Retention rate calculates what portion of customers return to make additional purchases. The formula subtracts new customers gained during a period from total customers at the end, divides by customers at the start, and multiplies by 100. High retention indicates customer satisfaction and loyalty, while low retention signals problems worth investigating.
Calculation Method
Choose a timeframe, typically monthly or annually. Take your ending customer count, subtract new customers acquired during that period, then divide by starting customers. Multiply by 100 for a percentage.
If you started with 1,000 customers, gained 200 new ones, and ended with 900 total, your retention rate is 70%. The 200 new customers do not count because they were not at risk of churning.
Ecommerce Benchmarks
Average ecommerce retention falls between 30% and 38%. Rates below 25% indicate serious problems. Rates above 40% are excellent. Industry variations are significant: grocery achieves 65% retention intent while luxury goods sees only 10%.
Pet supplies reaches 30% or higher. Electronics faces 18% retention due to long replacement cycles. Sports apparel achieves around 33%.
Business Impact
Increasing retention by just 5% can boost profits by 25% or more. Retained customers cost nothing to acquire. They spend more per order and refer new customers. Loyalty program members spend 67% more than non-members after 30 months.
Improving Retention
Stores that actively nurture customers through email campaigns, loyalty programs, and personalized offers see 15-25% higher retention. Post-purchase follow-ups and hassle-free returns build trust. Product recommendations based on purchase history increase repeat purchases by up to 29%.
