards returning customers. It all depends on a store’s ability to transform these new customers into repeat ones.

Revenue from New vs. Returning Customers from Last Month

This chart reflects the data from June 2021 and helps you see how revenue is distributed between the two types of customers depending on the shop’s age.

If the results in June 2021 vary significantly from the lifetime average, you might want to look deeper into your data and search for anomalies through qualitative analysis.

Average Days Between Transactions (ADBT) by Industry

Knowing how much time passes on average between two transactions is very important for your retention strategies. It’s a metric that helps you increase purchase frequency, which also directly impacts customer lifetime value. 

Average Days Between Transactions is different from one industry to another because consumption behaviors vary depending on the products or the services a store sells.

Based on this metric, you will know how to design your retention programs to keep customers engaged between transactions and make sure they stay loyal to your brand.

Historical Customer Lifetime Value by Industry

We saved the best for last. Historical Customer Lifetime Value shows you how much profit a customer produced over their relationship with a company. 

Keep in mind that many other KPIs influence CLV. So, if your store’s value is below the average value of the industry, you might want to take a look at your Customer Acquisition Cost, Purchase Frequency, Profit Margin and find what’s affecting this key metric.

Anytime you want to benchmark your company against similar stores, you can check the Real-Time Customer Lifetime Value (CLV) Benchmark Report. Apart from Customer Retention stats, you can also find real-time stats about Customer Behavior and Segmentation, Customer Lifetime Value, and eCommerce Analytics.

Are you curious how others approached customer retention? You can check one of our case studies that show how a footwear company managed to generate a 30% increase in retention rate by focusing on a single customer segment.

Retention rate optimization is all about keeping your loyal customers happy and attracting more like them to your business. So, what’s your retention rate right now? What would your net revenue be if you invest more in Customer Retention?

Go to the Customer Retention Rate Calculator and get your answers now!