August 22, 2012

Retail Conversion Rates

We know how to measure conversion rate:
  • Conversion Rate = Orders / Visits.
This works well, until you're a retail brand.

In retail, the website (and email campaigns) are used as research tools to facilitate retail purchases.

I like to analyze conversion on a monthly basis.  It gives us a better representation of actual customer behavior, and it clearly illustrates the importance of a website or mobile experience.

Here's a sample retail brand, evaluated on a monthly basis, within only the e-commerce channel, for a segment of customers.
  • Customers at the Start of July = 22,394.
  • Re-Visit Rate, Month of July = 60%.
  • Actual Visits per Visitor = 4.00.
  • Conversion Rate = 5%.
  • Purchases per Customer = 0.60 * 4.00 * 0.05 = 0.12.
Now, it's nice to know that the average customer in this segment placed 0.12 purchases in the next month.  It's nice to know that 60% of the audience was "engaged", as the kids like to say.  And it's nice to know that those who were engaged visited the website weekly.  That's all good.

But in this case, for this segment, the customer purchased three times as often in-store as online.  By merging databases, we can see this behavior.  The table now looks something like this:
  • Customers at the Start of July = 22,394.
  • Re-Visit Rate, Month of July = 60%.
  • Actual Visits per Visitor = 4.00.
  • Conversion Rate = 20%.
  • Purchases per Customer = 0.60 * 4.00 * 0.20 = 0.36.
  • Fraction of Orders, Retail = 75%.
  • Fraction of Orders, Direct Channel = 25%.
Web Analysts have an opportunity to link retail and website activities.  Just because one is a "digital analyst" doesn't mean you only measure "digital" activities.  No, you need to measure reality!  And for retail-based businesses, 75%ish of purchases, +/-, happen in-store.  It makes sense to illustrate just how important a website is at generating in-store purchases.

1 comment:

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