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Online retailers are struggling to get shoppers to come back (AMZN)

Returning Shoppers
Returning Shoppers

BII

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Returning customers are crucial for retailers because they generate much of a company's sales, but retailers today are struggling to generate repeat business.

In fact, 55% of U.S. retailers currently have retention rates of les than 20%, according to a new report from Internet Retailer that defined "retention" as a customer making at least three purchases from one online retail site.

To fight this problem, retailers are pouring resources into loyalty programs and other tools to increase customer engagement. Approximately 60% of U.S. retailers are spending at least half of their email resources on marketing efforts that target existing customers to try to generate future purchases.

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Meanwhile, 16% of retailers spend at least half of their on-site personalized recommendations on existing customers. These recommendations include customers' demonstrated interests, viewing habits, and past purchase behavior.

But a mere 9% of retailers devote at least half of their social media resources to existing customers. These funds could go toward customer service issues and tools for shoppers who have already made a purchase.

Retailers must devote significant resources to reaching existing customers on multiple channels because the value of returning customers is greater across product categories and continues to climb every year, according to a Monetate report. Repeat customers' transactions accounted for 48% of all U.S. e-commerce sessions during the fourth quarter of 2015 for a total of $2.7 billion, nearly twice as much as new shoppers in the same period.

Returning shoppers are more engaged with retailers, and converting new customers into habitual shoppers is a sign of strength in the e-commerce industry. The top 25% of worldwide e-commerce companies note most of their revenue from repeat customers comes at around the two-year mark, according to RJ Metrics. At three years, repeat customers represent more than 60% of revenue for these companies.

E-commerce companies must pay special attention to repeat customers, especially if the companies are weaning off private funding and trying to build sustainable models. Loyalty programs are particularly effective at converting first-time shoppers into repeat ones.

Companies such as Amazon have been incredibly successful at using these programs to drive growth. Amazon Prime, which costs $99 per year, is an additional revenue stream for the company and conditions shoppers to spend more each time they visit the site.

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