REPEAT COMMERCE: 01 - What Number Predicts If Your Shopify Store Survives?

Jay Myers: [00:00:00] In 2013, the average online store lost about $9 every time it won a new customer. So the cost of acquiring that customer, nine bucks. After the ad spend any discount codes, returns, you know, $9 on average. Annoying, but not horrible.

Now, today, that number is $29 on average. I know many stores spending a ton more than this, but 29 bucks gone every single time somebody buys from your store for the first time. And you know what most of us do when the first order comes in? We celebrate. We screenshot, we hear the cha-ching, uh, we put the ROAS number in Slack, and we're throwing parties around transactions that we're actually losing money on.

Well, welcome to today's Shopify 1% episode. As you know, I'm Jay Myers, and every episode we try to do one specific thing to help you improve your store or make it at least 1% better. Now, today's episode is actually the start of something bigger. [00:01:00] This episode is one of a whole series on what I'm calling repeat commerce, which is the business of the second order, the third order, the tenth order, and so on.

Because I believe that most Shopify brands have actually been quietly building, like, the wrong machine, a machine that's brilliant at winning customers once, but it's terrible at keeping them coming back over and over. Now, by the end of this episode, you're gonna do one thing for me. You're gonna pull up two numbers in your Shopify admin.

It'll take maybe five minutes to do, and you're gonna find your repeat purchase rate and the percentage of your revenue that is coming from returning customers. Now, most merchants I talk to have never even looked at these numbers, and they definitely don't know it off the top of their head, but they're numbers you should know intimately.

And I'm gonna tell you later exactly how you find them, what counts as good, what counts as bad, and one kinda sneaky way that Shopify's default number can actually fool you into thinking you're much healthier than you are. So I'm gonna show you how to actually figure out your true number. So stick around for that part, because almost nobody [00:02:00] knows that.

Jay Myers: So let me give you two numbers that made me want to record this entire series. That $29 figure from the open where I talked about how an average order now is costing $29 versus nine. That came from a report from Simplicity DX. They actually tracked the fully loaded cost of acquiring a new customer, including ads, returns, overhead, all of it.

And they found that the average merchant went from losing $9 in 2013 to now losing $29. That's a 222% increase. And there's a lot of factors playing into this. iOS privacy changes, ad costs are skyrocketing rising rates of returns. People are returning stuff more than ever, and it, it all kind of stacks up.

Now, the second number from that same research is the average repeat sale generates $39 in profit. Okay? [00:03:00] So the thing I didn't mention in the beginning is the cost on the initial order has gone up 227% to losing more money. But the second order, the average repeat sale is gener... and, and third and fourth and fifth order, is generating $39 in profit.

Again, not just taking into account the acquisition cost, because that would be obvious because you're not paying to acquire, but returns, all the other costs, everything else. So that's actually up 36% over the same period of time. So first time customers have become dramatically less valuable, 222%, and your repeat customers have actually become much more valuable, 36% more valuable.

Like if that doesn't kind of make you stop and think right there, the difference, it's, it's widening. The gap is increasing, making repeat customers even more valuable. And there's so many things, I've talked about this on the show before, that are important about repeat customers. Not only [00:04:00] are, is, is your spend going up, customers just aren't finding you through Google like they used to.

Google actually put out a report recently that 61% of searches no longer end in a click. So like they're just going to AI. They're reading the AI ins- overview. And on top of that, agentic commerce is, is here. People are just going to like Shop App, for example ChatGPT and asking for products, and they might not even visit your site.

So once you do get that customer, it's so, so important. Okay. So when someone asks, "Is my store profitable?" Honestly, that's almost kind of the wrong question. The real question is, "Do my customers come back?" Because if they don't, you didn't really make a sale. You made a donation to Meta or whoever you're spending your ad money with, with just a few extra steps.

And that's why I think repeat commerce should be the default way we build stores, not the thing we think about after. The word default actually really matters here [00:05:00] because right now RePete is kind of the exception. It's an afterthought. Like, it might be some email flow that you have set up or some- someone hasn't touched it.

Who knows if, if it's even still working. So I wanna spend this series convincing you to completely flip that. And so today we're gonna start with uh, what I call the three lies that got us here. So lie number one, growth means new customers And this one is baked so deep into e-commerce culture that we don't even notice it.

If you open any brand's marketing meeting, the agenda is acquisition, new customers, CAC, customer acquisition cost, ROAS, return on ad spend, top of funnel. These are words that you hear at any marketing meeting. And I get it. Like, I fell for this one too when I was running stores. I've been running on stor- online stores since 1998.

