Customer retention rate is the percentage of people who make several orders from your online store. These people are your loyal fans, generating 44% of total revenue and 46% of orders—despite only accounting for 21% of your customer base.
Loyal customers are clearly more profitable. They already know, like, and trust your direct-to-consumer (DTC) brand. The real question is: How do you turn more first-time buyers into your best customers?
Managing retention can feel overwhelming, especially if you’re a DTC operator looking to give existing customers personalized retention marketing at scale. This guide shares how to identify and improve your ecommerce customer retention rate, with a focus on retention emails.
What is customer retention in ecommerce?
Customer retention rate measures a company’s ability to build and maintain customer relationships.
If you sell to 10,000 people each month and 2,500 of them return to make another purchase at some point in the next year, for example, your customer retention rate would be 25%.
Other metrics to benchmark your ecommerce customer retention include:
- Customer lifetime value (CLV) is a measurement of how much revenue you’ll make from your entire relationship with a customer. If the average customer makes a total of three purchases of $40 each, for example, your average CLV would be $120. Use this to measure the effectiveness of retention strategy. An increase in average CLV means even if the number of purchases someone makes doesn’t increase, it’s working—customers are spending more money with your brand.
- Customer or revenue churn is the percentage of customers who leave a business over any given period. Businesses in the consumer electronics industry have the highest average churn rate, at 82% over a year-long span. Basically, the lower the churn rate, the better.
- Customer loyalty rate is the percentage of existing customers who join your brand’s loyalty program. People who join the program show an intention to buy again—even if they haven’t made a second purchase yet.
“Retention is about revenue. Sure, you could think about acquisition when you think about revenue. ‘How do we bring more customers in to combat the customers we’re losing?’ And you’re right, that’s a piece of the puzzle. But if you only focus on getting new customers, giving little thought to the ones you’ve already attracted, you’re missing a giant piece of the puzzle. More DTC brands could benefit from putting as much focus on retention as they do on new customer acquisition.
What’s the average customer retention rate in ecommerce?
Data shows that online retailers have an average repeat customer rate of 28.2%. However, this differs by industry, product type, and business model.
Industry
The data shows that the CBD industry leads with an impressive 36.2% repeat purchase rate, significantly above the average. High-performance sports and athletic industries also show strong retention, with examples like Onewheel Accessories achieving a 33% repeat rate.
Product type
Consumables like meal deliveries and supplements perform well, both hovering at around 29% repeat purchase rates, while tea products show the lowest at 20.9%. Products designed for continuous use tend to have higher repeat rates than one-off purchases like apparel or standalone food items.
Business model
Subscription-friendly products like meal deliveries and supplements naturally encourage repeat purchases through their regular delivery model. Direct-to-consumer brands that focus on customer engagement and feedback typically see higher retention rates, as they can build stronger relationships with their customers through personalized communications and unboxing experiences.
Because average retention rates are so wide, Moran Khoubian, senior director, ecosystem & community at Yotpo, recommends that, “brands measure retention by more specific metrics, including customer lifetime value, repeat purchase rate, average order value, average purchase value of loyalty redeemers versus non-redeemers, and time to second purchase.”
Moran adds, “Shifting focus toward retention leads to improvement across these KPIs, leading to higher overall retention rates.”
How to calculate your ecommerce retention rate
The calculation starts with selecting a specific time period (such as a month, quarter, or year) and following these steps:
Retention Rate = ((CE – CN) / CS) × 100
Where:
CE = Number of customers at the end of the period
CN = Number of new customers acquired during the period
CS = Number of customers at the start of the period
For example, if you started January with 500 customers, gained 100 new customers during the month, and ended with 450 customers, your retention rate would be:
((450 - 100) / 500) × 100 = 70% retention rate
Factors that affect retention rates
- A smooth shopping experience: When customers can easily find what they need and check out without hassle, they're more likely to return. Fast-loading pages, mobile-friendly design, and intuitive navigation make shopping effortless.
- Smart product recommendations: Show customers you understand them by recommending products that match their interests and past purchases. When suggestions feel personal and relevant, customers discover more products they love.
