Online retailers are focusing more on retaining existing customers than acquiring new ones, as the active customer retention rate reached a record high in the May to July period this year.
The customer retention rate grew a full five percentage points to 36.4% compared to the same quarter last year (33.7%), according to the latest data from IMRG and Capgemini.
This indicates that the number of customers making return purchases was at its highest rate since the research began in 2010, whilst the percentage of first-time customers was at a record low.
Costs associated with retaining customers are typically less than when acquiring new ones, which may have reflected an overall cautious approach among retailers in how they used their marketing budgets during the period leading up to and including the Brexit vote.
The average selling price per item reached its lowest rate in over three years in Q2, down a full 9% on the same period last year, which suggests that there was a lot of discounting over the quarter which also featured Amazon Prime Day.
In July, Amazon Prime Day generated a huge 41.5 million visits from UK mobile and desktop, a 42% increase on Prime Day compared to last year, according to analysis from Hitwise.
Tina Spooner, chief information officer, IMRG said: “The record high customer retention rate suggests a more conservative approach to how retailers are assigning their marketing budgets, and a number of factors may have influenced the fall in average selling price per item – disappointing weather in May and June, concerns over the referendum, Prime Day etc.
“The average basket value that shoppers are checking out with, which may include multiple items, was also up, despite the fall in individual item prices. So ultimately, as unpredictable a period as we may now be in, this approach seems to have kept customers engaged overall so far.”
Bhavesh Unadkat, management consultant in retail customer engagement design, Capgemini: “Retailers in the past have concentrated efforts on acquisition which usually comes at a higher cost than retention, so a focus on retention is great to see and I am sure retailers will reap the benefits of this.
“It isn’t just big-business retailers which are refocusing their efforts. We’re increasingly seeing smaller retailers in the news as a result of their increased focus on improving customer retention, through investment in new cloud technologies”.
Mr Unadkat added: “Customer loyalty and retention has implications which reach every aspect of every business, and so we can expect to see retailers and other businesses alike continuing to rethink how they build both trust and consumer confidence in the coming months.”