And for the first dec- decade, I, like, I literally believed that the scoreboard was how many new customers I got per month, how many new faces were coming in, how many total customers [00:06:00] I had. Then in 2012, you know, I, I founded Bold Commerce with three friends, and over the next decade, I, I got to see the inside of h- hundreds of thousands of Shopify stores.

We built the first upsell app on Shopify, the first subscription app, the first membership app, all of it, were con- constantly showing us their numbers, uh, 'cause our apps were using those numbers. And patterns started to show up so consistently every single time. The brands that grew steadily year after year through, through all the changes, through iOS update changes, ad cost spikes, pandemics, you name it, they were never the ones with the best ads.

They were the ones whose customers kept coming back without being chased. And the data backs up and w- what I watched happen. Stores I got this written down here. Stores with a 40% rePete customer rate generate 50% more revenue than stores sitting at a 10% rePete customer rate. Same traffic, [00:07:00] but wildly different outcome as far as revenue goes.

And rePete customers, so many more benefits. They spend 60% more per order than one-time buyers, and it's because they already trust you. They s- they skip the whole comparison shopping. Once they've bought from you once, and especially if they're a member if they're-- And I-- even more so if they're a paid member they don't-- they stop shopping around.

It's called brand affinity. They just add the second items to the cart, so they-- that's why they're spending more. And so here's a different definition of growth that I want you to s- try on, let's call it. Growth for you should be the number of customers who would notice if you disappeared. So if today, if your store disappeared, how many customers would notice?

Is it 10? Is it 1,000? Is it zero? So new customer acquisition fills the room, so to speak. It brings the customers in. But rePete purchasing is whether anyone stays for dinner, let's call it. [00:08:00] Both matter, and I'm not telling you to turn off your ads. Of course, that would be insane. I'm telling you that if every dollar of energy goes into just filling the room and zero goes into dinner, you've basically built a really expensive revolving door.

So, uh, just I guess a quick gut check on what you can do right now before we even get to the Shopify reports. If you stopped all paid advertising tomorrow, what would your revenue do next month if you had zero ads? And if your honest answer is it would completely fall off a cliff, you don't have a brand yet.

You have a media buying operation that ships products, and that's not bad. That's important, but we need to get you to the point where you become a brand and you're not a media buying operation shipping product. So I know it stings a little bit. I know it stung me when I first did the math on one of my own stores back in the day, but it's kind of one of the single more clarifying questions in this whole episode [00:09:00] Okay lie number two.

Retention is an email problem. Lie number two is... This is sneakier because it actually sounds responsible. A merchant hears retention and they say, "Yep. Oh yeah, we got that covered. We've got, uh, we've got email flows, we got welcome series, we got abandoned carts, we got win-backs. Uh, yep, yep. We've, uh, we, we got our repent- retention taken care of."

Box checked. Email is a channel. Retention is a design decision so if you think about the brands that you personally reorder from, not as a merchant but as a customer, the coffee you buy every month or the dog food or the skincare, did the email make you loyal to them? Or did it just remind you of a decision you'd already made because, like, the product was awesome and the reordering was painless?

Retention actually gets decided in places email doesn't touch. It gets decided in the product experience. Did the thing arrive fast? Did it work as promised? Did it feel worth it? It gets decided in [00:10:00] unboxing and the follow-up. Did any- anyone tell me how to get the most out of what I bought, how to use it, how to...

tips and tricks? Or like, did the relationsh- end up, did the relationship end, like, after it was shipped? Uh, which a lot of brands do. You get your shipping confirmation and that's it. And this one matters I, I, I think more and more every year because it gets decided by how easy you make the reorder itself.

Every single click between "I want this again" and purchased is a place where I might wander off and get distracted, or worse, I might just buy it from Amazon or Costco or anywhere else I happen to see that product. So when I say rePete commerce should be the default, I mean designed in the same way you would design your product page.

Most brands design the path to first purchase obsessively. Like you've got heat maps, A/B tests, you're watching screen recordings, CRO audits. Like you obsess over getting that customer through when [00:11:00] they land on your site through to the first purchase. But they leave the path to the second purchase as, I don't know.

They get a newsletter, they get an email. So we gotta flip that energy. I mean, even, even if you flip 10 or 20% of it, let's flip it

Jay Myers: Okay, lie number three. I call this one we'll fix rePete later after we scale. And this third lie is one honestly, I hear, I hear most from growing brands and, you know, it sounds totally reasonable. Like I get it. You don't have a ton of customers yet, so why worry about retention? I'll worry about that when I have thousands of customers.

