E-Commerce Conversion Rate Explained
E-commerce has seen explosive growth in recent years. Morgan Stanley reports that global e-commerce rose from 15% of total retail sales in 2019 to 22% in 2022. Online shopping has become the preferred option for many shoppers, and this growth has changed consumer expectations of e-commerce retailers.
Today, it’s no longer enough to offer a simple website with a few product pages. In this ever-expanding industry, growth and long-term success require vigilant tracking of your competition and your store’s own performance.
Fortunately, online retailers have a ton of data at their fingertips from which to improve selling strategies and continually improve. Key performance indicators are a vital part of e-commerce success. And even among these indicators, conversion rate is perhaps the most important data point. Your e-commerce conversion is the foundational metric that tells you how well your Shopify store is performing with online shoppers.
An extensive survey of Shopify stores in September 2022 found that the average conversion rate is 1.4%. In this article, we’ll break down what that means, why conversion rate matters, and some other metrics you should be tracking to measure the health of your e-commerce store.
What is E-commerce Conversion Rate?
What do we mean when we talk about conversion rate? Let’s break down this term in a little more detail to understand why conversion rate is a core metric of e-commerce success.
Let’s start with conversions. A conversion takes place when someone on your website does what you want them to do. Conversions are defined by you and your marketing team. A conversion for your business could be:
- Clicking on a product page
- Purchasing a product
- Reading your blog posts
- Subscribing for a newsletter
- Messaging live sales support
- Joining your loyalty program
Ideally, you should define a conversion as an action that has a measurable impact on your business. Orders are one of the most popular forms of conversions.
With this understanding, what is the conversion rate? Your conversion rate is a key performance indicator (KPI) expressed as the percentage of the total number of website visits that result in the conversion action. We’ll demonstrate how to calculate your e-commerce conversion rate in a later section of this guide.
Brick-and-mortar stores have their own conversion rates. Typically, conversion rates for offline retailers tend to be higher than those of e-commerce merchants: usually around 13-20%. An in-store conversion rate is calculated by dividing store transaction count by foot traffic.
E-commerce conversion rates are not so different from their offline counterparts. Usually, e-commerce conversion rates refer to the number of visitors to an e-commerce store who complete an order — although of course, it depends on what conversion action you decide to track. Your e-commerce conversion rate can be found both in Google Analytics and Shopify’s Analytics; in Shopify, look for “Online store conversion rate” to see what your current Shopify conversion rate is.
Of course, viewing your Shopify conversion rate in isolation doesn’t tell you much. Here are some ways to benchmark your conversion rate against similar stores.
What is the Average E-commerce Conversion Rate?
There are a number of different estimates for what makes a good conversion rate. The average conversion rate for e-commerce stores is somewhere between 1.8% and 2.63%. However, the average e-commerce rate varies depending on your industry and other variables.
When benchmarking your e-commerce conversion rate, keep a few things in mind. First, the conversion rate is contextual. That means that premium, luxury, and high-end products will have low conversion rates when compared to everyday staples. Likewise, a store that has a loyalty program with thousands of members will get a better conversion rate than a new business buying cold leads from social media.
Other variables that impact e-commerce conversion rate can include:
- What products you sell
- The product cost, or average order value (AOV)
- Traffic source: how do visitors reach your e-commerce page?
- What device are they using to browse your product pages (e.g., mobile phones, tablet, desktop)?
- Your location and your visitors’ locations
It’s also worth reiterating that while conversion rate is usually used to measure the percent of website visitors that turn into customers, your e-commerce store may have a different conversion goal in mind. You may see higher conversion rates if your goal is to get people to sign up for your newsletter, versus buy an item from your website.
With these caveats in mind, here are a few average conversion rate examples for different e-commerce segments.
What is Considered a Good Conversion Rate?
The short answer: it depends. A good conversion rate can range. On Shopify, however, aim for a conversion rate above 3.7%. Anything above that rate will rank your Shopify store in the top 20% of conversion rates. If your Shopify store’s conversion rate is above 5.2%, it puts you in the top 10%.
How is E-commerce Conversion Rate Calculated?
The simple formula for calculating your e-commerce conversion rate is:
Conversion rate = the number of desired actions taken over a specific period of time / total number of visits to your site over the same period of time.
For example, if your e-commerce store receives 1,000 visitors over one month, and you see 10 conversions over that month, your store’s conversion rate is 1%.
As your visitors grow, your conversion rate may get harder to calculate manually. Fortunately, you can set up Shopify and Google Analytics to calculate your conversion rate for you.
On Google Analytics, follow these steps to start measuring your conversion rate. These steps assume you’ve already connected your e-commerce site to the analytics tool. In this example, we’ll assume the conversion rate you wish to track reflects orders.