- Reliable delivery: Nothing builds trust like consistent, speedy delivery. Keep customers informed with tracking updates and deliver when promised—it's the foundation of a lasting relationship.
- Stress-free returns: Make returns painless and customers will shop with confidence. Clear policies and simple processes turn potential frustrations into opportunities to demonstrate great service.
- Listening to customer feedback: When customers speak up, pay attention and take action. Their insights point to exactly what needs improving, and they'll appreciate seeing their suggestions put into practice.
How to improve ecommerce customer retention
Define your ideal customer
Customers are unlikely to make repeat purchases if they’re not getting value from the product.
Get your marketing and retention teams on the same page. Build accurate buyer personas—based on data, not assumptions—to figure out the type of person most likely to enjoy your product. Execute marketing campaigns that speak to that specific persona.
“Retention works hand in hand with CX and Growth to ensure we are acquiring customers who would like our brand, so retention is an easier battle to win.”
—Eli Weiss, Senior Director of CX and Retention at Jones Road Beauty
Let’s put that into practice and say sales data shows people aged 60-plus and those in the 20–25 age demographic have similar conversion rates. However, those aged 60-plus have a 7.8% retention rate, compared to 3.5% for the younger segment.
It makes sense to refine your marketing messaging, imagery, and targeting to reach the older demographic. They’re the segment less likely to leave after making a single purchase.
Merge customer data in one platform
From inventory management systems to your email marketing platform, there’s a wealth of data to tap into when fixing a customer retention problem.
According to Yotpo’s Moran Khoubian: “The most impactful retention strategies are built on shared data between a brand’s tech stack, so your brand has a 360-degree view of every single customer—what they like, what they don’t, when and what they purchase, who they are, and more.”
“Use a platform that connects your marketing solutions out of the box, or enables integrations between your enterprise tech solutions in the back end, so that way your team can focus on building better, more personalized experiences for every shopper,” Moran continues.
Popular options that sync with your Shopify store include:
Pay close attention to tools that combine data in almost real time. Things move fast—customer demand can change overnight. Direct integrations with your most-used apps will prevent you from missing important retention insights.
Leverage personalized product and content suggestions
Your online storefront should adapt to each customer, just like a helpful store employee remembers regular customers' preferences. With Shopify's unified customer data model, you can turn your basic website into a personalized shopping space that recognizes and responds to each customer.
Personalized storefronts go beyond just showing products. Customers can create their own shopping space by logging in when they visit your site.
Once logged in, customers get immediate access to features that make shopping easier:
- Wishlists to save items for later
- Quick reordering of past purchases
- Product recommendations based on their interests
- Special discounts picked just for them
- Saved shopping carts they can return to
You can make these customer experiences even more targeted using Shopify's customer segments. Group shoppers with similar habits and customize what they see. For example, you might create special product collections for customers who frequently buy athletic gear, or show different homepage items to people who prefer sustainable products. Your store learns from every interaction, making product suggestions and homepage displays more relevant over time.
Design loyalty programs
A great loyalty program should make customers feel valued whether they shop online, in your store, or both. With Shopify, you can track and reward customer loyalty across all your sales channels.
When customers earn points, they're stored in one central system. This means:
- Store staff can see and apply points during checkout.
- Customers can check their points online.
- Points add up from both online and in-store purchases.
- Rewards are available to use wherever customers prefer to shop.
Store employees can see customer information right at checkout through Shopify POS. For example, Tecovas, a Western-wear brand with over 30 stores, uses this feature to:
- Show staff each customer's purchase history
- Suggest products based on previous purchases
- Track loyalty program status
- Offer personalized rewards
This helps create better shopping experiences and improve retention rates. When a regular customer walks in, staff can see if they're close to earning a reward or if they have points to spend. They can also recommend new products based on what that customer typically buys.
Provide proactive support
When customers browse your online store, they often have questions before buying, and quick answers can make the difference between a sale and a scroll-past. Shopify Inbox gives customers a smart, self-service way to get answers about products, shipping, or returns while they shop.