And retention's on the roadmap, and right now we just need to focus on volume, and we'll fix it once we're bigger. And it... I've heard it all. There's two big problems with that. First, a rePete revenue compounds, which means delaying it is very expensive. Every cohort of customers that you acquire this [00:12:00] year, even if you're just beginning, becomes an asset that you're gonna have to pay to acquire again next year, or it just becomes a sunk cost.

So if you acquire 10,000 customers this year and your second purchase machinery doesn't exist, you didn't just postpone retention. You probably permanently lost most of that cohort, and they're not sitting around in a waiting room until your roadmap catches up. They've moved on. They've, they've bought their next bag of coffee from someone else, their next protein powder from someone else.

Like, s- so it-- you have to bake it in from, from day one. And I think the second big problem with it is later is when retention actually gets harder, not easier. So at 500,000 a year, you can kind of read individual customer emails. You can actually see the names that keep coming back. Like when you're just getting started, you can, you can see what makes someone loyal, and you can fix a reorder problem with [00:13:00] one Shopify setting much easier than you can at, at 20 or 30 million.

At 20 million, that same problem gets get buried under 14 dashboards and m- and an agency managing your email and, and you don't see it as easily. And unwinding an acquisition-only culture is-- becomes a company-wide project at that point, but it's easy to do when it's early, so it's important to bake it in early on.

The average rePete customer rate across Shopify sits at around 28%. That means for a typical store, roughly seven out of 10 customers buy once and then vanish forever, gone. You paid $29 to each of them, actually lost $29, and most of them ghost you. Now, and this matters for everyone listening, whether you're doing 100,000 or 50 million, the right benchmark depends heavily on what you sell.

So consumables supplements, coffee, Pet food, [00:14:00] skincare, usually their rePete revenue is around f- at least 40% because their products naturally run out and they need replenishing. So, furniture clothing, luxury, big one-time purchases, they're usually around 15%. And that's, that's normal. That's like the structure of the business or that vertical.

That's not a failure. But it's important to know w- what the ranges are for the different verticals. And so if you sell mattresses and you're listening to this show, don't panic when your number looks nothing like a coffee brand's. Your rePete purchase game is different. It's accessories, it's referrals, it's replacement cycles.

It's a different sport, but the same scorecard, but different sport. But whatever your category or your vertical, there is a healthy number for it, and most brands are below what it should be simply because nobody ever made the second purchase someone's actual job Okay, so time to get to your numbers.

I don't know if you're at your computer right now, but if you are, I'm gonna kinda walk you through something. But if not, [00:15:00] you can kinda bookmark this and come back to when you are at your computer. So you're gonna open your Shopify admin and this is just gonna take a few minutes. Number one, first thing you're gonna do, your returning customers rate.

So in your admin, go to analytics, and right on the main dashboard, there's a call, c- card called Returning Customer Rate. Now, set your date range to the last 12 months. So a full year kind of smoothens out seasonality, 'cause if you're running this report in December or January, y- you might see a lower rate because you saw a spike of customers in Black Friday.

So you'll always wanna run it for at least a year to actually get a true number. Now, the sneaky part I kinda promised about in the open is Shopify's version of this metric counts any customer in your date range who's ever ordered before, even if their first order was outside the window. Now, that tends to kind of flatten the number, uh, which it's directionally useful, but it can run [00:16:00] a lot hot- hotter, I wanna say, than your true rePete purchase rate, sometimes by a lot.

So treat this dashboard card as the friendly version because... So remember, if someone ordered from you 10 years ago and you run this report for the last 12 months, they're gonna show as a rePete order, even though it's not a super healthy rePete order. But just keep that in mind, knowing that that's how it's calculated, okay?

Now, number two, which is, I would say, the honest kind of version of your rePete revenue, is go to analytics, then reports, and then pull up New vs Returning Customers. So you can also search the report list for first time vs returning, and this will show you the sales dollar split between first-time customers and returning customers.

Now, the question you're answering here is, what percentage of my last 12 months of revenue came from people buying a second or third or fourth or fifth [00:17:00] time? What percentage of my revenue is coming from rePete customers versus one-time customers? Okay? That's it. Those are the only two I want you to run right now.

Write those numbers down. Physically write them down, put them on a sticky note, put them on your wall beside your computer. The... It's important that you know these numbers. Now, even though the first one I said is somewhat inflated, that's okay. This, these are gonna be your benchmarks. So I'm serious about this.

Put it, put it beside your monitor because we've got a whole series coming out about moving these numbers and improving them. So I hope that you look back at that sticky note in three or four months and you run these reports again, and the numbers are better Now, there's an even more kind of honest version of these numbers, and it's one that strips out your subscribers.

