No matter the size of your business, you are no doubt interested to know how you are performing in relation to your competitors. One possible metric for measuring relative success is to compare e-commerce conversion rates, which is effectively a measure of what happens when users visit a website. This is an important parameter to track in order to assess whether or not the user experience on your website is positive since it can effectively inform you if the design of your e-commerce store is working or not. Lower than average conversion rates for your sector despite successful advertising campaigns driving lots of traffic imply that website design is letting you down, whereas average or greater conversions suggest that you are going the extra mile with user experience (unless you just happen to be running a sale!)
There are naturally some pitfalls to comparing your performance against industry benchmarks, the first of which would be to put side-by-side with global metrics, or those from a different sector to your e-commerce store. Furthermore, you ought to be careful not to rely only on conversion rate as a measure of success, since if traffic is decreasing while conversions are increasing then total sales could actually be decreasing too.
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What is a Conversion Rate?
A conversion rate may be clearly defined as the percentage of users who perform a desired action, which is known as the conversion event.
CR = Number of goals achieved / number of visits x 100
The best example of this in the e-commerce industry would probably be the number of visitors who complete a purchase. To illustrate this with a calculation let’s suppose that a website receives 1000 visitors during a particular month and that 22 of them finalize the buying process, this means that the site’s visitors to purchases conversion rate for that month is
CR = 22000 / 100000 * 100% = 2%.
There is a little wiggle room in this definition concerning the counting of visitors and conversion events, which can be made more precise. One must decide whether every unique visit is counted individually, which results in a conversion rate by session, or if all visits by one user in the given time period are considered as one visit, which gives a conversion rate by user. Either method is acceptable, and each are more suitable to record for different actions. It’s important that the counting method during any given time period remains consistent, and that you are clear about which type of conversion rate you have recorded.
Conversion events in e-commerce don’t necessarily have to be sales either. There are many more desired actions that users may complete, which online stores may find it useful to keep track of. Other possible conversion events can include becoming a registered customer, allowing payment details to be stored for faster checkouts in the future, signing up for a newsletter or subscription and downloading or using certain features of a mobile app, for example.
What’s worth mentioning, social media can visibly help with growing your conversion rate especially when it comes to e-commerce. Advertising options on Facebook or features of Instagram for business opened a whole new world of possibilities for advertisers who may now use social media as another sales channel. While Instagram reach is still important for many brands, setting up a shop on Instagram can convert followers into loyal clients.
Conversion Rates for E-commerce
Overall e-commerce metrics from Wolfgang Digital show Global conversion rates of 1.70% by session and 2.91% by a user, with an average order value (total cost of all sales by a given user during the measured time period) equivalent to £109.10. This will give you a general idea about expected conversion rates, although there are many factors that have an influence. Internationally, the UK has a higher conversion rate by session (1.78%) than either Europe (1.51%) or the US (1.37%), so there are trends by location that must be taken into consideration. Conversion rates also vary massively between different industries, which will be looked at in more detail in the following section.
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Conversion Rates by Industry
Data from IRP commerce, revealing the conversion rates by session for different industries in the UK during June 2019, will now be compared to see which sectors perform best at persuading users to complete the desired action, and how they rank against industry-wide averages. The average sale price of an item for each industry, that is the ratio of the total revenue to the number of units sold in a particular market sector, will also be given to investigate whether conversion rate correlates directly with the unit cost. This is also useful information for you to benchmark your e-commerce store with the relevant industry, rather than the global averages alone since there are large variations.
As shown in the above table, the Arts & Crafts and Health & Wellbeing industries have the highest conversion rates of 3.69% and 3.24% respectively, whereas the Baby & Child and Agricultural Supplies sectors have the lowest rates of 0.84% and 0.77% respectively. Comparing the average sale price of an item for those industries gives values in the corresponding order of £18.24, £13.02, £138.72 and £50.70. The scatter graph below for the whole dataset shows a perhaps unsurprising trend of higher average item sale price leading to a lower conversion rate, although that is somewhat skewed by the significantly greater cost in the Baby & Child market. In fact, looking at the 5 sectors that have an average item sales price of less than £25.oo, there is a large amount of scattering in the conversion rates, implying that the design, usability, and functionality of the e-commerce store may have more influence on convincing customers to complete a purchase for lower-priced products. There are of course logical reasons why different sectors experience different conversion rates too, such as some being susceptible to more browsing without buying versus others likely to attract returning habitual shoppers.
Conversion rates are a useful metric for any e-commerce store to be aware of in order to measure relative success against the competition, particularly when it comes to user experience on a website for which it is a strong indicator. Caution must be taken, however, to keep an eye on how traffic to the store is changing alongside conversion rates, since neither of those parameters alone tells the whole story about total sales. Furthermore, conversion rates are greatly influenced by location around the World and by the market sector of an e-commerce store, so one must take many factors into consideration in order to make meaningful comparisons with industry benchmarks.