E-commerce Conversion Rates !

Frankly guys, I do hear lots of lunacies around here about e-tailer conversion rates ! Most of the time people don't really understand what commerce is all about, the relevance, the interpretation and the limits of this specific metrics.

Let's put it bluntly, there's no single general so-called e-commerce "benchmark" as for conversion rates, it depends very much on what you sell, how you sell it and your marketing & promotional activity.

Nothing rocket science here and, again, e-commerce hasn't invented anything : in the brick&mortar world, conversion rates are for example much higher in food stores then in book store, apparel or consumer electronics ones. You may enter the latter for "tourism" purposes, with no intention to buy, or you may not find what you specifically want, but that's hardly the case for the former !

We just have the same pattern in the e-commerce world : while Peapod or FreshDirect (food segment) reach a nearly 30% conversion, Amazon or the Moma Store (see last saturday note) both have a c3% rate.

What really matters as for conversion rates is :

- Comparison within same industry. Let's take the online shoe segment : the leader, Zappos, has a nice 5%, the n°2 Ebags has 4%, the n°3 Shoebuy reaches 2%. Guess why !

- Relative variations depending on home page changes, promotional activity, new product introduction, etc. That's the interesting part and what has to be monitored very closely ! It's worthless presenting one's conversion rate evolution without understanding what made it move in one direction or the other !

What's more, having the highest conversion rate possible can not be an objective in itself ! What is better, to have 100 customers buying $100 each or 50 customers with an $200 average ticket ? To have 1 million visitors converting at 0,5% or 500,000 converting at 1% ? I can't tell without further elements, but I want to point out that conversion rate is only one of the 3 metrics to consider in any retail activity thruput analysis : total trafic x conversion rate x average ticket = sales.

If one metrics is increased at the expense of others, it may not be that interesting ! What really matters is total sales and what is invested to grow them ! We may even fine tune saying that what matters is not sales but gross margin : if one increases conversion rate at the expense of absolute gross margin (thanks/because of very low prices which lowers margins), what's the point ?

Comments

[Jeremie Berrebi (Zlio)]

Very interesting Michel ! What about Photoways ? What is your conversation rate ?

[Daniel]

That is very clear and interesting.
That is why our team objective is indexed on the ROI rate (Turnover / Mkt investments) and not the converstion rate

[David]

Interesting article. Where did you find Zappos figures?

[Hubert]

I can only agree ! Convertion rate is only a fantastic indicator of your onsite/crm marketing performance, not your ROI.

[Michel de Guilhermier]

David,

Well, I have my sources...

[J.]

an estimation like Francis about Nike (market share);)?