Online conversion rates have been on the decline since companies started tracking them. Although we used to talk to our clients about average site conversion rates of around 5%, these figures no longer hold true. Most websites struggle to convert visitors into clients, and the numbers aren’t improving. Table 1-2 shows the Fireclick Index average conversion rate based on the industry in June 2007 and June 2008. Most (though not all) categories report a decline in conversion rates.
On the other end of the spectrum, some ecommerce sites report double-digit conversion rates. Table 1-3 shows the top converting ecommerce websites according to Nielsen’s MegaView Online Retail report in June 2007.[9] Next to each top converting website we included the industry averages as reported by the Fireclick Index.[10] Table 1-4 shows the top converting ecommerce websites according to Nielsen’s MegaView Online Retail report in March 2010,[11] as well as the industry averages.[12]
|
Conversion rate |
Industry average |
|
|
Lane Bryant Catalog |
24.7% |
2.3% |
|
QVC |
16.7% |
5.8% |
|
Oriental Trading Company |
15.2% |
5.8% |
|
Blair.com |
14.5% |
2.3% |
|
Jessicalondon.com |
13.7% |
2.3% |
|
Symantec |
13.5% |
3.9% |
|
Roamans |
13.5% |
2.3% |
|
The Sportsman’s Guide |
12.2% |
0.4% |
|
Christianbook.com |
11.9% |
5.8% |
|
Lillian Vernon |
11.8% |
1.7% |
|
Type of site |
Conversion rate |
Industry average |
|
Schwan’s |
40.6% |
2.1% |
|
Woman Within |
25.3% |
1.7% |
|
Blair.com |
20.4% |
1.7% |
|
1800petmeds.com |
17.7% |
2.1% |
|
Vitacost.com |
16.4% |
2.1% |
|
QVC |
16.0% |
5.2% |
|
ProFlowers |
15.8% |
2.1% |
|
Office Depot |
15.4% |
5.2% |
|
Oriental Trading Company |
14.9% |
2.1% |
|
Roamans |
14.4% |
1.7% |
Although most online retailers are able to convert 2.3% of their visitors into customers, retailers such as Lane Bryant convert 24% of their visitors into customers. Yes, some online retailers are able to capture 10 times as much business compared to their competitors. Some even sustain that rate over years.
Conversion optimization can bring a company a staggering increase in revenue. For many companies, conversion rate optimization translates into hundreds of thousands of dollars of additional revenue. For example, a client of ours that runs an ecommerce furniture store had annual sales of around $20 million. The initial three months of conversion optimization generated a 30% increase in online sales, which translated to around $600,000 in additional sales per month. With large numbers such as these, you may be wondering: why wouldn’t every company jump on the conversion optimization bandwagon?
Before we answer that question, let’s compare ecommerce conversion rates to those of the physical world. Although there is no published data on the average physical-store conversion rate, informal surveys show that most offline stores convert around 25% of their in-store traffic into actual purchases. When a store runs a large discount, those conversion rates shoot up even more significantly. Think back to Black Friday 2009. Even in a bad economy, thousands of customers waited in lines for hours in front of retail stores looking for good deals.
So, why are website operators content with low conversion rates? We’ve encountered three common reasons:
In the case of a standalone ecommerce website where the company does not operate a traditional physical store, calculating conversion is clear. The line is not so clear in the case of a mixed operation, where the company sells both offline and online. Many websites that have a physical-store presence report that offline retail sales increase as a result of their online advertising.
Research by Yahoo! and comScore shows that consumers who were exposed to online advertising are more likely to research products online and then to make their purchases offline.[13] And although more and more people are purchasing online, data shows there is a segment of visitors who are more comfortable completing a purchase offline. In that case, consumers complete the research online, but the actual purchase (conversion) takes place in the physical store.
So, although the reported online conversion rate is low, the overall conversion rate for the company is actually higher. The question of attributing offline sales to online visits presents a challenge that many companies continue to struggle with.
Acquiring website visitors, whether via organic search results or through paid advertising, used to be cheap. As a result, most ecommerce stores did not worry about their low conversion rates. This is no longer the case. Search engine optimization whereby a website ranks at the top of the natural search results requires more time, effort, and money today. Paid results requiring bids of between $3 and $5 per keyword are typical in most industries. It is not unheard of to pay more than $10 in certain competitive markets. As traffic gets more expensive, more website operators will look for ways to maximize ROI on the current traffic they are getting.
This is perhaps the biggest reason we have not seen a real push toward improving conversion rates in the past few years. Conversion optimization is a blend of science and art. It is the intersection of creative, marketing, and analytical disciplines. It would be easier to state that there is a simple formula you can apply to increase your conversion rate. And yes, there might be a few tweaks you can make here and there to quickly increase your conversion rate a bit. But it takes time and patience to move from a 2% to a 10% conversion rate.