How to calculate customer retention rate
Customer retention rate is the share of customers you had at the start of a period who are still customers at the end. You take out the new customers won during the period, so they can't hide losses among existing ones. It tells you whether your customer base is holding or quietly leaking.
The formula is:
Customer retention rate = ((E − N) ÷ S) × 100
- S is the number of customers at the start of the period.
- E is the number of customers at the end of the period.
- N is the number of new customers gained during the period.
The calculator also shows customers kept (E − N) and churn rate (100% − retention rate).
Define "customer" before you count
Subscription businesses know exactly when someone leaves. Ecommerce stores don't, because nobody cancels a Shopify account. So "customers at the end" needs a rule, such as anyone who has placed an order in the last 12 months.
Be explicit about this, because the window changes the answer. A 6-month window counts fewer people as active than a 24-month window, so the same store will show a lower retention rate with the shorter window. Neither is wrong. Pick the window that matches how often your customers naturally reorder, write it down, and use it every time.
Worked example
These are the calculator's default inputs.
| Input or result | Value |
|---|---|
| Customers at the start (S) | 1,000 |
| Customers at the end (E) | 1,100 |
| New customers during the period (N) | 400 |
| Customers kept | 700 (1,100 − 400) |
| Customer retention rate | 70% (700 ÷ 1,000 × 100) |
| Churn rate | 30% (100% − 70%) |
Notice what the headline count hides. The customer base grew from 1,000 to 1,100, which looks like progress. But 300 of the original customers stopped buying. The growth came from 400 new customers covering those losses.
Retention rate vs repeat purchase rate vs churn
These three metrics get used interchangeably, and they measure different things.
| Metric | Question it answers | Formula |
|---|---|---|
| Customer retention rate | Of the customers I started with, how many are still active? | ((E − N) ÷ S) × 100 |
| Churn rate | Of the customers I started with, how many did I lose? | 100% − retention rate |
| Repeat purchase rate | What share of all my customers have bought more than once? | repeat customers ÷ total customers × 100 |
Retention and churn are about a period. Repeat purchase rate is about the customer base as a whole, and it doesn't care when the second order happened. Can a store have a decent repeat purchase rate and falling retention? Yes, if loyal customers from two years ago are drifting off while the history still counts them. Our guide to repeat purchase rate goes deeper on that one.
How to read your result
Read your retention rate against your own past periods, using the same window each time. The trend is the signal. One number in isolation tells you very little.
Decision rules from your own numbers:
- Retention falling while total customers rise: acquisition is covering a leak. You're paying ad money to replace customers you already had, so find out why people stop.
- Retention steady, revenue flat: customers are staying but not buying more. Look at order frequency and average order value instead.
- Retention rising: feed the improvement into your customer lifetime value. A longer lifespan raises what you can afford to pay per new customer.
What moves customer retention
Retention improves when the first order goes well and there's a clear reason to come back.
- The first delivery. Late, damaged or confusing first orders lose customers before any email can win them back.
- A reason to reorder. Replenishment timing, refills and complementary products give customers a next purchase to make.
- Post-purchase communication. Useful emails about using the product beat discount blasts, which train people to wait for a code.
- The second-order experience. Returning customers should find what they bought before quickly. A teardown shows where that path breaks.
- Long-term ownership. Retention takes steady testing over months, which is how our Skuology Growth Partner retainer is set up.
Our guide to ecommerce customer retention covers these levers in detail.
Common mistakes
- Not removing new customers. Without subtracting N, a store that's losing customers can still show "retention" above 100%.
- Changing the active window. Switching from 12 months to 6 months between reports makes retention appear to drop when nothing changed.
- Comparing periods of different lengths. A quarter and a year aren't comparable. Keep the period fixed.
- Counting orders instead of customers. One customer with three orders is still one retained customer.
- Treating retention as a revenue metric. A retained customer who buys once a year at a discount isn't worth much. Pair retention with profit per order.
If retention is slipping and you're not sure why, a game plan gives you a prioritised list of what to fix.