A first-time ecommerce retailer makes their first ever sale every 28 seconds. It happens approximately 3,000 times every single day – and that’s accounting for Shopify sales alone. And although the number of new market entrants does mean increased competition, it also reflects a more positive development: there have never been more opportunities to convert customers.
As many of you will already know, ecommerce conversion rates are often used as a KPI to measure the success of ecommerce sites. Naturally, as the online competition grows, all businesses want to know the benchmarks of how their conversion rates compare to their opponents – in order to be able to optimize these important metrics for Q4.
In this blog we will take a look at the different industries and their respected ecommerce conversion rates, economical issues that could impact online businesses conversion rates worldwide, and opportunities for conversion rate optimization (CRO) in Q4.
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How to calculate ecommerce conversion rate
Before calculating your ecommerce conversion rate consider the denominator. Are you dividing the number of sales (conversions) by the number of unique visitors or website visitor sessions? Generally these figures differ and will give you a different conversion rate percentage.
Once you have determined the denominator you can take the total number of conversions (e.g. amount of sales) and divide it by the number of visitors or unique visitors that you have had that month. Then you multiply that figure by hundred to get your percentage total.
Standard formula: Total number of conversions / number of visits X 100 = conversion rate (%)
For instance, let’s say last month you had 100 sales and 10,000 visits. (100 / 10,000 = 0.01) X 100 = 1% ecommerce conversion rate.
Studies show that a good conversion rate sits at around 2%. Depending on the industry vertical this percentage can sit higher or lower. The average conversion rate marketers tend to aim for – generally speaking – ranges between 1% to 4%. According to Shopify’s research the average conversion rate across all ecommerce business industries sits at 2.86%.
Overview of ecommerce conversion rate by industry globally
In the UK, online shopping is growing almost twice as fast as in the US; spending surged to £28 billion in Q1 2021. Ecommerce conversion rates are significantly up from a UK average conversion rate, across all industries, of 1.71% in the first half of 2019.
The winners are all in industries given a boost by changing consumer behaviour during the pandemic – arts and crafts, health and wellbeing, and pet care. Clearly, the end of lockdown hasn’t stifled our interest in getting creative at home and taking better care of both ourselves and our furry friends.
Moreover, conversion rates of ecommerce stores were reported the highest in the food and beverage sector, at 5.5% according to Statistica. Whereas, the average in this sector is around the 2.37% benchmark. Ecommerce websites selling beauty products followed in the conversions’ ranking, with businesses selling hair products seeing an ecommerce conversion rate as high as 3.5%.
However, whilst some industries triumphed during the pandemic others were hit hard. The Baby and Child vertical is now converting fewer than 1% of customers on average, while cars and motorcycling, and sports and recreation are also at the low end of the scale.
Spotlight on: Food & Beverages
Food and drink has been crowned ‘the winners of the pandemic’. In the UK alone, 4 in 10 shoppers now buy their groceries online and say they’ll continue to do so after the pandemic (2021), spending £357 million a week. And bricks and mortar is also alive and well. Consumers are finding a harmonious balance of grocery shopping both on and off line.
Food and drink retailers need to offer an omnichannel experience, blending both online and offline interactions, to convert more customers. Large supermarkets are meeting this need by bringing more of their offering online, while formerly online only retailers are experimenting with more and more offline interactions.
Aldi, for example, tried online shopping in mid 2020 with a click and collect product and soon rolled it out across 200 stores in November, as well as providing direct delivery through partner Deliveroo. It’s UK market share doubled to 14% over the same period.
Amazon, meanwhile, acquired Whole Foods in 2017, continues to open more of its cashier-less HelloFresh stores around the world, and is reportedly planning to open a chain of traditional department stores.
So, what does the omnichannel experience look like for smaller retailers? Those with a physical store presence can offer pick-up in store and kerbside delivery, creating more opportunities to engage with customers in-store. Those without physical stores may choose to follow suit from Chinese ecommerce retailers, which allow customers to pick up their purchase directly from the warehouse.
Either way, the already razor thin margins on food and drink retail – typically just 2-4% website conversion rate – are likely to get thinner. Retailers will need to adopt new strategies to improve their customer experience and retain customers whose loyalty might be wavering.
Spotlight on: Health & Wellness
When we start a new health & wellness routine, we tend to stick with it. That’s why personal care brands have so much to gain from customer acquisition; many will become repeat customers for life. The industry saw major growth in 2020, with DTC brands like Harry’s (a razor manufacturer) doing particularly well. Conversion rates have almost doubled since 2019, up from 2.02% to 3.62% in 2021.
