We are all busy trying to figure out how to get a new customer in, but did you know that 41% of the overall revenue of fashion e-commerce comes from returning customers, which are on average just 8% of shoppers?
You can see for yourself that customer retention is the growth engine behind the success of your shop. Nevertheless, most fashion e-commerce focus their marketing efforts on acquisition campaigns.
A report by Bain & Company (the people who invented the concept of Net Promoter Score) proves that a 5% increase in customer retention rates can boost profits by as much as 95%. This number by itself should be more than enough incentive to get you to switch your priorities.
But why are returning customers so profitable? Check out the data:
- CPCs/CPMs are getting more expensive – no, that’s not just your feeling.
- Loyal customers are 14x more likely to convert.
- Returning customers in apparel spend 40% more than a new customer.
- Loyal customers are 2,5x more likely to act as a referral for your store.
It has become clear that it is indeed ‘better to keep a customer than to acquire a new one’. Retention should be at the top of your priority list when it comes to sales and marketing strategy. Plan properly, and you can easily boost your retention rates on Shopify with minimal investment.
In this article, we will present some strategies to increase your retention rates, but let’s start with some definitions.
Retention metrics, an overview
CLV: customer lifetime value, quite self-explanatory. You just need to multiply the average spent per customer by the average lifetime of a customer. Averages differ by industry and region, but in general terms your CLV should be 3x your cost per acquired customer, that is: if you spend $100 to get a customer, aim for a CLV of $300. For full reporting on retention metrics, we recommend the Shopify App Lifetimely, which also provides forecasting based on collected data.
Repeat Customer rate (called Returning Customer rate in Shopify): equals the number of customers who completed more than one purchase divided by the number of unique customers. Shopify provides this metric, which you can find in the overview dashboard of the analytics panel.
Purchase frequency: the number of orders divided by the number of unique buyers over a specific time frame (for apparel, let’s say around three months). In apparel, a purchase frequency of 30% will probably put you amongst the top performers of your industry.
Average order value: applying the same time frame used to calculate the purchase frequency, divide the overall order value by the number of orders.
Churn rate: first, you need to define what a churned customer is. A shopper that hasn’t purchased in the last 6 months? For over a year? To understand this, you need to look at the average lifetime of your customer base and draw a line. If you notice that your average customer has a lifetime of 6 months, 6 months plus 1 day will be your definition of churned.
At this point, you just need to divide the number of churned customers by the number of total customers, and you have your average churn rate.
How to increase Customer Retention in Shopify
1. Recency & Frequency rule the world (at least, the e-commerce world)
Which customer is more likely to buy from your store again: the one who bought two weeks ago or the one who bought two years ago? The person who bought recently is engaged with your products and services, and it will be much easier to start a dialogue with him/her.
The same goes for frequency. A user who tends to purchase more often is a user you want to keep close. Simply put, make sure you stay top of mind for your customers. How to do it? Here are some tips.
- Personalize your confirmation email. Thank them for the trust, give them an estimate of the expected delivery day/time, and provide the contact of the transport company.
- Ask them to join your social media network, and get them to talk with other users. Numerous psychology studies show that identification in the group is a powerful factor in sales success and significantly increases brand loyalty.
- Stay in touch. After a couple of weeks, ask for feedback on the product. If they are happy, send a follow-up email asking to recommend a friend, if they are unhappy, get them in contact with customer support.
- Happy about the purchase? Ask them to share a picture of them with the garment just purchased, to publish on your social media. They will repost and share it with their network, and you have both free branding and the post of the day.
- Share relevant information: a guide to understand which jeans model is the best fit by body type, an article on how to choose a color palette by skin color, etc.
What you are saying by staying in touch is: “Our relationship has just begun, I will always be with you to make your life even better”. And what is really happening is that the next time the user needs something that is also sold by a competitor of yours, there is a much better chance that they will end up buying it from you.
2. Upsell as if there’s no tomorrow
They are not buying a t-shirt, they are buying a new version of themselves. Is a t-shirt enough? Not even close. A new ‘me’ needs new shoes. And a matching skirt. Probably even earrings. Try to propose not only matching items, but a whole look, from top to… socks.
Upsells are offered via a non-intrusive popup on the product page after the buyer clicks the Add to Cart button. The popup uses a tree-like layout, so each upsell or cross-sell looks like an add-on to the main product.
In addition to the unique approach to offering upsells, Candy Rack also provides advanced targeting options, so you have full control over targets by creating your own customer rules.
3. Add Wishlists
And make them shareable! In our experience, wishlists are still not used enough, despite being such a useful feature to increase retention rates. The ability to save favorite items for future purchase (by sending users a follow-up email) increases the likelihood of that purchase being completed – even if at a later stage, and moreover guarantees an additional email address to contact even if the person is not registered to the site. Among the many options available, we recommend Wishlist Plus, because it is easy to set up and customize.
4. Get them the right size!
When it comes to picking the right size, users tend to hesitate, especially if they are not yet familiar with the brand. We know this issue very well. Less confidence at the moment of choosing a size means a lower average order value or, even worse, an unsatisfied customer. The issue can easily be solved by implementing a sizing solution like Sizefox in your fashion e-commerce shop. Quick, easy and free of charge.
5. Segment and automate
Email marketing is hands down the most effective marketing channel. Try to segment your users as much as possible, and automate even more. Some basic automations that you can’t afford to forget:
- – “Cart abandonment” notification
- – “Item back in stock” notification
- – “Special offer” email, that gets sent after a specific number of days of inactivity
Here is a full overview of possible automations:
6. Friendly customer support
Often overlooked, your customer support agents are ‘the face’ of the company and often the only ones who have the real pulse of a situation.
Not to mention that a good support can act as a powerful lever to increase retention rates and overall revenue. Have you ever heard of the concept of reciprocity in behavioral economics? We tend to reciprocate a nice gesture with an equally nice one. You get what you give, there’s no way around it.
Make sure the interaction with the customer runs as smoothly as possible, provide quick feedback, and do your best to solve the possible issues in a friendly and professional manner.
Key takeaways: you have several options to increase your retention rates on Shopify. Make sure you are leveraging each of them to increase loyalty and to provide your shoppers with a fun, hassle-free experience. And we promise, they will come back asking for more!