Most eCommerce brands think about customer lifetime value (LTV) in calculating how much they can spend to acquire a customer profitably. But if you have a hard time getting customers to keep shopping with your brand, it’s nearly impossible to achieve a sustainable LTV.
This is known as a churn problem. While it’s unrealistic to try and bring your eCommerce churn rate down to 0%, there are strategies you can use to lower it to a healthier level and keep your brand growing profitably.
What exactly is the ideal churn rate in eCommerce, though? How do you calculate churn rate for eCommerce brands in the first place? We’re here to get to the bottom of things so you can put this problem in the past with our Shopify loyalty program. Learn more below!
What is Churn Rate in eCommerce?
This is the percentage of customers who stop buying from your brand within a given period. It’s one of the most important customer retention KPIs to keep an eye on as it reveals how well you’re keeping customers engaged and coming back for more.
Think about it - if you’re losing customers faster than you acquire them, it’s only a matter of time before your brand goes belly-up. The goal is to keep churn in check so you’re not constantly chasing new customers. Instead, you can nurture your existing customer base.
Churn exists across all industries, not just eCommerce. But it’s much harder to grasp in this industry because, unlike SAAS or subscription-based businesses, a customer isn’t necessarily “cancelling” anything. They just stop buying from you one day.
There are two types of churn in eCommerce. Voluntary churn is when a customer makes the decision to shop buying from you because of pricing, product dissatisfaction, or a better alternative.
Involuntary churn, on the other hand, is when external factors prevent them from making a purchase - be it payment failure or forgotten subscriptions. But either type of churn can be a problem when it spirals out of control.
How Churn Affects eCommerce Brands
Understanding your eCommerce churn rate ties into customer lifetime value vs customer acquisition cost. After all, you can be more profitable with a lower churn rate since you don’t have to spend so aggressively on acquisition.
This is the most obvious reason you want to keep churn low. It directly impacts revenue and profitability. High churn creates a vicious cycle where brands have to constantly replace departing customers just to maintain the same revenue levels.
As you probably know from reading customer retention statistics, it can cost 5 times more to acquire a new customer than sell to an existing one. In this sense, high churn cuts into your profitability.
You have to spend more money on ads, influencer partnerships, and promotions just to break even. A brand with low churn can spend that money on more profitable growth opportunities.
At a certain point churn impacts the sustainability and predictability of your business model. You probably rely heavily on accurate LTV calculations to figure out how much you can spend to acquire a customer.
But as churn ramps up, LTV plummets. While customers used to bring in $500 over the course of their life, they may only spend $200 now. This means you can afford to spend much less on acquisition.
Depending on the reason behind the churn, it could impact brand perception as well. Customers don’t always go quietly. They might leave a bad review if the churn is the result of low product quality, poor customer service, or better alternatives elsewhere.
On the flip side, brands that prioritize retention build stronger emotional connections, fostering loyalty and advocacy that drives organic growth. We’ll talk about how to push users higher up the customer loyalty ladder later, but first, we need to figure out if you really have a churn issue.
Finding Your eCommerce Brand’s Churn Rate
Calculating eCommerce churn rate is fairly simple. Use this formula to get a sense of where you currently stand: Churn Rate (%) = (Lost Customers During Period / Total Customers at Start of Period) x 100
Let’s say you had 5,000 customers at the beginning of the month and lost 500. That’s a churn rate in eCommerce of 10%. Is that a good eCommerce churn rate, though? Is it realistic to aim for zero churn?
Can You Avoid Churn Altogether?
No brand is immune to churn. Some level of customer loss is inevitable as a result of changing needs, price sensitivity, better competitor offers, or a lack of ongoing engagement.
The goal is not to completely eliminate churn, but rather to keep it at a healthy level through retention tactics ranging from better customer service to customer loyalty strategies.
How Often Should You Measure Churn?
The eCommerce churn rate can be measured at any interval you deem fit. This could be monthly, quarterly, or annually depending on your business model. However, monthly makes the most sense for most eCommerce businesses looking to keep their finger on the pulse.
Subscription-based brands should track churn weekly or even daily to spot trends before they escalate into bigger issues that derail the business. You also need to analyze trends alongside retention and reactivation metrics for a better understanding of customer behavior.
Comparing Your Company’s Churn to the Average Churn Rate for eCommerce as a Whole
The average churn rate for eCommerce as a whole is somewhat difficult to measure, because different industries and segments naturally experience different churn rates. Here are some general guidelines:
- Subscription-based eCommerce: 5-10% monthly churn
- Non-subscription eCommerce: 20-30% annual churn
- Luxury & high-ticket items: Lower churn (~10-15%) due to infrequent purchases but higher retention value
- Fast-moving consumer goods (FMCG): Higher churn (~25-40%) since purchases are often impulse-driven
You shouldn’t look at your churn rate in isolation as it really doesn’t tell you much. If you sell a single product that is supposed to last a lifetime, you’re obviously going to have a higher eCommerce churn rate than a brand selling consumable goods through a subscription model.
Key Data Points to Monitor Beyond Churn Rate
It’s also important to note that churn doesn’t paint the whole picture. It should be monitored alongside other customer loyalty analytics, including:
- Customer Retention Rate (CRR): The percentage of customers you keep over time.
- Repeat Purchase Rate (RPR): How many customers return to make a second or third purchase.
- Customer Lifetime Value (LTV): The total revenue a customer generates over their relationship with your brand.
