December 2, 2022
It’s often taken for granted that enticing new customers en masse is the only road to keeping a business stable. However, retaining customers who have already passed through your doors is just as important. You likely already have strategies in place to get customers to visit your establishment once, and now it’s time to learn what you should expect in terms of retention rate in retail, and what you can do to improve it.
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The average customer retention rate in retail is 63%, according to a 2018 CustomerGauge study. That’s smaller than some industries that exceed 80%, such as banking and insurance (people don’t tend to go to different banks from week to week), but that number still shouldn’t be taken for granted. If a business is going to be successful, then it must cater to returning customers by keeping them coming back, engaging with the brand, and spreading word-of-mouth to friends and family.
Your retention rate in retail is one significant measure of the health of your business. If that rate is high, it’s a good indication that media strategies are working, customers are happy, and products and services are meeting the needs of your business. If the retention rate is low, it might be time to revise some of the strategies your business is implementing.
Want to know how your business’ retention rate measures up against the average, but not sure how to compare? Just plug your business’ numbers into this simple formula and put the resulting figures side by side.
Customer Retention Rate = (E-N) / B
Note that you will need insight into who has been in your store before and who is all-new in order to perform this calculation. While this is a trivial matter for online stores that create customer accounts and passively receive ample user information in the space of any given transaction, it can be more of a challenge for traditional brick-and-mortar retailers.
Thankfully, new digital infrastructure tools that unify traditional retail with connected shopping present a compelling way to bridge this gap. Read our Guide to the New Digital Infrastructure for Malls & Retail Properties to find out more.
Returning customers means steady business, but here are even more reasons why it’s vital to keep retention rate in retail high:
Retaining customers is the best way to build brand loyalty and trust. Not only will it keep customers coming back to your business, but it will also make it less likely for them to try out competitors and — worst case scenario — get caught by your competition’s own retention strategies.
Finding new customers takes a lot of time. Significant planning goes into identifying exactly what kind of customer you want to attract, and it also calls for increased spending on marketing and outreach. By focusing on returning customers, your business can more effectively identify and address their needs to encourage organic growth.
A happy customer is one who sings the praises of your business in their daily life. Whether that customer is wearing your logo, sharing social media posts, or just mentioning your great prices and products to friends, it all means a powerful way to attract new customers without needing to spend a cent. Don’t discount the power of word-of-mouth; 92% of consumers say they trust recommendations from friends and family above all other forms of advertising.
Many factors influence whether customers are likely to return to your business. Some of the most important are:
The retention rate of your business will always be dictated at least in part by the types of goods and services you provide. Expensive electronics stores with compelling warranty and service plans will have a better chance of bringing customers back than the type of store a customer may visit on a road trip once to stock up on snacks and drinks.
Happy staff can make a more welcoming environment for your customers. Team members are the ones who build actual human relationships with your customers, and they should feel empowered and supported to go the extra mile in delivering excellent customer service — whether that’s helping customers to their car, always being available to provide directions, checking stock on in-demand items, or services beyond.
Your choice of retail store layout strategies can have a massive impact on how much time and money customers spend on your store, and it can also influence how likely they are to come back. Carefully consider what types of store layouts you use and the impression they leave on visitors.
Now that you know what the average retention in rate in retail is, how to find yours, and some of the factors that contribute, what can you do to start improving? One solution that works across many different types of stores is setting up a loyalty program. For instance, Nordstorm’s “Nordy Club” gives customers points on every purchase, which they can then exchange for discounts and special access to loyalty events like Nordstrom’s Anniversary Sale. This encourages them to come back again and again to make the most of the benefits they’re already entitled to.
But you don’t have to stop at apps that leave a wall between your brand’s virtual and physical experiences. Another way to make your business stand out is to use the technology customers already have in their pockets to foster an entirely unique shopping experience. By building augmented reality and metaverse elements into your physical locations, you can create a more engaged customer base that can’t be replicated by ecommerce or traditional brick-and-mortar locations.
Are you ready to learn more? Get in touch with Resonai today and set up a free demonstration.
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