What Is Conversion Rate in E-commerce? – The Basic Definition

Let me start off by busting a common myth- nope, the ecommerce conversion rate is not the number of individuals visiting your website. It is a different ballgame altogether. In simple terms, the conversion rate is the percentage of visitors who convert into buyers or respond to your call to a specific action.

And this specific action can be anything you want, e.g.adding a product to the cart, subscribe to newsletters or purchasing your product. As a marketer, your ultimate goal is to convert the visitors from various traffic sources into active buyers. Thus, the conversion rate is one of the most valuable metrics of your ecommerce’s success.

In general, eCommerce conversion rate is actually the percentage of visitors those who actually buys your product.

How to calculate eCommerce conversion rate and formula to calculate

ecommerce conversion rate formula

Calculating the conversion rate is simple. Suppose you have 60,000 visitors for a set period and 60 of them purchased the product from your site. This means that your conversion rate is 1%. At the very end of this guide, I will also discuss some tried and tested tactics to optimize and improve your ecommerce conversion rates.

But first things first-

The average ecommerce conversion rate for a company is influenced by a couple of factors-

  • Cost of the product or service you are selling.
  • Type of service or product.
  • Platform and device you are primarily targeting.
  • Demographics like age and location of your target buyer group.
  • Type of website.

The market is inundated with conversion rate optimization tools to monitor the number of visitors a website is getting. It is not that simple with tracking and analyzing your ecommerce conversion rate.

In this blog post, you will learn how to benchmark your ecommerce’s conversion rates against the rates of various other companies, segmented by industry types, channel, device, and platform as well. One more word of wisdom: it is important to take into account the type of visitors your site has as well in order to segment the conversion.

The biggest problem that every ecommerce business have to deal with in order to convince people to spend their money on their products is to make their products appear authentic. That’s a tough feat to achieve since the customers cannot physically touch or examine the product before buying.

So, how do you gain their trust? All you can do is provide them with enough resources to research on the products you’re selling. The more they know about what they are signing up for, the more they are likely to sign up.

What is an average conversion rate for e-commerce sites?

The average global conversion rate for ecommerce sites all over the world, unto the second quarter of 2017 is 2.94%.

Just so you know, the ecommerce conversion rate for U.S online shoppers is typically 3-4% higher than the global average.
average ecommerce conversion rates
These statistics might come handy to you if you are a pro. But this article isn’t just meant for seasoned webmasters. If you are just starting out with your online venture and want to expand your knowledge on the subject of conversion rate, you should pay attention to things I am going to talk about below.

However, before I get into the core details, I’ll loosely touch upon the average e-commerce conversion rate by industry

What is the Average E-commerce Rates by Industry Type

It is quite obvious that certain industries will have a higher conversion rate than the others. That’s simply because they sell products people buy more often. For example, a ecommerce store selling graphics tees won’t have the same conversion rate as an ecommerce store selling welding equipment.

From 2010 to 2015, sports equipment selling stores observed a massive leap of 900% in the conversion rates. The stores that were converting at the rate of 0.5% started converting 4.8% of their traffic into paying customers.

average ecommerce conversion rate by industry

According to FireClick index findings in 2010, specialty ecommerce stores have a conversion rate of 7.6% while the catalog stores’ rate ranges around 6.7%. These data is contradicted by a report of MarketingSherpa in 2014. It suggests that the conversion rate of niche sites, selling a specific category of products have a conversion rate of 16.3%. This is slightly lower than the rates of catalog stores having a ecommerce conversion rate of 17.2%.

average ecommerce conversion rate by industry

What is the average ecommerce Conversion Rates by Devices and Platform

A study in 2016 conducted by smart insights in US and UK has shown that desktops and laptops have a comparatively higher conversion rate than smartphones and tablets. As for the conversion rates of different mobile devices, tablets have outperformed smartphones. This data implies that consumers mainly use smartphones for site browsing and product research.

Whereas, for something as important as purchasing a product online, they tend to rely on desktops and tablets. Though ecommerce conversion rate of tablets is considerably lower than that of desktops, the former is catching up slowly and steadily.