The pandemic did, of course, give health and wellness retailers a real boost; it made consumers think more carefully about their health and well-being, a shift that looks set to stay. 77% of consumers say they’ll now make more attempts to stay healthy in the future with personal care revenue growth set to increase until 2024 – albeit at a slower rate than the high of 2020. There are, though, potential challenges on the horizon too: smaller retailers are seeing acute price pressures as they struggle to keep up with larger competitors on price and logistics.
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Spotlight on: Fashion
Accounting for more than a third of the UK’s entire ecommerce revenues, fashion retailers had a tough year in 2020. Sales growth was, as is to be expected when we can’t go outside, almost flat. Yet Manchester based In the Style defied all expectations during lockdown; turnover increased by 132% in the year to March 2021.
The retailer has seen website visits rising by almost a third, conversions are up 62% and average order values are now 10% higher than the previous year. New customer acquisition, meanwhile grew by 59%, with 55% of its total sales accounted for by in-app purchases.
It’s a remarkable success for a retailer making £2 million losses in the previous financial year, reflected in its £105 million valuation in an IPO earlier in 2021. So what’s driven the unstoppable growth?
“Central to our success,” says Chief Executive & Founder Adam Frisby, “is our differentiated influencer collaboration model that creates a strong customer connection, drives highly efficient customer acquisition marketing metrics, and gives us exposure to a broad range of customers.”
That model includes launching nine new collections with influencers including TV personality Stacey Solomon, along with a partnership with Asda to market the collections across more than 100 stores.
Looking to the future, there may be some challenges ahead for fashion; barriers to entry have never been lower, and the competitive landscape is becoming even more crowded. And at the same time, loyalty is falling. And returns are, according to most estimates, between 30% and 50%, adding further pressure to already slim margins.
The overall outlook for ecommerce fashion retailers, though, is bright. The industry’s compound annual growth rate (CAGR) is set to recover by 2022, creating a global market worth $713 billion. There are lots of opportunities to engage more customers on the horizon, primarily the emergence of new technology – like AI-powered, personalised virtual shopping assistants – and new influencer partnership models, like those of In the Style. Sustainability, as for most ecommerce retailers, will become a key differentiator.
Spotlight on: Home & Furniture
Home and furniture saw a big increase in sales 2020, ecommerce conversion rate sits at on average 0.6%. Although this is below the global industry average, higher priced products have a longer consideration process.
Whilst the amount of sales did in fact increase within this sector during the pandemic, the high demand put a huge restraint on the market. Supply chains were unable to trade efficiently, deliveries were delayed, and consumption decreased due to lockdowns globally.
However, 2021 seems to be looking much more positive for the market. Furniture Today has predicted that the furniture sector will continue to grow throughout the year, with an overall anticipated growth of 3.3%.
The big trend now that home and furniture brands need to consider is the element of mirroring an in-store experience online. Ikea and Wayfair, earlier adopters of AR, have stated that it has hugely driven their sales and ecommerce conversion rate.
Global issues that will impact ecommerce conversion rates for all industries
HGV driver shortage will disrupt UK supply chains
Despite retailers including Amazon, Tesco and Marks & Spencer introducing generous pay packages and other perks like sign-on bonuses for HGV drivers, around 100,000 vacancies remain unfilled as of September 2021. That means building inventory could become more challenging for many retailers in the run-up to Christmas, particularly those in the food and drink industry. Deliveries of soft drinks, for example, are currently down by 50%.
Fulfillment space is getting more expensive
Ecommerce retail typically requires three times as much physical space as a bricks and mortar store, to accommodate the wider range of choice consumers expect online. And as the ecommerce boom continues, warehouse space is in shorter supply, particularly in big cities; vacancy rates in Europe have fallen by half since 2011. That means rents are going up – by around 6% this year according to warehouse developer ProLogis.
Competition in the attention economy is heating up
British adults spend three hours and 17 minutes on their phone every day on average. And there’s only so much free time in the day – yet the number of apps, platforms and media competing for our attention continues to rise. As a result, fully engaging consumers with ecommerce experiences will likely get harder; already, we’re starting to shop online at the same time as doing other things. Only retailers with the most compelling online experience will keep our attention for long.
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Conversion rate optimization: Opportunities abound for growth in ecommerce conversion rates in Q4 2021
British consumers are the most confident they’ve been in a decade
Consumers in the UK think the future looks bright. When McKinsey, a consultancy, surveyed consumer sentiment across the five biggest European economies in February, Brits were by far the most confident that the “economy will rebound within 2-3 months and grow just as strong or stronger than before Covid-19”. In fact, the study, conducted in the middle of the UK’s third lockdown, recorded the highest level of consumer confidence at any point in the pandemic.
