Simple, but not easy.
This phrase perfectly describes what running an ecommerce business can be like. For example, you need to set prices for your products that allow you to make money, and need to ensure you can reliably ship your product to your customers. Both are easier said than done.
As a store owner, your ecommerce conversion rate might be the ultimate expression of this phrase. 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.
What is an ecommerce conversion rate?
A conversion is an event when someone takes an action on your website that you wanted them to take. Every website and its marketing team decides what they define as a conversion. You might consider someone clicking a product image to be a conversion, or you might say only someone ordering a product is a conversion. It’s totally up to you. However, typically, people will focus on actions that measurably impact their business as conversions. This usually means either orders or activities in which someone shares their contact information, such as their email, which allows you to continue to market to them.
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 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%.
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) = 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
Example of online store conversion rate in Shopify Analytics
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 remains “Purchases divided by 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, pre-sale 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 any website analytics tool. Google Analytics is the most common and focuses on website-only data. However, there are many possible ways to track it. Here are the other most common ones:
- Segment. This aggregates data from multiple sources, such as Facebook/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 touchpoints with a brand, including social media and search activity.
Most analytics tools work the same—they provide a snippet of code for you to add to your site, and that code (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).
What period do I measure my ecommerce conversion rate in?
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. A common review cadence of ecommerce conversion rates is as follows:
- Weekly monitoring. 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 accidentally listed as ‘free.’)
- Monthly optimization. Review for opportunities to improve conversion rate. This includes reviewing whether certain product categories have higher conversion rates, whether there are new features (such as review apps) that could improve conversion rates, or areas to A/B test.
- Quarterly/yearly strategy. 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 time-sensitive sales/product releases.
- Campaign Retro. 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 higher doesn’t always mean better. Here are a few things that will affect how you benchmark your ecommerce conversion rates:
- Traffic sources. 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.
- Price point. 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 conversion rates begin to decrease first after $50, then again after $150 and $500.
- Purchase type. 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. The Shopify analytics app LittleData has done the most comprehensive survey of Shopify stores’ conversion rates, and they found the average ecommerce 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.
How to improve your ecommerce 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, one of the best places to start is by reviewing your site using a simplified version of Widerfunnel’s LIFT model. Here are 3 lens to review your site through:
- 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 that fulfills a need for your customers, your site visitors will tolerate a lot of other imperfections in the experience in order to get it. Review your site and ask yourself, “is it clear what my product is and why they need it?”
- Friction. Friction refers to any part of the user experience that is overly effortful or confusing. This includes everything from buttons that can’t be clicked to unclear shipping fees. Any individual piece of unneeded friction can drastically affect a site’s conversion rate.
- 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.
Simple, but not easy. Measuring your eCommerce conversion rate really is as simple 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. Merchants that can do all this, however, have a powerful new set of tools to take their store to new heights.