The 4th Quarter data issues in late 2016 also show the lower conversion rates of smartphones based on various platforms such as iOS, Android, and Windows. As you can clearly see, iOS has defeated Android in terms of conversion rates by a respectable margin.

average conversion rate for ecommerce by platform

Average Conversion Rates for Different Types of Websites

Lead Generation Websites– Invesp Internal Metrics conducted a research 35 different lead generation websites and found out that the highest conversion rate is approximately 28% while the average rate is 18%.

Webinar Registration Pages– Conversion rates for this type of pages are highly influenced by the type of webinar software you are using and the quality of traffic you get. GotoWebinar, the most popular software to date can convert 22% visitors on a standard web page and up to 45% visitors on a custom-built web page.

Affiliate Websites: According to a survey based on observing 17 different affiliate sites, the average conversion rate is approximately 26%

What about the Conversion Rates of B2B Sites?

Only if I had a dollar for every time I get that question asked! But since this blog post mainly focuses on the conversion rate for e-commerce sites only, I will keep this section concise. In a MarketingSherpa study, PPC advertisers get an average ecommerce conversion  rate of 7%.

The same report also points out that SaaS or Software industry receives the highest conversion rate among all the other sectors in this category.

Now, as I already highlighted at the beginning, the term conversion is highly contextual. It solely depends on what kind of action of your visitors needs to take in order to be counted as a “conversion”. The conversion rate of B2B is also immensely impacted by the ad channel.
lead generation conversion rate by industry
According to a research conducted by WordStream on thousands of Google AdWords accounts, the average conversion rate of B2B sites is not more than 2.23% while the highest rate crossed the mark of 11.7%. This is a huge gap. But still, that is quite far behind compared to the conversion rates of the SaaS industry. One of the key reasons behind this is the difference between the quality of traffic of both sectors get.

What is a good ecommerce conversion rate

good ecommerce conversion rate


Possible Reasons Why Your E-commerce Conversion Rate Is too Low

Now that you have a somewhat idea about what a conversion rate for a specific industry or product type should be, you need to take some measures if your conversion rates are below the average mark. Below, I have listed down some of the common reasons behind low conversion rates-

1. Poor First Impression

The popular adage “first impression is the last impression” is popular for a reason. People won’t respond to your call to action if the information you are providing doesn’t interest them. There might be a flaw in the design or issues with user-interface due to which, even high traffic isn’t resulting in decent conversion rates.

2. Price Hike- Everybody loves a discount.

This is one of the chief reasons why more and more people are opting for online shopping these days. Many successful e-commerce websites sell popular products at nearly half a price of their original market price. People are also getting smarter with time. They would compare the price of a product on one site to 10 other websites before finalizing their purchase. So, you have to keep the prices competitive to attract more buyers.

3. You Don’t Know Your Customers:

It is vital to properly monitor the behavior of your visitors on your site. You can also use social analytics to know the demand of your target customers. Through the process of segmentation, you can start selling products right according to the demand of certain buyer groups. Try to sell your products blindly to everyone and you end up with an increased hard bounce rate along with a poor conversion rate.

4. You Are Not Testing Your Website- Or maybe you are but just not enough.

From split-testing your campaigns frequently to testing product offers, landing pages and CTAs- you should leave no stone unturned. This will not only help you figure out which aspects have room for improvement but will also help you optimize your site more efficiently.

5. Seasonal Drop in Conversion:

Seasonality can be a make or break factor, depending on how much you are aware of the impact of it on your sales. There are various instances where e-commerce retail owners have seen a huge drop in conversions during summer and fall. However, it has peaked during the holiday seasons with the right kind of promotion.

6. Checkout Process Is Complicated:

A research by Baymard has clearly suggested that 27% of your potential paid customers leave the product in the cart due to complicated checkout procedure. Increased cart abandonment is also a prominent trigger of low conversion rates. But more on that later.
The check out page should have the proper shipping information, image of the product they are buying and a progress bar too, to constantly keep them updated on the steps they are taking during the process.

