As eCommerce leaders, we all know the usual KPIs that dominate our dashboards: conversion rate (CR), average order value (AoV), and quantity per transaction (QPT). But there’s one critical KPI that often flies under the radar: Repurchase Rate (RPR).
With Cyber Month just around the corner, there’s one question every retail exec should be asking: What defines success during these high-pressure days? Sure, top-line revenue matters, but how valuable is revenue if we’re not profitable on the margin?
I know many of you are thinking: “But that’s just acquisition cost; it’s the cost of doing business.” Yes, every brand should fully leverage these sales events, but generating revenue without becoming margin-positive, especially considering the customer lifetime value (CLTV), is a recipe for short-term gains and long-term headaches.
Where’s the Focus? Retention.
Retention isn’t just a buzzword—it’s the ultimate performance metric for eCommerce, particularly for retailers striving to maintain profitability.
A common question is: “What’s your hero product performance?” But they are not asking about the immediate sales spike from hero products. They want to know about their repurchase rate. What’s the retention rate for those bestsellers? While hero products often bring in new customers, understanding how frequently these customers return for a second or third purchase is what transforms a good product into a core driver of business growth.
Key Questions for Hero Product Performance:
- What’s the repurchase rate of the hero products?
- How many times is it repurchased before customers stop?
- What’s the strategy to boost both the purchase frequency and overall revenue?
- What’s the total revenue driven by repeat purchases?
Understanding this helps us create sustainable growth by focusing on retention—a KPI that matters most in replenishment categories like beauty, pet care, groceries, and baby products.
The Path to Profitability Starts with Retention
Retention is directly tied to profitability. If you’re acquiring users through paid channels, your repurchase rate helps you gauge the payback period on your customer acquisition cost (CAC):
Retention is critical in increasing your annual revenue per customer, particularly when your average order value and gross margin are stable, as they are in many retail verticals. Without a clear view of your repurchase rate, you’re flying blind.
The longer it takes to recover acquisition costs, the more capital you’ll need to support continued acquisition, pushing profitability further out of reach.
Defining the Repurchase Rate
The repurchase rate represents the percentage of customers in a cohort who make another purchase within a specific timeframe—whether that’s 30, 60, 90, 180, or even 360 days post-purchase. When analyzing hero product performance, the RPR of each interval should follow this pattern:
Different verticals and categories may require different intervals, but getting this cadence right is essential for accurate targeting.
The Right Repurchase Rate Varies by Vertical
The ideal repurchase rate differs vertically. For example, pet supplies typically see more frequent repurchases than electronics. Subscription models can enhance this by creating a recurring revenue stream. But here’s the catch: many retailers don’t know their true RPR, or they lack the right tools to act on it.
Every customer is different. Even if millions buy the same SKU, they will do so at different times based on individual consumption habits. Understanding the right time for each customer is critical. This is where dynamic personalization and replenishment reminders—ideally through a subscription model—come into play.
Static vs. Dynamic Replenishment
Current static targeting methods—like preset reminders or subscription intervals of 30, 60, or 90 days—are limiting. Take Amazon UAE’s relaunch of its Subscribe & Save program, for example. It had to be revamped due to high churn, driven by the static nature of the replenishment model.
Customers don’t want to deal with overstock or running out of products because of poorly timed deliveries. The solution lies in dynamic, personalized targeting that adapts to individual purchasing patterns.
Retention: The Key to Unlocking Growth
Understanding your repurchase rate is crucial not just for improving retention, but for evaluating the effectiveness of your acquisition strategies. If you’re relying on repeat purchase percentages to measure product stickiness, it’s time to shift the focus to the repurchase rate. Optimizing this metric will drive faster growth and, more importantly, accelerate your journey toward profitability.
By shifting the focus from acquisition to retention, and from revenue to repurchase, we can build brands that not only thrive on Cyber Week but succeed year-round.
