Does Your Web Site Have Room for Improvement? Let’s run the numbers

Each month the top 10 online retailers, as measured by conversion rate, are reported on FutureNow’s GrokDotCom Marketing Optimization Blog. These are some pretty impressive numbers and industry leaders like Amazon.com and OfficeDepot.com usually make the list with conversion rates in the high teens and low twenties.

Of course, the industry average for conversion is a lot lower, around 3 percent, but I tend think of that as good news. Why? It means that most online retailers have plenty of room for improvement. In this post I’d like to flesh out that assertion with some numbers.

From Coremetrics, cited in that FutureNow article, we know that the average online order value is $132.57. Suppose your ‘average’ site is getting 100,000 visitors a month. That translates to $387,000 in revenue at an average conversion rate of 3% (based on 3,000 customers buying an average of $132.57 each).

Now suppose you achieved a 10% increase in conversion. I’m not talking about increasing conversion to 10%, just taking it up a notch to 3.30%. That produces close to $40,000 in additional revenue for the month. If your profit margin is 30% that’s about $12,000 in added profit, less the cost of creating that 10% increase in conversion.

Of course, conversion rates are not the only factor in web site profitability. Most sites that implement a post-click marketing solution also see an increase in average order value. So let’s plug a modest 10% increase in average order value into our numbers. That results in another $40K jump in revenue. In other words, a 10% increase in both conversion rate and average order value lifts revenue for the month by $80K and adds $25K in profit, less the cost of producing that lift.

How far can we go with this math? Let’s say you’re chasing CDW which claimed the number 10 spot in January’s performance chart with a conversion rate of 16.90%. Suppose you hit 15% conversion. Even without an increase in order value that lift transforms your $400K per month revenue into $2 million! (Bear in mind that this is achieved without any increase in traffic to your site.)

How far can your site go? Hopefully these numbers, including the real world conversion rates at some of the leading ecommerce sites, will help you figure that out.