7. Unclear CTA

If the call-to-action buttons on your e-commerce website don’t properly state what action exactly needs to be taken, it won’t be good for your conversion rates.

8. The Copy Isn’t up to the Mark: Content is the king they say.

The copies have to generate a sense of surprise, excitement, reliability, and persuasion in the minds of the readers. With copies full of fluff sentences, wrong information and myriads of grammatical errors, your hopes of high conversion rates are much likely to doom to ashes.

9. Improper Product Demonstration and description

Another reason for low conversion rate could be the lack of proper demonstration on the product pages. People won’t show interested in your products if they don’t get enough information about the features and performance of them.

10. Lack of Mobile-optimization

As we have already discussed before, these days, people are relying increasingly on smartphones and laptops for their online purchases. As reported by GoMoxie, there was a jump of 65% in the sales made on mobile devices between 2015-2016. That sure does say a lot.

KPIs and KPMs for E-commerce

Key Performance Indicators (KPIs) for your ecommerce store

Data is everything when it comes to chalking out online marketing strategies. Keeping tabs on the Key Performance Indicators or KPIs will help you track the gradual progress of your conversion and sales, price trends, cart abandonment rates and more.
Some of the KPIs for E-commerce Websites

For Sales-

• Conversion rate.
• Hourly, monthly, bi-annual and annual sales.
• Cost of the sold goods.
• Order size
• Cart abandonment rate.

For Customer Service-

• Recurrent customers
• Overall customer satisfaction.
• Customer care chat, phone call, and email count.
• Net Promoter Score of the customer service.
• Average resolution time.
• Active and resolved issues.
• Customer Feedback

For Product Marketing

• Source of traffic.
• Organic Traffic.
• Mobile traffic
• Landing page and social media traffic.
• Blog traffic
• Number of newsletters subscribers.
• Volume of PPC traffic
• Quality and type of product reviews and ratings.
• Click-through rates.

For Customer Life Value-

• Purchase frequency.
• Value of the order.
• Time of the order.

Key Performance Metrics (KPMs)

It is very normal to confuse between these two terms- KPIs and KPMs. While Key Performance Indicators let you track how efficiently you are achieving your goals, a metric is a quantifiable measure.

In simpler words, ecommerce metrics are used to keep the progress of a particular process under check. Tracking metrics help you figure out which aspects of your virtual marketing need improvement. Below, I have listed down different ecommerce metrics essential for the different stage of the marketing funnel.

A. Brand Awareness:

Brand discovery or brand awareness is the uppermost stage of the marketing funnel. People enter this stage through product research and brand promotion. The personal information of the visitors (e.g email address) procured in this stage results in lead generation. The key metrics of this stage of the funnel are:

i. Frequency of the product/brand name search

ii. CPM or Cost Per Impression

a. The cost per 1000 Impression is one of the most critical metrics of analyzing the success of your online venture. Impression, in this context, means the number of times your advertisements are viewed.

Note that key impression metrics vary from platform to platform. For example, while CPM and frequency of impressions are important reach metrics for Facebook and Instagram ads, for popular video hosting platforms like Youtube, the reach metric is “views”.

b. Key performance metrics for Google AdWords are Display Impression Share and Search Impression Share.

B. Consideration Stage:

Further into the tunnel, after the awareness and interest stages, your aim should be to track metrics related to free trials, social media traffic, email marketing campaigns and most importantly, inbound marketing to your online retail store. The key metrics for this stage are:

i. Email Engagement Metrics:

• Email conversion rate.
• Email click-through rate.
• Email list growth rate.
• Open rate.
• Bounce rate.
• Unsubscriber rate.

ii. Onsite Traffic Metrics:

• Users.
• Sessions and page sessions.
• Number of new users.
• The average duration of each session.
• Bounce rate.

iii. Social media metrics: On the basis of per post or ad published on platforms like Facebook, LinkedIn and Google+

• Number of Likes.
• Number of Comments.
• Number of Shares.
• Number of Clicks.
N.B: For Facebook, you will have to divide all these metrics by the post’s “reach”. And in the case of LinkedIn, you have to divide the same metrics (additionally, the number of Followers for sponsored ads) by the number of Impressions.

