Last editedMar 20232 min read
Most business owners instinctively understand that a good ecommerce churn rate benchmark should be as low as possible, but knowing how to calculate churn rate in ecommerce and then reduce it is more complex.
It is also important to understand where your business stands in terms of the average churn rate for ecommerce in your sector. Knowing the ecommerce churn rate benchmark among your competitors helps you recognise any serious issues that are generating a higher churn rate than should be expected.
In this guide to churn rate in ecommerce, we explain exactly what it is and how to calculate it, so you can take the necessary measures to ensure you are minimising churn wherever possible.
What is churn rate in ecommerce?
A churn rate in ecommerce represents the number of customers who have stopped doing business with your company over a particular period of time. This could be in the form of no longer making any purchases, or unsubscribing from your subscription service.
Timeframes involved vary depending on different types of business model, but the most common periods to calculate churn rate for include monthly, quarterly and annually.
Some customer churn is inevitable, and even the very best businesses are unlikely to ever achieve a 0% churn rate in ecommerce. On top of the inevitable churn is the avoidable churn, which can be separated into two categories:
Minimising voluntary churn
Voluntary churn is what happens when a customer actively chooses to unsubscribe from your service, abandon a cart or simply stop visiting your ecommerce store altogether. It comes down to the customer’s dissatisfaction with either your product, service or your website’s user experience (UX).
You can minimise voluntary churn by ensuring your website is easy to navigate with an optimised UX, and the checkout process is streamlined and secure.
Minimising involuntary churn
The primary cause of involuntary churn is payment failure. Declines causing payment failure usually occur because of suspicion of fraud, although only a few of these payment failures actually turn out to be genuine attempts at fraud.
There are measures you can take to minimise involuntary churn, such as CVV capture, and 3D Secure for international transactions. Contacting customers after a payment failure can also help, while payment systems that automatically retry a failed payment can also reduce involuntary churn.
How to calculate churn rate ecommerce
Learn how to calculate churn rate ecommerce by dividing the amount of lost customers during a specified timeframe by the total amount of customers at the start of that timeframe.
Now simply multiply the result by 100 to get the churn rate percentage
Establishing an ecommerce churn rate benchmark
A good ecommerce churn rate benchmark varies from business to business, and there is no universal answer. Some commentators say 5% is an acceptable churn rate for ecommerce businesses, but some businesses can thrive with a significantly higher churn rate. It really depends on the business model in question and the products and services on offer.
Ultimately, every business must determine their own profitability threshold. This then informs you about an acceptable ecommerce churn rate benchmark, allowing you to implement the necessary measures to improve it.
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