The system learns from every interaction, making it better at answering common questions and knowing when to bring in human help. You can see what pages customers viewed before asking for help, which helps you understand where they might be getting stuck or confused.
Meet customer expectations
The strategy you use to improve customer retention doesn’t have to be anything groundbreaking. Start small and get the basics right.
According to Eli Weiss, senior director of CX and retention at Jones Road Beauty, “When a customer buys something online, you need to ensure their reality meets the expectation you are selling.”
Eli shares the mistakes brands often make throughout this process:
- Selling something that does not exist (i.e., promising too much)
- Selling shipping time that is not guaranteed (for example, a brand promises free 2-day delivery and it takes 4–6 days)
- Trying to sell a customer more product before they see any ROI from their original purchase (i.e., cross-selling before the product even arrives)
Transparency is doubly beneficial: Not only does it improve customer retention, but it could help attract more customers less likely to leave after an initial purchase. Research from Shopify’s Future of Commerce report shows 45% of shoppers are actively looking to shop from businesses that clearly show anticipated delivery times.
Above all, make sure you can keep the promises you make to customers. If there’s a risk that shipping times could be thrown off, buffer some extra time into your delivery timeframes. It’s much better to meet expectations than let someone down.
Support a cause or mission
There are likely other competitors selling a comparable product at a similar price point—but your customers chose you. Dig deep into why, and pull it into your customer retention strategy. For most people, that’s a shared cause or mission.
According to Bill Glaser, CEO of Outstanding Foods, “Companies that advertise their social contributions often experience higher customer retention rates because they know that their shopping habits benefit others.”
Outstanding Foods puts this into practice through its partnerships with Snoop Special Stars and the Maryland Food Bank. Bill says, “Customers know that when they shop with us, they help provide food and finances to individuals in need and outstanding charities. Customers will remain with companies that involve them in their social mission.”
Host fun product-usage challenges
As we mentioned earlier, customers are at a higher risk of leaving if they don’t get value from your product. That can easily happen if the product sits unused.
Host a fun product-related challenge to get customers actively using your product and sharing it with others. That could be:
- A cooking challenge using your ingredients
- A fitness challenge using your workout clothes
- A monthly goal-setting challenge using your journal
Take it from Slater McLean, cofounder of Oliver Charles. The brand reduced their customer retention rate from 20% to 5% by convincing first-time customers to join a challenge: “The 1-Week Challenge encourages our customers to wear our product every day for a week straight. If they do it and send us a photo each day, we refund them $50,” Slater says.
“This incentives customers to fully experience the value our product offers,” Slater continues. “Those who complete the challenge are 50% more likely to return and buy more sweaters.”
Use dunning management software to avoid subscription churn
Research shows three-quarters of ecommerce businesses plan to offer subscriptions in the near future, largely because they give scaling businesses sustainable revenue. Subscriptions also lend themselves to customer retention: once someone signs up, they’re authorizing the brand to make repeat purchases on their behalf.
Pet Joy is one DTC brand taking advantage of the subscription boom. However, their vice president Jeffrey Petett says, “The main word internally these days is involuntary customer churn; losing customers not because they canceled, but because the credit card didn't bill. For us, that’s about 13% of our monthly customers, and 28% for the yearlies.”
“Most of the things we do, like sending out emails, don’t really affect that, since a credit card is going to bill or not—it doesn't matter about the customer,” Jeffrey continues. “We noticed that by retrying the customer every Friday for the next few weeks, we could get back about a quarter of them.”
Minimize this problem—and therefore, improve customer retention—with dunning management software. The following tools will automatically notify customers who need to update a soon-to-expire payment card:
Customer retention stats and trends
Retention combats skyrocketing customer acquisition costs
As browsers phase out third-party cookies and put privacy first, finding new customers gets more expensive and complicated. But this change brings an opportunity: focusing on keeping your current customers through better, more personal shopping experiences.
The key is first-party data—information customers share directly with you through purchases, account creation, and store interactions. Unlike third-party cookies that track people across websites, first-party data comes from real connections with your brand. This data helps you understand what your customers want, when they want it, and how they like to shop.
