As a store owner, your ecommerce conversion rate might be the ultimate indicator of your business’s viability. It is a fairly simple concept to understand, but not easy to improve. However, a great ecommerce conversion rate is crucial to your store’s success.
Table of Contents
- What is a conversion?
- Average ecommerce website conversion rate
- What is ecommerce conversion rate?
- What is a conversion rate?
- Common ecommerce conversion rate misconceptions
- How are ecommerce conversion rates measured?
- Ecommerce conversion rate benchmarks
- How to calculate conversion rates
- How to improve your ecommerce site conversion rate
- Investing in ecommerce conversion rate optimization
What is a conversion?
A conversion occurs when someone takes an action on your website that you wanted them to take. Every website and its digital marketing team decides what they define as a conversion.
You might consider conversions to be when potential customers engage with pop ups. You might also refer to someone ordering a product as a conversion. It’s up to you.
Typically, businesses label actions that measurably impact their online business as ecommerce conversions. This usually focuses on either orders or activities in which someone shares their contact information, such as their email, which allows you to continue to market to them.
Average ecommerce website conversion rate benchmarks
Average ecommerce conversion rates are around 2.5% to 3% according to industry leaders, but that doesn’t mean this is your business’s sweet spot. Having a baseline of 2.5% is a good place to start, but keep working to optimize this with conversion rate tactics.
The Shopify analytics app LittleData did a comprehensive survey of Shopify stores’ conversion rates and found the average conversion rate for Shopify stores is 1.4%. If you have below 0.5%, you likely have room to improve, and if you are above 3.3%, you have a very good ecommerce conversion rate—in the top 20% of all Shopify stores.
What is ecommerce conversion rate?
When someone refers to an ecommerce conversion rate, they are referring to the conversion rate of orders on a store. This is represented via a more specific formula:
Ecommerce conversion rate = orders / visits to your website
So if you have 1,000 visits to your site, and in 50 of those visits there’s an order, your ecommerce conversion rate is (50 / 1,000) = .05 or 5%.
Depending on what data source you’re looking at, you may see this metric called something different. Google Analytics refers to it as “ecommerce conversion rate,” so this has become the most common name.
But in Shopify’s Analytics, we refer to it as “online store conversion rate,” and other analytics tools may refer to it as the “transaction rate” or “order rate.” They all mean the same thing.
Example of ecommerce Conversion Rate in Google Analytics
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What is a conversion rate?
A conversion rate is the percentage of the total number of visits to a website that result in a conversion action. It’s expressed as a percentage and calculated via a simple formula:
Conversion rate = number of specific actions taken in a period of time / total number of visits to your site in the same period of time
So if your conversion action is subscriptions to your newsletter, and in a period you have 1,000 visits to your site and 100 newsletter subscriptions, your conversion rate is 100 / 1,000 = 0.10, or 10%.
Common ecommerce conversion rate misconceptions
There are a few common misunderstandings people have when defining ecommerce conversion rate:
Sessions (visits), not users
When someone visits your website, most analytics tools refer to this as a “session” and identify the person (or their device) as a “user.” If you visit a website on Sunday, then come back again on Monday, you would be one user who had two sessions. Ecommerce conversion rate is calculated using the number of orders and sessions in a period, not the number of users. If you report ecommerce conversion rate using users, the rate will be inflated. Some marketers have begun advocating the use of users instead of sessions, especially for high-priced stores where most users need multiple sessions before converting, but the industry norm continues to be sessions.
Using “overall conversion rate”
A website’s overall conversion rate is the percentage of visits (sessions) that take any conversion action. This includes orders but can also include actions like newsletter subscriptions, presale signups, or add to carts. A website’s overall conversion rate will typically be higher than its ecommerce conversion rate, which refers only to orders.
How are ecommerce conversion rates measured?
A website’s ecommerce conversion rate can be measured through a website analytics tool. Google Analytics is the most common and focuses on website-only data. However, there are many possible ways to track the metric. Here are other common ones:
- Segment: This aggregates data from multiple sources, such as Facebook and Instagram Ads.
- Heap: Similar to Segment, Heap aggregates data from multiple sources, and allows for more customization in event tracking than Google Analytics.
- Triple Whale: This analytics tool tracks all of a customer’s touch points with a brand, including social media and search activity.
Most analytics tools work the same way—they provide a snippet of code for you to add to your site, which (with input from a marketer or developer) interprets when a session starts and finishes and when an order occurs.
The right analytics tool for you depends on a combination of your budget, acquisition channels, and ad spend level (high ad spends require more complex analytics and attribution tools).
Over what period do I measure my ecommerce conversion rate?
Most marketers will choose regular intervals to measure their ecommerce conversion rate. Setting a regular review cadence helps marketers avoid overreacting to fluctuations and understand trends. Here are common review cadences of ecommerce conversion rates:
Review only to see if there are any major dips or spikes that might indicate something on the site is broken. (A spike could mean, for example, a product is accidentally listed as “free.”)
Review for opportunities to improve conversion rate. This includes reviewing whether certain product categories or landing pages have higher conversion rates, whether there are new features (such as review apps) that could improve conversion rates, or areas to A/B test.