Because auto renewals or subscriptions, they can kind of quietly inflate your rePete rate, and it is a [00:18:00] rePete order, I get it. But we also wanna track separately customers who are just coming back, because in-- when the default number that Shopify has in, it includes all of the subscriptions, so it kind of hides how many of your one-time buyers are actually choosing to come back, and there's a big difference there.

So there's no canned Shopify report for this, and you have to run a query. And I'm gonna give you the exact query for this in one of the upcoming episodes because I don't wanna go too deep here. But just so you know, those canned ones in Shopify do not include... Sorry, they do include all subscriptions.

There is no canned one to exclude it. You have to run a custom query. You can ask Sidekick to do it for you. Um, but we're gonna cover that in depth in an upcoming episode, so I'm not gonna go too deep in here. Just wanted to let you know. So, here's how to grade yourself roughly is, I mean, this varies, but industry average rePete purchase rate is around 20%.

And a healthy [00:19:00] revenue share from rePete customers from an established store somewhere should lie in between 20% to 40%. Now, I've seen stores upwards of 80% to 90%. Like this is kind of benchmark average. We're of course gonna strive for better. And it's gonna be higher for high consumable products and then lower f-for what I call durables, which are anything that, um, lasts and doesn't get consumed.

So below 20% in a repurchaseable category is, is where you are, you should be concerned. So, You found the biggest lever in your, in your business, and it's not gonna be new ad creative. It's gonna be growing rePete revenue. So, one more thing while you're in your reports. Uh, I want you to glance at customers over time.

It's in the same report section. If your new customer line goes up and your returning customer line stays flat, that's what I would call a leaky bucket [00:20:00] indicator. So that's in the new versus returning customer section, and you can see customers over time. And so if your new customers is going up, meaning you're paying and spending to acquire more, but the returning customers isn't also going up, it's of course gonna be less.

I know it's gonna be in, you know, the 30 to 40% range, but it should mirror the new customer rate. But if it's not, even if it's flat or not going up at kind of the same rate, you've got a leaky bucket. So take a screenshot of that because we're gonna come back to that in a future episode as well too, but that's one that we want to to increase.

So, let's leave it at that. Your, your 1% win today, I'm just gonna say this, it's dead simple. Actually do it instead of nodding along as you're running on a treadmill, which is totally fine. Run these reports. Open Shopify Analytics, pull your returning customer rate, your rePete revenue share for your last 12 months, and the customers over time and write these down with today's date, put it on your wall.

That's it. No app to install, no flow to build, nothing crazy, nothing to buy, [00:21:00] just, just look. Look at your reports. That's your 1% win. Put it on your wall, because I've watched this exact moment change how founders run their companies. That number kind of just makes it real. So " We should work on retention someday," quote-unquote, becomes, "Wait, 81% of our customers are never coming back?

We paid all this, all these, all these people for ads?" So, one is a vibe and the other is a fire alarm. So quick recap, the average new customer now today is costing brands $29 in losses, and the average rePete sale is making $39 in profit. So which one do you want to focus on? Which one is actually building a real business?

So the three lies keeping brands stuck, just to go over them again, is growth means new customers, lie number one. Lie number two, retention is an email problem. And lie number three is we'll fix this later once we have a lot of customers. So, and your one [00:22:00] number, or actually two, is sitting in Shopify Analytics right now, uh, just five minutes away.

Run those reports and including, you know, the kind of quirk in how Shopify calc- calculates it, just make sure you remember that. So, that closes the loop that I opened up at the very beginning of this episode and now you know where these numbers live and what good looks like and why the dashboard version kind of flatters you a little bit.

So, this episode is one of the rePete Commerce series. So I'm gonna add a little special badge on the cover art so you know it's part of the series because we will, of course, be having guest interviews intermixed in between. But we're gonna be doing a whole series on this. I think, I think I've got about 20 episodes planned on this mapped out because, like I said, rePete commerce is not something you just do when you're done.

It should become part of your ongoing strategy. So, I'm gonna be going a lot deeper. Next episode, uh, we're gonna be covering what I call the leaky bucket math, and it's [00:23:00] why a 5% improvement in retention can beat basically any ad campaign you will ever run with numbers you can actually plug into your own store.

So if you got 1% better from this episode today I would just like to ask you to follow our show, click subscribe wherever you're listening, and so that you'll get notified when there's a next episode coming out. And if you pulled your numbers and you got anything from this report, would you be so kind to leave a five-star review wherever you're listening, Apple, Spotify.

And if you do it in Apple, can you write something in the comment section? I love to read them. We feature them and it just makes my day. So, you know, five stars is awesome, but if you can write something like, "Loving the series on rePete commerce," that would be awesome. That's the pod. See you on the next one.

Bye.