With Shopify's unified customer data model, you can use this information to create shopping experiences that keep customers coming back. For example, when someone logs in to your store, you can show them products based on their interests, remind them of items they liked before, and offer relevant discounts.
This personal touch matters more than ever. When you make shopping easier and more relevant for existing customers, they're more likely to return, and happy customers often become your best source of new customers through word of mouth and referrals.
Embed retention in community
Strong affinity with your product isn’t always enough to improve retention, especially with new competitors emerging every day. One thing a competitor can’t beat you on, however, is your community.
Studies show that communities increase customer retention and decrease customer support costs. It’s why ecommerce brands will invest more in customer loyalty and connection than almost any other customer acquisition and retention strategy over the next year.
To build a community your existing customers want to stay connected with, define your purpose and have a shared vision that knits your community together. Position it as an exclusive club—a group of likeminded people who talk about the topics they’re interested in. Your products should naturally weave into those conversations.
Superplastic is one brand capitalizing on NFTs. Their president, founder and CEO Paul Budnitz says he has plans to build a brick-and-mortar store: “At certain times, you’re not going to be able to get in unless you’ve got one of our NFTs or tokens in your wallet.”
“It’s the same thing with our website,” he continues. “There will be exclusive entry, things only you are able to buy. Because if you’re willing to make a commitment and join in with us, then we’ll make a commitment back to you.”
Hire a retention team
Community management alone is a mammoth task. Instead of dividing the task between customer support and marketing teams, give your all to community-building by employing a specialist retention team.
Val Geisler, customer advocacy lead at Klaviyo, tweeted, “Seeing more and more brands taking retention seriously and hiring for it in-house. [I] LOVE this movement and I guarantee this will be a table-stakes role in every growing ecommerce company in the next 2-3 years.”
How Shopify can help
Shopify businesses have a range of tools to improve customer retention. That includes:
- Shopify Flow: Build custom workflows that re-engage existing customers based on data you already have about them, such as actions they’ve completed or products they’ve bought.
- Yotpo: Turn first-time customers into loyal fans with this ecommerce marketing platform. Manage SMS campaigns, run loyalty programs, and personalize email campaigns by pulling data from your Shopify store into Yotpo.
- Klaviyo: Build automated email campaigns using sales data. Used by 65,000 Shopify businesses, Klaviyo uses predictive analytics to identify customers most likely to churn—so you can remarket to them before they zone out.
- Smile: Create a customer loyalty program with tiered rewards that incentivize existing customers to stick around. You can even integrate other Shopify apps and reward people for leaving reviews, donating to a nonprofit you support, or subscribing to your SMS list.
- RAPP: Instantly see your most important customer retention metrics, such as churn rate and CLV, within RAPP’s Shopify dashboard. This single source of truth can help you track whether your strategy is working.
Retain more customers and increase profitability
If you focus all of your attention on acquiring new customers, you could be fighting a losing battle.
Customer acquisition costs are skyrocketing; existing customers are ditching future purchases in favor of a competitor that re-engages them post-purchase.
Use the techniques we’ve outlined here to identify and improve your customer retention rate. From supporting a shared cause to hosting a branded community—don’t let your most valuable customers walk away from future purchases.
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Ecommerce Customer Retention Rate FAQ
What is a good customer retention rate in ecommerce?
A good customer retention rate in ecommerce typically ranges between 20%–40%, though this varies significantly by industry and product type. For subscription-based ecommerce businesses, retention rates tend to be higher, often around 30%–45%.
Is a 70% retention rate good?
A 70% retention rate is considered excellent in ecommerce, as it means you're keeping more than two-thirds of your customers coming back. This high rate would put you well above industry averages and likely indicates strong customer satisfaction and product-market fit.
What is a good ROAS on Shopify?
A good return on ad spend (ROAS) on Shopify is generally considered to be 4:1 or higher, meaning you earn $4 for every $1 spent on advertising. However, for newer stores or those selling lower-margin products, a ROAS of 2:1 to 3:1 can still be sustainable, depending on your business model and overall goals.