C. Revenue Generation Stage:

At this stage of the funnel, your goal is to convert your highest engaging visitors into paying customers. Here are the key metrics you should follow to bolster your conversion rates.

i. For Micro Conversion- Growth of email list and sample to order ratio.

ii. The Ratio of Micro to Marco Conversion,

iii. AOV or Average Order Value.

iv. Number of Transactions.

v. Micro Conversions.

vi. Sales Conversion.

vii. Cart Abandonment Rate.

viii. For CAC or Customer Acquisition Cost- Assisted and Direct Sales Conversion.

D. Retention Stage

The popular metrics for driving up customer retention rates are-

i. Purchase Frequency.
ii. Repeat Purchase Rate.
iii. The gap between the orders.

E. Advocacy Stage:

This is the last stage of a customer’s journey in the funnel. Personal recommendation through reviews can skyrocket your sales. And why not? After all, 88% people rely on user reviews before purchasing a product. The key metrics for this stage are:
i. NPS or Net Promoter Score.
ii. Product Reviews (of both buyers and sellers).

What Is Shopping Cart Abandonment and how to reduce it

Shopping cart abandonment is another crucial metric that implies the number of customers who added products to the cart but did not checkout. Adding a product in the cart clearly indicates the interest of the buyer in your product and you should cash on it. The lower the cart abandonment rate is, the higher your conversion rates and revenues are.
What Triggers Shopping Cart Abandonment?
Because finding out what’s causing a problem is the first step of solving it. Baymard from the UK has reported lost 67.45% of their revenues due to increased cart abandonment.

If you are facing a similar trouble, let’s find out and analyze the probable reasons behind it-

Website Crash

This usually happens when your web host cannot handle the traffic load your website is getting. This dramatically reduces the page loading speed, leads to website time-out and even site crash. Imagine a bunch of customers who are hungry for your products but cannot complete the transaction due to poor loading speed.

Increased Price

A sudden, massive spike in the price is a major turn off for customers. They have the privilege to compare your prices with that of your competitors’ sites. Whoever provides the best offer will seal the deal. It is very usual for a customer to add a product to the cart seeing its MRP on your site and then get shocked seeing the total cost that includes tax and high shipping cost.

The Potential Buyer Just Left Your Site for No Reason

This is not actually your fault. If a visitor unexpectedly exits from your site, you should send them a cart abandonment reminder email containing the image and shopping link of the product.

Price Shown in Foreign Currency

If you are accepting international orders, you must display the cost of the item in the local currency. Showing the price in foreign currency means the buyer will have to find out the exchange and calculate the cost of the item accordingly. Seriously, nobody has that kind of time and patience.

Other Possible Reasons:

• Limited payment options.
• Limited delivery options.
• Poor checkout design.
• Too many security checks.
• Website navigation is complicated.
• The customer was virtually window shopping.
• The payment was declined.

Pro Tips to Reduce Shopping Cart Abandonment

Recovering the sales by reducing the cart abandonment is not a big deal, provided you have the proper guidance. Below, I will share with you some of the most widely used methods to reduce abandonment rate:

• Entice with Free Shipping:

Who doesn’t love freebies? And if someone is offering free shipping, the offer is quite hard to refuse. According to a survey by Forrester, 44% of the customers leave the products in the cart due to high shipping cost.

Highlight it on your product page that you are offering “free shipping” and behold the drastic rise in the sales. Even if you can’t provide free shipping, add a built-in shipping cost calculator on the product page so that the customers don’t get shocked by the total cost at the time of checking out.

• Add live chat support:

During selecting a product online, a buyer may have a lot of questions in mind, about the warranty, replacement policy, maintenance, performance and so on. You should add a live chat integration right at the bottom of the Checkout. That way, the buyer will be able to satiate their query immediately which will strengthen their trust in your product.