- Visit the ‘All Website Data’ option for your site.
- From the taskbar on the left, select the Conversions » Goals tab.
- Create a goal by clicking on the ‘Set up Goals’ button, and clicking on the red + New Goal button.
- Under Goal setup, select the Custom radio button at the very bottom of all the options and click Continue.
- When you are prompted to create a name for your goal and choose the type, enter a name that describes the action you wish to track (e.g., “Purchases”). Select Destination as the type. Then hit the Continue button.
- Enter the URL for the thank you page that someone will see after they complete the check-out process into the Destination field.
- Save and track your data!
Shopify also offers conversion tracking via the site’s conversion summary. This summary gives an overview of a customer's previous visits and their behavior leading up to a purchase. You can find this data on the order details page.
Why is Knowing Your Conversion Rate Important?
Your conversion rate is one of the fundamental indicators of the health of your Shopify store. It tells you whether potential customers who reach your landing page are intrigued and motivated enough by your product offering, branding, and website user experience to take action.
Small improvements to your conversion rate can boost your revenue, improve customer loyalty, and even increase your store’s SEO. High conversion rates ultimately lead to higher ROI on your marketing and sales investment — which translates to more earnings for your business.
Your conversion rate can also provide insight into the user experience. Analytics tools will show you how customers are interacting with your Shopify store, which product pages they’re clicking on, and which parts of the user experience are encouraging high engagement. Looking into these details can help you progress customers through your funnel, build loyalty, and optimize your customer retention rates.
Finally, Google loves high conversion rates. Your Shopify store will be shown to more potential customers through Google SEO rankings the higher your conversion rate. Google’s algorithms reward a positive customer experience. Upping your conversion rates and reducing your bounce rate will help you clear this benchmark.
Provide the reader with an in-depth analysis of why conversion rates are an important metric to know and how they can inform their future business decisions.
Conversion rate isn’t the only key metric to track, however — and some experts warn that conversion rate shouldn’t be the primary metric you seek to improve. This is because conversion rates can vary so much from one industry to the next, and one landing page to the next. Most experts suggest tracking conversion rate along with other key metrics to get the full picture of your user experience.
Other Key Metrics You Should Be Tracking
There are many factors that can inform how you optimize your website. Conversion rate is a vital metric, but there are other data points that can help you draw more people into your product pages, encourage them to add products to the cart and entice more completed transactions. Bounce rate, click-through rate, cart abandonment rate, average visit duration, and average order value can help you understand the customer journey on your website and deliver a better experience.
Bounce Rate
Bounce rate is defined by Google as “a single-page session on your site.” Essentially, this metric shows you how many people came to your website and left immediately.
Bounce rates tend to be high in comparison to conversion rates. The average bounce rate from mobile search for Shopify stores is around 48%. Like conversion rates, bounce rates tend to vary by industry.
A high bounce rate isn’t necessarily a bad sign; although if you see high bounce rates from the landing page through which people enter the path-to-purchase, that’s a sign there’s probably something wrong. Bounce rates can negatively impact your Google search rating, in addition to showing that customers aren’t completing the actions you want them to complete.
Click-Through Rate
Your click-through rate (CTR) measures the number of people who click a link to your Shopify store from an ad, email marketing efforts, social media link, or another channel. Click-through rate helps you determine the effectiveness of your marketing efforts across channels. High click-through rates show that the ad you’ve displayed is compelling enough to encourage someone to learn more — and possibly convert.
Click-through rates vary widely depending on the channel and industry. HubSpot reports that across all industries, the average CTR for a search ad is 1.91%, and 0.35% for a display ad. Here's a look at the average CTR by industry:
Click-through rate can be found via Google Analytics or by dividing the number of clicks that your ad receives by the number of times your ad is shown. For example, an ad with 5 clicks and 100 impressions would result in a 5% CTR.
Cart Abandonment Rate
Cart abandonment rate tells you how many people added products to their online shopping cart, but then didn’t complete the purchase process. This metric shows you how customers are proceeding through the funnel; how serious is their purchase intent?
Cart abandonment rates tend to be high — the average cart abandonment rate in 2022 is close to 70%. There are dozens of reasons why shoppers abandon full carts. This graph shows a few of the most common issues.
Cart abandonment rate ties directly to conversion rates. Data from the Baymard Institute shows that e-commerce sites can gain a 35.26% increase in conversion rate by improving their checkout design. Make sure your checkout process is simple and streamlined to avoid having too high cart abandonment rates.
Average Visit Duration
Average visit duration is calculated by Google as the total duration of all sessions (in seconds) divided by the number of sessions. This metric gives you a general idea of how long people are spending on your site and engaging with your products.