Review for opportunities to make strategic, larger differences in the conversion rate. This can include strategies for better communicating the store’s value proposition, rebranding, redesigning the user experience, or involving time-sensitive sales and product releases.
The exception to a regular interval of review is after a large marketing campaign. This could be a holiday sale, new product release, or large influencer collaboration. Marketers can learn more about the impact of the campaign by comparing it to previous campaigns or to non-campaign periods.
Ecommerce conversion rate benchmarks
The idea of a universal benchmark for ecommerce conversion rates is a fallacy. A conversion rate isn’t just driven by the quality of the store’s experience, and a higher rate doesn’t always mean better. Here are a few things that will affect how you benchmark your ecommerce conversion rates:
Sites that drive a high volume of traffic from ads or blog posts will typically have a lower conversion rate than sites that rely on traffic from existing customers or social media followers. This doesn’t mean the ad or blog-driven sites are worse—they are just introducing more people to their brand for the first time.
Sites with more expensive products will typically have lower conversion rates than those with fairly inexpensive ones. Making a bigger purchase typically requires more consideration on the part of the consumer than a cheaper, impulse purchase might, since it requires a larger share of their income. The common belief in marketing psychology is that average conversion rates begin to decrease first after $50, then again after $150 and $500.
Ecommerce stores that sell subscription products will typically have lower conversion rates than those selling one-time purchases. This is because consumers need more time to think about the commitment, but also because the subscription stores typically have fewer visits from returning customers.
However, it can still be helpful to benchmark your store against an overall average to understand your performance.
How to calculate conversion rates
Ecommerce businesses mostly refer to conversions as a completed sale. You could also consider a newsletter signup a conversion, but for the sake of this walkthrough, a conversion will be an ecommerce sale.
To calculate your conversion rate:
1. Track your total number of visitors
Look at the total number of visitors on your website over a period of time. You can use tools like Google Analytics to track your site traffic. Include all visitors, regardless of whether they made a purchase or not.
2. Monitor your total number of conversions
Track the total number of completed sales over a desired time frame. You can find this number in your Sales report in the Shopify admin.
3. Calculate conversion rate
Now, calculate the conversion rate by using the following formula:
Conversion Rate = (Total Conversions / Total Visitors) x 100
For example, if you had 1,000 visitors on your website and 20 of them made a purchase, your conversion rate would be (20 / 1,000) x 100 = 2%.
Remember to be consistent with the time frame you’re analyzing. If you’re calculating the conversion rate for a particular month, ensure both the number of visitors and conversions are for that same month.
How to improve your ecommerce site conversion rate
Conversion rate optimization (CRO) is an incredibly in-depth subject deserving of its own guide.
However, if you are just getting started with CRO for your site, here are some tips for improving your conversion rate:
Develop a value proposition
Your value proposition, or unique selling proposition (USP), is the single most important factor in your conversion rate. If you have a fantastic, unique product and messaging that fulfills a need for your customers, your site visitors will tolerate a lot of other imperfections in the experience in order to get your product. Review your site and ask yourself, “Is it clear what my product is and why they need it?”
Friction refers to any part of the user experience that is overly effortful or confusing. This includes everything from a poor checkout process to unclear shipping fees. Any individual piece of unneeded friction can drastically affect a site’s conversion rate.
Reduce buyer’s anxiety
This is particularly important for newer sites and brands. Customers can’t see or touch the product you’re selling ahead of time, so they need extra assurances about quality before making a purchase. Stores can address customer anxiety with clear return/guarantee policies, social proof such as reviews, or immersive AR shopping experiences.
Reduce cart abandonment
Lower shopping cart abandonment by simplifying the checkout process, being transparent about costs, and offering guest checkout options. Use strategies like automated emails or remarketing ads to remind customers to complete their purchase.
Optimize for mobile devices
Make sure your site is mobile-friendly, with easy navigation, fast load times, and clear call-to-action buttons (CTAs). Simplify checkout with mobile payment options to provide a superior customer experience and boost conversions.
Track the right KPIs
Identify and monitor key performance indicators that align with your objectives. Think about metrics like conversion rate, average order value, cart abandonment rate, and customer lifetime value. Correct tracking helps you understand your business’s performance and guides strategic decisions.
- Use customer testimonials. Leverage the power of social proof by showcasing customer reviews. Authentic reviews and ratings not only build trust with potential buyers but also highlight the value of your product to website visitors.
- Invest in heatmap tools. Use heatmap tools to visualize customer interactions on your website. These tools can reveal hot and cold areas, showing where visitors click, scroll, or linger the most, helping you optimize your site design for improved user experience and more conversions.
Investing in ecommerce conversion rate optimization
Tracking your conversion rates is simple, but not easy.
Measuring your ecommerce conversion rate really is as straightforward as counting the number of orders in a period relative to the sessions. But avoiding measurement pitfalls, establishing a benchmark and review cadence, and improving the rate over time, can feel anything but easy for ecommerce websites. Merchants that can do all this, however, have a powerful new set of tools to take their stores to new heights.