• Cash in on the Fear of Missing out:

People hate the fear of missing out. If you lure them with discount offers which are only valid for a limited period, it will induce a sense of urgency in them. You can provide a unique discount code to first time buyers in the form of a pop-up. The buyer will have to sign up for it with their email address. This way, you get the added benefit of growing your email list as well.

• Build Trust:

Building trust and credibility with an intuitive web design is too broad a concept to cover in a single segment of this article. Including shipping policies and shipping information, ensuring fast and secure checkout, smart branding by highlighting renowned brands are some of the pointers given by pro marketers.

conversion rate ecommerce security badge

Showing a security badge in the product page also helps in solidifying the trust of your potential customers.

Some Useful E-commerce Conversion Rate Optimization Techniques and Tactics

Setting up an e-commerce store and generating a lot of traffic is just a fraction of the battle won. The real challenge is to successfully convert visitors into buyers and earn tons of money. Conversion doesn’t happen just like that. A lot of hard work goes behind setting up a million dollar web store. Here are a few useful CRO tactics you can apply to boost the conversion rates:

a. Include Proper Search Filters:

Sometimes what happens is that a customer is unable to find a certain product on your site despite knowing the exact product name. A poor search function can be a huge deal-breaker. Also, the lack of filters such as size, brand, price etc. makes it hard to find the perfect product.

Reducing the choice, contrary to the popular belief, is actually good for the conversion. It lets the buyer jump to the decision quickly. Improve the search function of your website to help the customers get accurate results. And also, keep testing the functionality with popular monitoring tools like Kissmetrics.

b. Make the “Add to Cart” Sign Visible:

No matter how further a visitor has scrolled down on the web page, the “Add to Cart” sign should always be kept in front of their eyes. Luiz Cantenaro tested out this idea on the product description page (PDP) and experienced a 15% increase in mobile conversions.

c. Use Images Wisely:

Stay one step ahead of your competitors by using images to draw attention to the CTA. Take the example of the image below.

The Ralph Lauren model is directly looking at the offer. Several tests have proven that when the model in the picture looks directly at the CTA or product description, the focus of the buyers automatically shifts to the text.

d. Provide Live Chat Support:

Including a live chat support can prove to be an immensely successful method of bolstering your conversions. But you have to make sure that the support is actually available 24×7. If your tech support team can’t be at the beck and call of customers all the time, it will leave a bad impression.

e. Utilize above-the-fold area:

above the field ecommerce conversion rate

A Nielsen Test has stated that 80% of the site visitors pay attention to the information contained in the area above the fold. Fold, in this context, is the area within view before you scroll down the web page. Try to promote your offer as neatly as possible utilizing that little space for better conversions.

f. Understand the Visual Hierarchy:

According to a popular test, texts that require maximum focus (e.g. the CTA, the product name) should be written in the largest font. Whereas, less important information like product descriptions and tags should have a comparatively smaller font-size. If we go by the Gestalt Psychological Theory, humans have a tendency to grasp information based on its size on the paper or document.

g. Keep the Design Uncluttered:

It takes a customer about 2.5 seconds on an average to decide whether they wish to buy or skip a product. You should remove the unnecessary design elements to keep the entire frame neat and user-friendly.

Since your primary goal is to convince the visitor to click on the CTA button, you should give them a clear idea of what you’re trying to sell. Too many images and other design elements will confuse the buyer and they will skip the product.

h. Intuitive Checkout Design:

ecommerce check out

Having a user-friendly, fast and easy checkout process integrated on your site will instill confidence in your buyers while trusting you with their money. The checkout form should be detailed and each term should be easily understood by commoners.

Digital wallets like Amazon Pay, Apple Pay are extremely popular these days. Paying through wallets is much easier and faster. Therefore, make sure you have wallet payment option present on the checkout page.

The Bottom Line

Having all said and done, you should never be content with the average conversion rate. The only way to generate massive revenues from your online venture is to always thrive for improvement. And to know which aspects require improvement, you have to keep testing everything. There are tons of online analytics tools and techniques to help you keep track of all the required aspects. That’s for today. Toodles





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