7 Reasons Your eCommerce Retention Rate Is Declining

Retention Terminology

First of all, when we discuss “retention” in eCommerce, it’s often used in broad terms without a clear cut definition.

For some people, retention is solely about generating a strong Customer Lifetime Value (CLV), essentially your net sales minus your SKU costs. However, this ignores the fact that maybe your contribution margin increases greatly on first order, but overall repurchase rate goes down. Regardless, all that truly matters is that you yield more profit from the custom when measuring them over a period of time.

This is why the discussion involves a lot of nuance and often confusing semantics.

In most of my discussions with brands, their main concerns focus on two particular metrics/KPIs:

1. Their repurchase rates within cohorts are not as strong year-over year
2. Their returning customer revenue is in decline year-over-year

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Both are legitimate concerns that any growing eCommerce business needs to be aware of and as such, require further investigation.

To make your store a healthy, profitable business in the long-term, you want your retention to be stable and trending upwards, not down.

Here are some of the most common reasons why your overall retention may be stagnant or declining.

DON'T MISS: Email is not the only sales channel for retention

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1. Is your product actually built for retention?

This is the most common reason on the list, and the least discussed.

Let’s say you sell mattresses. Whatever marketing strategy you pursue, however many emails, texts and promos you run, when does that customer need another mattress? Not this year. Probably not this decade.

I was recently auditing a kids furniture brand whose hero SKU is bunk beds. The team was adamant the repeat purchase rate needed to hit 20% within 365 days. When I looked at the cohorts, it was sitting around 8%. Here’s why we turned them down.

The only way to reach that 20% figure is to change the business model in its entirety. For many businesses, that's simply not plausible. The category sets the repeat purchase rate ceiling, and the honest starting point for any retention conversation is knowing where that ceiling is.

Read: Retention Marketing Strategy: A Practical Playbook by Business Model

This leads us nicely into number 2, which is:

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2. Are you releasing complementary products around your hero SKU?

This follows directly from reason one, because it's the legitimate answer to it.

Customers won't buy a second mattress but they will buy bedding and pillows. The bunk-bed brand can't sell another bunk bed, but there's a whole assortment of complementary products that fit naturally around the one they did sell.

Strategically increasing your product assortment is a powerful way to get returning customer revenue spiking again.

Two examples from brands we have worked with:

• Big Blanket expanded into bedding
• Snug Sofa started to sell cushions

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Case study: Big Blanket

However, let’s say that you’re not selling 1-time purchase items and you’re in a category such as FMCG or fashion. If your retention is in decline in these categories, it’s highly possible that your latest releases were disappointing flops compared to previous years.

I have seen this before on several occasions: new products don’t live up to expectations, customers are disappointed and cohorts take a hit. It happens.

In this scenario, you just need to get back to the drawing board and de-risk new product development by leveraging qualitative research to find out what your customers actually want to buy from you in future releases.

For most brands, around 80% of first-time sales are the hero SKU, so the pattern in the remaining 20% tells you which complementary products deserve investment.

DON'T MISS: How to create a retention marketing strategy for a single SKU store

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3. Has your product quality dropped over time?

When I worked in the sports nutrition industry, one of the brands I worked with started formulating their whey protein with a different supplier to save margin. Customers immediately noticed and went berserk.

The fall-out from this was massive, and although I wasn’t monitoring the exact numbers at the time, the discontent across social media was enough to let you know that their retention probably took a battering.

Moreover, this reason is subtle and it rarely shows up immediately, but over time the trend becomes unmistakable.

Ask yourself the same question: "Am I maintaining a consistent quality product aligned with our customers values?" People don’t like freakish change, especially when they’re in the habit of buying your product frequently.

The signals are qualitative before they're quantitative. Reviews mentioning the flavour has changed or support tickets referencing texture, potency, packaging or customers expressing discontent with something they used to love.

It's most common with supplements, flavoured nutritional products and perishable goods, and it usually can be attributable to a manufacturing change: a new facility, different ingredients, a tweaked formulation. The retention damage arrives with a lag, which is exactly why it gets missed. The cohort that experienced the change churns months later, and by then your team could be tinkering with the email flows instead of the product formulation.