Since then, that sentiment has only increased. In Q2, the economy grew by 4.8%, leaving UK GDP at 4.4% below Q4 2019 – a faster recovery than expected. And by August 2021, consumers were surer of their financial position than at any point since 2007.
That bodes well for ecommerce retailers. Customers have disposable income and they’re ready to spend it. The post-lockdown pent up demand won’t be stifled any time soon.
New channels create more shopper touch-points
Of the many behavioural shifts since 2020, one of the most important for retailers is how we communicate. 80% of our screen time is now consumed by social media’s messaging apps; use of Facebook’s Messenger and Instagram Messenger grew by 40% over the course of the pandemic.
That gives retailers a new way to meet consumers where they are: “conversational commerce”. A billion people now use messaging apps to interact with a business; Coca Cola, Nestle, Unilever, Sephora, IKEA and Walmart – among many others – have all created chat channels to reach more consumers. 175 million people interact with a business account on WhatsApp alone.
Digital marketing and commerce through chat apps is already popular in Asia and Latin America; hundreds of millions of Chinese consumers make purchases on WeChat, spending $250 billion last year.
Online conquers all generations
It’s not only millennials who have changed their attitudes during the pandemic. Baby boomers (aged 57-75) are spending more time online too; this group now considers their mobile as important as their laptop for the first time.
Online sales of products disproportionately bought by older consumers have risen by at least 50% over the course of the pandemic – more than sales increased on average overall.
Online retailers, particularly those in the health and wellness space, can capitalise on the market opportunity by removing some of the friction that can prevent an older person from buying – like reducing the number of steps in the checkout process, removing the requirement to create an account, and adding other payment options for those who are reluctant to share their card details online.
Sustainability emerges as top differentiator for all ecommerce brands
Consumers now care much more about where their purchases come from and how they get from factory to front door. Eight in 10 consumers say sustainability is important to them in 2021, and six in 10 are prepared to change their shopping habits to reduce their carbon footprint. Those who care most about their environmental impact are prepared to pay a premium for products that do better; they’re most likely to be in the Millennial age bracket.
According to IBM, most customers fit neatly into one of two groups: value-driven customers (41%), who are interested primarily in price, and purpose-driven customers, motivated to buy products and services aligned with their own values. The same study found that 71% of customers think traceability is important – and they’re willing to pay for it.
Packaging, too, is important; a McKinsey study of consumers around the world found that more than half (55%) are somewhat or very concerned about the impact of plastic packaging.
Sustainability is, then, no longer a nice-to-have. Ecommerce retailers able to demonstrate a positive impact on the planet, throughout the supply chain, will convert more of the purpose-driven customers. It’s a segment that’s growing fast.
DTC channels are growing fast
Direct to consumer sales are booming. More than half of consumer brand manufacturers are pivoting to a DTC strategy, giving them more control over their supply chains and higher margins. There are now, according to Shopify, 103 million DTC customers globally, around half of whom are buying items in larger quantities direct from producers to get better value.
Gymshark, the British fitness and apparel brand with customers in 180 countries, has achieved its £1 billion valuation in 2020 by cutting out the middle-man: since the brand doesn’t rely on retailers as an a distribution channel, there are no fees for getting products on shelves – leaving Gymshark with profits of over £18 million in 2020.
The power A/B testing
A/B testing (or split testing) is the process of running two or more marketing campaigns against each other for a certain period of time. It allows you to then compare the performance of each campaign or web pages through analytics.
Monitoring which campaigns and CTAs are working or deciding which will have the most impact isn’t always easy. That’s why marketers opt for using A/B tests.
This marketing strategy is a great way of optimizing your landing pages for SEO, understanding what your customers want and need, and of course, increasing ecommerce conversion rate. The data for these campaigns can be found within your Google Analytics, Google Ads, and any other campaign data capture software you use. Good personalisation software, such as PureClarity, also comes equipped with A/B testing tools.
Looking for a higher conversion rate? Speak to us today!
PureClarity gives ecommerce businesses like yours the technology, service and the customer insight you need to convert more customers. We are experts in optimizing user experiences, to increase ecommerce conversion rate, average order value, and online revenue.
Ready to talk about how we can boost your bottom line and help your online store grow? Get in touch today – book a discovery call here.
Case study: See how Harry Hall increased their ecommerce conversion rate by 10%
Our client Harry Hall, an equestrian supplier, wanted to focus on achieving a higher conversion rate. Since implementing AI product recommenders onto their homepage, product listing page, product page, and basket page, along with other forms of personalisation such as pop-ups, they have seen:
- 10% increase in their overall conversion rate.
- 17.5% increase in revenue driven by the use of PureClarity AI product recommenders alone.
Did someone say increased conversion?
Start a no-commitment 30-day free trial and enjoy all PureClarity features on your website.