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What is a good conversion rate?

Published in e-commerce by max.favilli, 05/12/2014 0

According to wikipedia, conversion rate is defined as number of goals achieved divided by visits, or in other (e-commerce) words the number of sales, divided by visits.

conversion-rate-definition

In fact, you should look at you website as a black box, with an input and an output; traffic is the input, sales is the output, and the internal mechanic of your black box is performing good or bad depending on few metrics, of which (probably) the most important and the one you care the most is the conversion rate.

Conversion rate optimization is the key metric to measure your e-commerce sales performance. 

What is the average conversion rate?

That is one of the most common question. Everyone want to know, as first thing, if their e-commerce is above or below the market standard for conversion rate.

The closest thing to an authoritative analysis is this two years old research by MarketingSherpa which place the needle for e-commerce conversion rate to 3%.

In a (three years old) study by CapGemini for the UK online retailer association imrg.org , conversion rate is droppig at a drammatically -55% over the course of 5 years.

My personal experience and feedback I am getting from others in the industry confirm Average Conversion Rate is declining through time. There are multiple reasons why this is happening, to make few examples:

  • consumers engaging brands with multiple devices match with e-commerce website not optimized for mobile browsing,
  • consumers becoming more skilled at shopping online, using price engines, and visiting more websites to compare prices and conditions before to actually buy,
  • the skyrocketing number of online retailers mean a lot of companies are jumping on the boat, but not all of them are optimizing their website for conversions,
  • 15% increase in online sales year-over-year, the widening of the audience just naturally decrease conversion rate from the beginning of time,

So, the Average Conversion Rate is not an useful metric, and you should not compare against it.

You should compare against your own previous conversion rate from yesterday, from last month, from last year. And you should compare with your market leader, with your competitors. Not with the average.

The myth of the 3% conversion rate

If you have done some googling on this topic you may have found many talking about the 3% conversion rate.

Yes I have seen e-commerce websites with 3% conversion rate. They are not the norm, but they do exists. My crystal ball tell me as of today probably the real (useless) average conversion rate across the globe and across e-commerce websites is below 3%, but it doesn’t matter.

In certain business sectors you may experience 10% conversion rate easily, if you skim your traffic to the smallest and best performing you may have an exceptional conversion rate, but it doesn’t matter. If you enjoy cheap not well targeted traffic you may still reach your sales target, but with an horrible let’s say 0.4% conversion rate, does it matter? If your average order is 10 EUR is much easier to convert than someone else selling luxury goods with a 1000 EUR average order.

Conversion rate is very contextual.

Conversion rate is a skittish horse, there are so many variables that affect conversion, such as:

  • Industry
  • Channel (Source of traffic)
  • Landing page
  • Seasonality
  • New vs. returning visitors
  • Mobile/Desktop
  • Current marketing campaigns
  • Competitors’ marketing campaigns
  • Product assortment
  • Prices
  • And more…

You must optimize your conversion rate, and you must compare your conversion rate with others. But not to the average conversion rate.

 

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