I’m going to start off 2007 with the assumption that you used 2006 to get your e-commerce operation up and off the ground. This year I want to focus more on the operational aspects of running your e-commerce operation and try to offer some guidance on some of the recognized best practices out there.It’s important that you have a set of measurement criteria to see how well your site is performing, and how effective any design, merchandising, or marketing changes may be.
To help you set a baseline, I’d recommend you to pick up a copy of the Internet Retailer Top 500 publication. This will allow you to get a feel for what the numbers are like for some of the top companies. Be warned that a lot of these measurements can vary wildly between very successful e-tailers in different industries or even in the same industry but with different target customers. Consider the numbers in the publication as guidelines rather than goals.
This month I want to focus on conversion. This is probably one of the primary metrics that you will hear just about every e-commerce business leader talking about. In a nutshell, it’s the ratio of how many real live people (as opposed to search engine spiders or other automated “robots”) visiting your site end up buying something from your site. It’s computed by taking the number of “unique visits” or “unique users” from your site’s server logs (or better yet an analytic package ““ more on that in a later column) and dividing it into the number of sales or invoices over a given period.
Key things that can influence conversion are:
Good site design and “appropriate” usability: Make it easy or enjoyable for a shopper to find what they are looking for. This requires that you have a good feel for how your target market prefers to shop. Do they want to “browse” through your category structure, or page through a virtual catalog? Or do they prefer to hit the search box, type in a part number from a service manual and get to the check out as quickly as possible? In the dream world, you’d be able to design a shopping experience that is perfect for both types, and everything in between. Given the nature of the real world however you may have to design your site to be better at the type of shopping that you know your customers prefer, or that your business model dictates.
An amazing example of this understanding and the guts to act on it is the fashion retailer Gap Inc. Gap is definitely a retailer that knows what it’s doing online and off. However, take a close look at their site. Notice something missing? There’s no site search! Unheard of! The business model and expertise of The Gap leads them to feel that their proficiency in merchandising fashion to shoppers is more powerful than offering everything under the sun and leaving it up to the shopper to try and find it via search. [for more on this interesting subject read this article: Site search on Gap.com? Not ’til it suits Gap’s style] What makes this decision even more interesting is that Gap’s decision flies against the prevailing practice of loading thousands of products and then spending substantial resources developing more and more advanced search tools to help the customer find what they are looking for.
UPDATE! OK, apparently since writing this, gap.com has decided that it was a really stoopid idea to not allow their customers to have the ability to search on their site. Or in more cynical terms, apparently the hubris and ego that drove this apparently bone-headed move was shone the door, and saner minds prevailed…
When I wrote this back in December, it seemed like a fairly stoopid thing to do, to not have a search box because “we’re The GAP! We know everything!” But again, because the muckety-mucks at GAP that made this decision probably make more in a day than I do all year I figured, “what the hell, maybe I’m the idiot.”
Nope… Once again I was proven not to be the idiot (at least not by this… I’m sure there’s other things out there that many would feel more than prove the point). The moron was the high paid manager (director, VP, EVP, whatever) that (no doubt over the objections, eye-rolls, and ridicule of his staff of underlings) pushed that moronic idea through…
What I find amusing to no end is that The GAP probably pissed away thousands, if not tens or even hundreds of thousands of dollars on research by experts to make the decision to not have search. I’d love to know how many emails and phone calls it took to get search added back in!
I wonder how many sheep out there, the day after reading the Internet Retailer article, called up their web developer and said something along the lines of: “We need to remove the search from our site! It’s all the rage!” I’d also like a webcam image of the look on the developer’s face!
Thank God for schadenfreude!
Among online fashion e-tailers, Gap Inc. is reported to have a very strong conversion ratio, so apparently there’s some wisdom to be gained by looking at what they are doing.
Again, or not…
The next major factor that helps in conversion is product selection and merchandising. This ties in closely with the above example of Gap. Have what the shoppers coming to your site are looking for and when they find it, make sure that the images, descriptions, and other merchandising information is enticing.
Finally there’s price. Price is a very important component when it comes to whether or not you’re going to make the sale to a particular visitor, especially if the products you’re selling are common items that are available from numerous sites. The availability of online comparison shopping means that if price is the only consideration in their decision, they’ll know instantly if joesbarginmotorcycleparts.com is selling that jacket for $1.00 less. However, remember that if you are doing everything else right (site design and performance, customer service, merchandising, etc.) price is just one factor in the value equation for most customers.
A caveat on managing the business with an eye on conversion: Be careful! You could easily do something that drives conversion way up to the detriment of other key metrics. An absurd example: conversion shoots through the roof when you start selling a popular $50.00 product for $5.00 and losing $30.00 on every sale. Conversion is great, but you’re going out of business really soon!
Like most topics I’ll cover, there’s enough on conversion in e-commerce to write several books. However, this should provide a brief highlight on the concept of conversion and a few examples of how it can be influenced and controlled. Next month I’m going to talk about another key concept, Average Order Value (AOV) and some of the things you can do to get it as high as possible.
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