I recommend surveying historical VIP customers from time-to-time to further investigate this issue as well. It is always worth staying connected to your customer base.

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4. Are you still price competitive?

New entrants come into the market and underquote you. What was once a steady retention rate starts eroding, and you're losing share not just on acquisition but on returning customers who comparison-shop at reorder time.

Buyers in every category purchase from multiple brands. That's natural market behaviour, and it means your returning customer isn't captive - they're comparing you against the competitor's price at every reorder. Watch what your competitors charge, and stay close enough that price alone never becomes the reason a customer doesn't come back.

If you are operating in a highly commoditised industry, I recommend paying very close attention to the impact your pricing may have on your returning customer revenue.

It is my sincere belief that pricing experimentation is one of the most important and neglected levers DTC brands can pull, but it can also be dangerous without carefully monitoring the long-term impact it has on your customer base.

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5. Are you attracting the right customers anymore?

Retention is downstream of acquisition, and this reason is where that plays out in the data.

Look at your acquisition strategy honestly. The hooks, positioning and the promises being made in the ads. And critically, which product you're selling as the entry point.

If your acquisition strategy has shifted towards an entry product with low repeat behaviour or low LTV, the damage shows up as cohorts mature - three, six, nine months later, when the retention curve of the new cohorts sits visibly below the old ones.

The course correction is at the entry level. What customers buy first is the long-term determiner of lifetime value for most brands. Change the entry product or the promise attached to it, and the downstream cohorts change with it.

DON'T MISS: The greatest retention unlock isn’t sending more emails, it’s doing this

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6. Is channel expansion diluting your DTC metrics?

This one happens without anyone noticing, because it's a side effect of doing something right.

You expand into Amazon and then retail. The brand grows overall, which is the point. But your DTC retention metrics start dipping, because customers who used to reorder from your site now pick the product up in a channel that's more natural for them - especially for food and other products people habitually buy in retail.

You need to consistently ask yourself: “What is the unique benefit of buying from my storefront directly compared to other locations?”.

Don't panic when this shows up in the DTC cohorts. It's a measurement artefact of omnichannel growth, not a retention failure. A lot of customers shop exclusively on price and shipping times, and you’re not going to beat Amazon on either of those unless you control the experience directly.

We worked with a brand that had the usual Covid-surge online in sales, but when customers returned to retail (where their products used to make up 90% of total sales), returning customer revenue to the website plummeted.

The real question it forces is: what experience are you giving customers that makes ordering DTC preferable to grabbing it off a shelf? Subscription convenience, exclusive bundles, loyalty benefits, member pricing. Every brand expanding across channels needs an answer to that question, because the channels will happily absorb your returning customers if DTC gives them no reason to stay.

If you run an omnichannel operation, be aware of how each location can both positively and negatively impact certain metrics and align your expectations accordingly.

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7. Has your customer service slipped?

The final one, and increasingly relevant as support gets automated.

AI agents are taking over support tickets, and that direction of travel isn't reversing. Of course, when you handle it well, it gives you faster resolution at lower cost. But when handled carelessly, it's a steady accumulation of negative sentiment from customers who couldn't get a real answer - and that sentiment converts into churn with the same lagging effect as a quality drop.

As you move your customer support towards automation, watch the same signals as reason three: reviews, complaint volume, sentiment in tickets, and the retention metrics of cohorts who've interacted with support. The technology should be invisible in your retention data. If it's visible, the implementation needs work before the cohorts mature any further.

Read: How to Implement Qualitative Research in Klaviyo

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Conclusion: Diagnosing Retention Problems is Hard

Your retention woes may be a combination of many of the above factors or even none. It can be difficult to diagnose and often requires rigorous investigation.

Here’s one thing you can do to immediately help dissect the problem though: speak to your customers. Not just your best ones either - call up the one’s you p*ssed off and find out what they didn’t like about your brand, or the one’s that used to love you and then divorced you.

Set up as many of these automated feedback loops as possible to keep a finger on the pulse and be willing to prioritise and act upon insights that can shift the trajectory of your business positively when the opportunity arises.

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