Report: Customer loyalty is e-commerce king

A new report on customer loyalty confirms that e-commerce profitability hinges on getting customers back to a site to make repeated purchases.

The report, released ylast week by Cambridge, Massachusetts-based Mainspring Communications and international consulting firm Bain & Co., is based on surveys of Web shoppers in the apparel, groceries and electronics sectors.

The study found that retailers on the Web have to retain a customer for 12 months to break even on that consumer and online grocers have to hang onto a shopper for 18 months to recoup the $80 customer-acquisition cost.

Repeat customers spend more, the report said. For example, the average repeat shopper at an apparel site spent 67 percent more in months 31 to 36 than in the first six months of shopping at the site. In addition, repeat customers refer significantly more people to a site, and those new customers over three years spend 50 percent to 75 percent of what the original customer spent, the report stated.

The findings show that building customer loyalty and paying attention to service are critical to making it on the Web, the authors of the report said.

"What we're seeing is that if you play out the long-term aspects, customer loyalty is the major differentiator for success," said Chris Zook, a Bain analyst.

Zook contends that in the highly competitive world of Internet commerce, customer loyalty may be more fragile and critical than it is for off-line businesses.

"Businesses can't depend anymore on just throwing out a net and getting new customers," said Jullian Chu, an analyst at Mainspring.

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