- Time Between Purchases: How long it takes for customers to reorder.
- Engagement Metrics: Email open rates, click-through rates, and customer support interactions can signal potential churn before it happens.
Tracking these in tandem with churn helps you be proactive and catch the early warning signs something is missing the market, be it customer support or product quality. On that note, let’s get into tips on lowering your churn rate in eCommerce.
How to Lower Your eCommerce Churn Rate
The key takeaway is that keeping customers around takes a lot more than offering a great product at a competitive price. You need to provide world-class customer service and continue engaging with customers to keep them coming back for more.
The best piece of advice we have to offer is building a customer loyalty program. This naturally reduces churn by giving customers a reason to continue supporting your brand. Here are some tips on getting started along with churn reduction strategies in general.
Improving Customer Experience to Reduce Friction
Every unnecessary step in your customer’s buying journey gives them a reason to walk away. You need to eliminate any friction from the shopping process - slow loading times, confusing checkout processes, hidden costs, etc. Start with these simple efforts:
- Speed up your site: No one likes waiting, so optimize load times, streamline checkout, and cut unnecessary steps from the process. The fewer clicks the better!
- Be upfront about pricing: Shipping costs or extra fees popping up late in the process will lead to drop-offs. Show all costs early.
- Offer guest checkout: Making customers create an account to shop is a friction point. Let them check out as guests and offer Shopify customer account creation later. This makes their next checkout process simpler, and you can personalize the experience.
- Make navigation simple: Clear menus, smart search functionality, and filters help customers find what they need fast.
The easier it is for someone to buy from you, the less likely they are to leave for a competitor.
Using Personalization to Keep Customers Engaged
People don’t want to feel like just another transaction. We’ve found that customers who get personalized experiences are 60% more likely to become repeat buyers.
You can use past purchase data and browsing behavior to suggest relevant products. Personalization can be baked into your marketing efforts and your loyalty program as well for a higher ROI.
Leveraging Loyalty Programs to Retain Customers
This is undoubtedly the best way to reduce your eCommerce churn rate. Give customers a tangible reason to keep coming back for more. 84% of customers are likely to stick with a brand that has a well-structured loyalty program in place! Here are some tips:
- Make it easy to earn points: Customers lose interest if they have to jump through hoops to earn rewards. Offer points for purchases, referrals, reviews, and even social media engagement.
- Offer meaningful rewards: Discounts, free shipping, and early product access give customers rewards that actually matter to them. You might want to poll your most loyal customers to get a better understanding of what motivates them.
- Create a VIP tier system: The more they spend, the better the perks. VIP customers can get exclusive products, extra discounts, or personalized support.
- Send reminders about unused points: A simple email about expiring points can bring inactive customers back.
The platform you build your loyalty program on matters. Leading eCommerce brands choose Rivo because we make it easier to personalize the experience for your customers and automate the backend of managing the program.
Compare Rivo vs Loyalty Lion, Rivo vs Smile.io , or Rivo vs Yotpo for a better understanding of why brands prefer Rivo loyalty to the alternatives. Or, request a demo today to learn more.
Proactive Customer Support
Waiting for customers to complain before taking action is a mistake. eCommerce brands with a low churn rate have a habit of reaching out to customers after orders to check in proactively.
Customer service in general dictates your churn rate in eCommerce. Make sure you’re offering multiple channels like live chat, email, and even phone so a customer can get in touch with you however they deem fit.
You should also make sure customers are kept in the loop about orders with real-time tracking and notifications. Uncertainty leads to frustration, and that leads to churn.
Speaking of frustration, make it easy to navigate the return or exchange process for your brand. You can turn a negative experience into a good one this way.
When a customer has a really bad experience and leaves a negative review, reach out to try and resolve the issue. This goes a long way in showing your commitment to the long-term relationship.
Re-engagement Strategies for Inactive Customers
Not every lost customer is gone for good. Sometimes, they just need the right nudge to return. This is why you need to have automated win-back campaigns in place.
These are emails or SMS notifications that fire off automatically after a certain period of inactivity with an exclusive discount, showcase new products, and ultimately remind the customer why they loved you in the first place.
A personal email or phone call can work wonders for high-value customers who’ve gone quiet out of nowhere. It’s the little things that build brand advocacy for life.
Analyzing Customer Exit Surveys to Address Pain Points
Reducing your eCommerce churn rate requires an understanding of why customers leave in the first place. If you don’t have exit surveys in place, you should set them up. These allow you to:
- Identify patterns in complaints: If multiple customers mention slow shipping, website glitches, or high prices, those are red flags you need to address.
- Optimize based on feedback: Use survey results to refine product offerings, adjust pricing strategies, or improve support.
- Follow up with unhappy customers: Reach out if someone leaves constructive feedback. Like we said, an apology or discount can win them back in some cases.
You’re collecting data, so you might as well act on it. Put all these strategies into practice and you’ll be amazed at how you can bring your eCommerce churn rate down to a healthier level!
Bringing Our eCommerce Churn Rate Guide to a Close
Every brand deals with churn to some degree. But when the churn rate in eCommerce spirals out of control it suggests an issue with customer service, product quality, or engagement.
Churn can take a serious toll on your brand’s profitability and sustainability, which is why it’s so important to get ahead of it with the tips we shared above. You work hard to acquire customers, so follow our advice on keeping them around for the long haul! Take the next step with Rivo.
