Shoppers Are Buying Online More Than Ever, But Customer Retention Is at Its Lowest

Brands have been able to acquire customers at higher rates during the pandemic than in previous months, according to a new survey by customer experience platform Braze. But retaining these shoppers for long-term success is a separate challenge, one that brands are failing: The report found that customer retention dropped to just 3% by month three.

As shoppers have flocked to new purchasing channels on desktop and mobile, many brands and retailers have been able to capitalize on this new market. Data from Q2 of this year shows a 60% increase in customer acquisition from Q1 across e-commerce, with mobile securing an even higher 62% increase. This reflects other studies from the pandemic showing that mobile sales have been growing significantly throughout this period.

Part of this acquisition can be attributed to consumers looking for new digital options, due to the closure of brick-and-mortar and the absence of an online presence for some brands. Many of these consumers were newcomers to e-commerce, providing a blank slate for online merchants to sell to — and these consumers were openminded to trying something new, according to the study.

In addition to the company’s owned data, Braze conducted a survey of 8,000 consumers with Wakefield research. They found that while 26% of global consumers have tried at least one new brand during the pandemic, 95% said they would be very or somewhat likely to purchase from a new brand in the future. This lack of brand loyalty presents an opportunity for retailers but also the challenge of keeping these new shoppers.

One way that companies are able to track the long-term value of customer acquisition is to look at retention rates. Braze found that after one month, customers acquired during the COVID-19 pandemic were more likely to have stayed with the brand (13.67%) than those acquired during either holiday (11.60%) or other non-holiday (12.35%) periods.

However, this rate then fell the most over a three-month window, resulting in a final rate of 3.32%. This is an 82% lower retention rate than those acquired during a non-COVID-19, non-holiday time period. The report also found that over 50% of new users acquired during the COVID era have already churned.

“With retention during the COVID-19 era falling below even traditional holiday patterns, there’s strong reason to worry that retailers may be facing an essential season characterized by less-loyal users with less inclination to buy,” said the Braze report.

The impacts of customer churn are high, as many companies invest considerable amounts of money in acquiring new shoppers. If these customers do not then stay loyal, the brand is required to continually invest at a high rate for only short-term benefit. Many businesses have been experiencing cash flow problems during this period, making this an even less-sustainable option.

“These headwinds mean that as brands begin to plan their holiday campaigns, it’s essential for them to focus on building out effective onboarding and lifecycle marketing programs,” wrote the report’s authors. “This high-touch, customer-centric approach can help to lower overall acquisition costs by reducing new user churn and increasing the chances that customers re-engage and make additional purchases in this key season and beyond.”

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