How to Boost Customer Retention Rates for Shopify Stores Past the COVID-19 Era?

customer retention blog post

Extended lockdowns. Morbid fear. Delayed vaccines. COVID-19 has hurled upon us a long list of challenges. Invariably, it has hurt businesses too. The eCommerce industry had a spike in volumes when stay-at-home and work-from-home scenarios became prevalent.

In fact, grocery shopping spiked by 210% during the second week of March when the COVID scare started spreading across the world.

bopis chart

There are two factors that had led to this spike in online grocery shopping during the pandemic. First, users are more internet-enabled than ever before. Second, user awareness about the convenience of online shopping and the benefits it offers is at its height. 

However, since Day One, there was one challenge that has been plaguing the eCommerce industry. The problem rose its head with a vengeance during the pandemic. 

It is customer retention. 

Shopify, the eCommerce platform, defines customer retention as “the collection of activities a business uses to increase the number of repeat customers and to increase the profitability of each existing customer.” Customer retention is not the same for every online store. It changes from industry to industry and the customer groups being targeted. 

According to Omniconvert, the average retention rate for e-commerce is around 30%. The rates improve past the halfway point and reach a healthy 60% only after the 5th year. 

omniconvert chart
Source: Omniconvert

If the retention rate stagnates below 20% for an eCommerce store, they will have to incur high customer acquisition costs to keep their business afloat. During a crisis, that is definitely possible. 

However, there are other strategies that can help sustain a healthy customer retention rate. The good news is that strategies can yield returns ever after the COVID situation. 

Communicate and engage

customer engagement

Sound communication is the bedrock foundation of all relationships, business relationships, of everything else. During times of a crisis, especially a pandemic like COVID-19, proactive communication and engagement is what keeps customer relationships intact. 

Also, studies by Loyalty360 have found that 95% of customers expect businesses to communicate proactively, not reactively. 

Proactive customer support is not possible if you do not have either the right tools or workforce. Since the latter is ruled out due to cost issues, the former is what should be considered seriously. 

Proactive customer service in the eCommerce industry usually takes the form of real-time chat. There are live chat software solutions available in the market that can be integrated with online storefronts. Customers can interact with the software and obtain first-hand information readily. The online store will also be able to drive customer service at scale since live chat software can handle dozens of conversations simultaneously. 

As a matter of act, the adoption rate of AI-enabled customer service models is on the rise. 78% of business leaders currently use or plan to introduce AI for customer service and see many benefits in doing so.

In fact, a future-focused business should proactively set up an omnichannel customer system wherein all customer communication channels can be brought under one roof, and you don’t just focus on mass email services. It will prevent fragmentation of data and help deliver a seamless customer experience. This itself can boost customer retention on its own.

Forecast user needs

forecast

The COVID situation made us rethink our priorities. Spending on luxury, leisure, and outdoor entertainment nosedived while essentials buying touched new heights. 

Businesses that were not able to forecast this change in customer behavior found themselves staring at a stockout situation. 

Also, until the situation returns to some amount of normalcy, 79% of consumers will continue to spend more conservatively in the coming months.

So, it is imperative for eCommerce businesses to ramp up on delivering essentials, experiment with multiple delivery models like curbside pickup, BOPIS, etc. They must keep a pulse of customer needs and deliver service accordingly.

Customers who are able to meet their needs in extraordinary times like these will be easier to retain and satisfy. 

Create product bundles

Product bundles were not so popular in the retail industry until eCommerce took it to a whole new level. Product bundles are excellent ways to increase your Average Order Value (AOV). Online stores built on Shopify makes it easy to create product bundles. In fact, Shopify store owners have been able to increase their sales by 30% to 111% with the help of product bundles. 

Here is how product bundles work. A product bundle is a combination of two or more products. If the customer buys these products together, they get the bundle at a discounted price. From the business perspective, it is the easiest way to increase the Average Order Value (AOV) without having to offer steep discounts.

bundles
Source: Happypoints

How does a product bundle help with retention? Most customers are buyers by habit. They buy the same product or combos repeatedly. This specifically applies to groceries and home consumables whose brand selection does not change often. 