Surveys from Databox show that most digital marketers report an average session duration of 2-3 minutes. Ideally, you want to see visit durations that indicate people are spending enough time on your site to explore your products, decide to shop with your brand, and complete the purchase. Longer visit durations, however, may indicate that people are having trouble using your site to find what they need.
Average Order Value
Average order value (AOV) tells you the average amount a customer spends each time they place an order on your Shopify store. Calculate AOV by dividing the total revenue by the number of orders.
Average order value can be increased through cross-selling and upselling. It’s a good metric for tracking customer retention, seeing the ROI of your marketing efforts, and getting a deeper understanding of your conversion rate. Your AOV can help you make strategic decisions about product bundling and discounts.
Average order values vary widely, so rather than benchmark your AOV, look for continuous upward growth month over month or year over year to see if your Shopify store is healthy.
Tracking Your Shopify Store’s E-commerce Conversion Rate
It’s helpful to regularly keep track of your Shopify store’s e-commerce conversion rates. By tracking this metric on a weekly, monthly, and yearly basis, you can work toward conversion rate optimization.
Conversion rate optimization is a set of practices and tactics that increase the percentage of visitors to your online store who make a purchase (or take the desired action). Conversion rate optimization (CRO) combines design, psychology, and testing to see what works: including multivariate, split, and A/B testing.
But first: how often should you track your conversion rate? Some business owners check on their conversion rates weekly, monthly, quarterly or annually, and during specific intervals. Checking at different moments in your business cycle serves different purposes. For instance, checking your conversion rate weekly can flag if there’s something on the site that’s broken. A monthly review can illuminate where there are product categories outselling others, showing you where to focus on improving your conversion rate.
Conversion rates can peak and dip at various times throughout the year. Ideally, you’ll check your quarterly or yearly metric to get the long-term data you need for strategic decision-making. Your annual conversion rate can help you understand how to communicate your value proposition, redesign your website, or time sales better throughout the year.
Finally, you should plan to measure conversion rates for discrete marketing campaigns. It’s crucial to get feedback on what’s working from a sale, influence collaboration, new product launch, or any other event you design to help increase conversions. Look at your conversion rate, as well as other key metrics, to see if people are responding to your marketing efforts or if you need to change something up.
Improving Your E-commerce Conversion Rate
Conversion rate optimization is both an art and a science. On one hand, it relies on data gathered throughout the customer journey. On the other hand, it takes the right messaging and social proof to convince visitors to complete the desired action.
Ultimately, conversion rate optimization considers a range of factors that could interrupt or motivate a customer to take the desired action. It can be broken up into a few subcategories: checkout optimization, mobile optimization, and content optimization. These focus areas help guide each visitor from initial interest to final purchase.
Checkout Optimization
Checkout optimization examines the checkout process of your Shopify store to see if there are any obstacles or friction that could lead to cart abandonment. When your store check-out process is too long or complicated, you risk losing customers at the moment of purchase.
There are plenty of things to test to improve the checkout experience for your customers. Free shipping is a powerful upselling technique that entices high conversion rates. One survey found that 73% of people are more likely to decide to buy an item if it includes free shipping; and, e-commerce stores that offer free shipping have a 20% higher conversion rate than those without this option.
Upselling and cross-selling can also help your Shopify store get more value out of every customer conversion. Upselling at checkout is a great way to capitalize on customer interest to earn higher revenue, increase customer satisfaction, and boost average order value.
Mobile Optimization
Mobile optimization considers how users interact with your Shopify site on mobile devices. It’s not enough for your Shopify store to simply look good on a phone screen. It must be easy to navigate, with high-quality product images, and seamless checkout options.
Design your page with the user experience in mind. Pick a Shopify theme that looks good on mobile and desktop devices and that will work for iOS and Android users. Make sure your load speeds are quick: slow-loading websites can contribute to high bounce rates. And, make it easy for users to complete the checkout process in just a few steps. Essentially, make the experience as frictionless as possible.
Content Optimization
Finally, the content you use is a powerful tool for driving conversion rate optimization. Customers are looking for trust signals before they decide to purchase from your store — or share any of their personal data.
User-generated content, customer reviews, and other social proof can speak volumes toward building trust with potential customers. Share positive reviews on your product pages. Re-post content created by your fans on your blog and social media pages. Let others speak on your behalf to build a compelling case for others to convert.
Conclusion
Your conversion rate is a key indicator of the health of your online store. Tracking and optimizing your conversion rate for purchases, collecting customer information, or creating a loyalty program, for example, gives you the feedback you need to grow. There are also apps that can help you improve conversion rates by offering upsell or cross-sell opportunities. Find out more and get a free trial of one of the best conversion apps, Honeycomb.