- Seller Can Directly Influence Six Major Areas of Conversion Optimization: Traffic Source, Basket Building, Checkout Experience, Payments, Customization, and Performance
- Customizations across the Conversion Funnel Can Have Varying Impacts, Though Shopify and BCG Find That Offering a Loyalty Program Can Increase Lower Funnel Conversion 4-6%
- In North America, Offering Use of Accelerated Payment Methods Can Increase Lower Funnel Conversion Rates by Upward of 50%
BOSTON, June 16, 2023 /PRNewswire/ — The COVID-19 pandemic forced commerce of all kinds to digital platforms, but online shopping activity today remains well above its pre-pandemic levels. Customers now expect a seamless, tailored shopping experience across channels and devices, including a wide range of merchandise, convenient access to details or instructions, customer-friendly return policies, and quick and frictionless payment processes.
For sellers, an extremely important element of performance is the conversion rate, which measures how many customers who begin their digital shopping journey complete their purchase. However, of the more than 100 variables examined by Shopify and Boston Consulting Group (BCG), not one explains more than 1.4% of the variation in lower funnel conversion rates, highlighting the complexity around achieving optimal conversion rates.
The report, titled Leading Online Shoppers to the Finish Line, is based on a comprehensive analysis of more than 220,000 e-commerce sites and more than 1 billion data points to identify the key drivers of the conversion process in which online shoppers become online buyers. The study leveraged rigorous data science methodology to create like-for-like samples that were then used to explore key variables across the e-commerce conversion funnel that are most relevant to industry participants.
“Conversion is at the heart of commerce, and is the center of everything we do at Shopify,” said Harley Finkelstein, President of Shopify. “It was important for us to conduct a rigorous study on how sellers can optimize their conversion rates through key factors like the platform they use and the integrations and customizations they make. The study reveals what we have always built for and known to be true: drivers like an optimized checkout experience, the use of accelerated payment methods, and selection of relevant customizations have a dramatic impact on conversion.”
The factors affecting conversion rates fall into two broad categories: factors that are fundamental to the store or business category itself (and are difficult or impossible for sellers to change or control); and factors that are more readily within the seller’s power to control and optimize.
Key Areas of Conversion Optimization
The report points out six major areas of conversion optimization that a seller can more directly influence:
Traffic Source. Organic channels such as word-of-mouth or social media recommendations have a clear edge over paid channels in overall conversion rate, particularly for smaller sellers.
Basket Building. Carts that contain more than five to ten items tend to yield demonstrably higher conversion. The conversion rate can increase by as much as 63% when a customer who initially puts just one or two units in the cart continues to shop and ends up with more than ten items.
Checkout Experience. Since customers increasingly expect a quick and easy checkout experience, automatically filling known or easily predictable information (such as a shipping address or credit card information) can increase the conversion rate. According to the study’s research, 99% of stores enable autofill when it is available. Another way to move customers through the checkout experience quickly is to streamline the path to checkout itself. To prevent customers from leaving mid-checkout, the seller can move them directly from the product detail page to the checkout flow, thereby increasing the number of checkouts that get started by upward of 18%.
Payments. The analysis found that in North America, the use of accelerated payment methods such as Meta Pay, Amazon Pay, PayPal, Shop Pay, Apple Pay, and Google Pay can increase lower funnel conversion rates dramatically. Offering these six methods, rather than a checkout experience that lacks any accelerated payment method, can increase lower funnel conversion rates by upward of 50%. Similarly, a buy now, pay later option can increase both traffic and sales for stores with higher revenues and average order values. Data suggests that this option boosts traffic for stores whose average order value exceeds $50, while stores with $1 million or more in revenue are likely to see spending increases.
Customization. Websites with front-end customization—such as a simplified user experience, obvious gateways to specific products, and an appealingly uncluttered product page—tend to achieve higher conversion rates than those with back-end customization only. Loyalty incentives are the most effective customizations across stores of all sizes, especially for stores in their startup phase. The analysis found that stores with average order values below $200 can see a lift of 4% to 6% on their conversion rate by implementing a loyalty program. Although customization has less impact on the smallest e-commerce sites, it produces a notable lift in lower funnel conversion for stores with revenues of $10 million or more.
Performance. Improved speed at every step of the checkout experience correlates with higher conversion rates across most industries. Counting from the moment the checkout experience begins, the conversion rate increases significantly if customers can complete the full checkout process in less than 90 seconds. If the process takes longer, the lower funnel conversion rate may decrease by around 47% on average.
Choosing the Right Platform Is Critical to Success
Before planning a conversion strategy, an e-commerce seller must determine how the platform itself will support the shopping experience. Businesses that choose a platform, rather than developing everything in house, can concentrate on the things they know best—the product, brand, and marketing—while relying on the technology provider to keep the engine up to date. Conversion rates may vary by as much as 36% from one off-the-shelf e-commerce platform to another.
Optimizing the Shopping Experience to Achieve Maximum Impact
Improving overall and lower funnel conversion rates can be a cost-neutral way to increase a seller’s profit margins. For a store with about 53 million unique sessions and annual revenue of about $100 million, a lower funnel conversion rate improvement of a single percentage point can be worth about $6 million per year.
“E-commerce has grown in both volume and importance in recent years, becoming an integral part of consumers’ shopping habits,” said Stephen Robnett, BCG partner and managing director and leader of BCG’s e-commerce practice. “All e-commerce businesses can benefit from adapting strategies such as driving loyalty, investing in personalization of the customer experience, and investing in an innovative and well-engineered e-commerce platform. Small changes to the shopping experience can have a huge impact on a seller’s business and turn browsers into buyers online.”
Download the publication here:
https://www.bcg.com/publications/2023/leading-online-shoppers-to-the-finish-line
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SOURCE Boston Consulting Group (BCG)