A product bundle makes buying easier for customers in three ways:

  1. It simplifies their task of placing an order. 
  2. It removes the pressure to make a new choice
  3. It offers the same best experience that they are already attuned to

For the online store, it acts as a customer retention strategy that keeps earning more revenue while keeping customer acquisition costs (CAC) low. 

Also, from a business point of view, product bundling can help in selling off excess inventory of related products that may not get sold on their own as individual SKUs. 

Empathy before profit

That is the peculiar trait of a crisis. It is equally risky and also offers opportune moments. For businesses that provide essential products and services, like groceries, healthcare products, and services, the COVID-19 situation gave a jumpstart to their sales graph. 

Customers also responded to the crisis with panic buying of essentials. In other words, the market forces were working in perfect harmony in favor of eCommerce businesses. 

It takes a superhuman effort not to use that opportunity for selfish gain. As a business that is dependent on its customers for growth, it is necessary to place empathy before profits.

And, empathy is not so bad for businesses. In fact, there are four undeniable benefits that empathy can provide for your business. 

  1. It increases referral sales
  2. It improves employee morale
  3. It gives a unique competitive advantage
  4. It heights customer interaction
  5. It can have a positive impact on product reviews

In customer service, being empathetic means listening to customers with the intent to solve their problems, offer genuine solutions in a friendly manner, and walking in the customer’s shoes. That’s the simplest way to retain customers.

Take data seriously

data

In eCommerce, and also in most businesses, the RFM model is popular for determining high-value customers. It is used to score customers based on three factors:

  • Recency: How recent was the last order?
  • Frequency: How often does the customer buy?
  • Monetary value: What is the total revenue that the customer generated?

Based on this model, you assign a score to your customer. The score will determine whether the customer is a high-value customer or one that still has promise for the future. 

Treat high-value customers with great care. They have been around for quite a while and hence might have higher expectations during the crisis period. 

For example, the Shopify eCommerce platform gives a bird’s eye view of the store’s performance with detailed data on the store’s recent activity, store visitors, conversions, store performance, and so on. The purpose of this data is to empower the store owner to look at key trends that could indicate user traits and how they behave on the website. Offering them special discounts, access to premium services, early deliveries, etc., can win their loyalty. As you must be already aware, a loyal customer is worth five times than a new customer. 

Armed with such data, you can tweak your store’s customer journey so that existing users spend more and new users and easily converted them into loyal customers. Without data, these tasks will have to be done based on guesswork. 

The takeaway is, take your data seriously. Dive into it to find customers of great value. It will tell you which customers are to keep and the ones that need the effort to win over.

The Final Wrap

The COVID-19 situation turned personal and economic situation 360-degree. eCommerce, which was already reeling under severe competitive pressure, found itself tackling an uncertain and unpredictable challenge.

Customer retention, the key metric which determines the future viability and profitability, started hanging in the balance with the onset of the pandemic situation. To control the situation and to prevent it from wreaking havoc in the long term, it is necessary for eCommerce businesses to adopt customer retention strategies. 

These strategies help with retaining customers for now and forever.

Author’s Bio:

Dhruv Mehta is a Digital Marketing Professional who works at Acquire and provides solutions in the digital era. In his free time, he loves to write on tech and marketing. He is a frequent contributor to Tweak Your Biz. Connect with him on Twitter or LinkedIn.


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FAQ

What is customer retention rate?

Customer retention is the rate of consumers who remain with a company for an extended period of time. The higher the customer retention rate, the more loyal the consumers are in general.

How to calculate customer retention rate?

You can calculate customer retention rate using customer retention formula:
Retention Rate = ((E-N)/S) x 100
E = Number of customers at end of the period.
N = Number of customers acquired during the period.
S = Number of customers at the start of the period.

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