Why Are E-Commerce Conversion Rates So Low?

In eMarketer’s newsletter today are data aggregated from Lauren Freedman’s E-Tailing Group and Shop.org:

Online merchants convert an average of 2%-3% of their site visitors into buyers, according to the e-tailing group‘s “Sixth Annual Merchant Survey.”

That’s about the same as last year. And the year before that.

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The group says that driving the right customers to sites and increasing sales and retention all require more targeted tactics every year. It points to analytics and data mining as the way to make this happen.

Shop.org conducts a similar annual survey with Forrester Research called “The State of Retailing Online.” Conversion rates in that study also average about 2%-3%.

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The piece goes on to discuss sites that have 15% to 20%+ conversion rates.

eMarketer presents these data as something of a “best practices” problem. Undoubtedly sites can improve conversion rates by adopting best practices. But there’s another thing going on here: consumers shop online and buy offline.

It’s really taking people a long time to get this point. Consumers, though they will buy online for various reasons (convenience, price), fundamentally want to buy locally.

As a result of this desire and behavior, you’re not going to see big increases in conversion rates — best practices or no — across the board any time soon.

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Related: My earlier post, “the future of online shopping is offline.”

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10 Responses to “Why Are E-Commerce Conversion Rates So Low?”

  1. Andy Says:

    Yes, and… Isn’t part of the solution (converting local researchers to online buyers) analysis by category, and considering each separately? For example, buying a Thai dinner for 4 after reading the online menu, vs. replacing my new balance SDS1005 size 11, vs. new windows for my house.

    In each case, variable factors common across commerce make a difference. I don’t need to try on the SDS1005 size 11 — i know they fit (need to touch = low). I *don’t* want to explain 4 Thai orders by phone (security in Phone experience = low) . And NO WAY am i buying windows online (need to touch = high).

    Seems like a subset of possible online transactions could be grouped which represents higher-than-average online opportunities. (How’s growth on THIS subset doing?) Yet, no one (?) has attempted to define & study what those are; instead, we call it “confusing,” and lump all sites accepting credit cards into “eTail.” Esp. confusing when the incremental cost of adding 10,000 less-likely eTail listings is negligible (Amazon…), or adding “purchase online” to our (ugly, tertiary) website is easy.

  2. Greg Sterling Says:

    Yes. Vertical by vertical. And in a decade or so it may change dramatically. Online shopping via TV may also have an impact.

  3. Neal Says:

    noticed that Circuit City is laying-off higher paid in-store sales people in favor or lower paid (less experienced, less knowledge) people. If this does not drive people to click and buy, I am not sure what will. In a society that is driven by immediate gratification, I am not sure it will be anytime soon when e-commerce will become a meaningful piece of the commerce pie – more than 10%

  4. Greg Sterling Says:

    Valid point. Bad sales reps in your stores will send people online.

  5. Paul Counts Says:

    A big reason that conversion rates are so low online is because so many people who go online to shop are just seeking information on products, or they are just price matching. I agree with the comment above that in a few years more and more people will simply buy online as it will be more convenient.

  6. NY Times Tech Coverage Roundup « Screenwerk Says:

    […] report the results as though they’d discovered something new and incredibly surprising. As I said before, people shop online but fundamentally will do most of their buying locally. What this means is that […]

  7. Apple and the Power of Local (Retail) Stores « Screenwerk Says:

    […] See my related post: “Why Are E-Commerce Conversion Rates So Low?“ […]

  8. Universal and Personalized Search Engine Optimization » Dave Lindberg Says:

    […] for keyword traffic. Combine these greater potential costs for generating traffic with average conversion rates still lagging at 2 to 3 percent, and the wake up calls from Grehan, Bryan Eisenberg, and others simply […]

  9. Brian Terry Says:

    All great points are made but what about “long-tail” searches which are very specific and niche focused?

    Whilst the numbers given above are very general and certainly and average… what if you’re selling something in a very niche orientated market where there’s no local equivelant?

    Conversions can be very much higher …but only if you have your website set up in the right way so as to maximize conversions and so few “mom” and “pop” websites really know how to do this.

    The problem as I see it is a vast majority of ecommerce websites know next to nothing about direct response marketing so tend to suffer from low conversions as a result.

  10. Search, Death, and Other Relevant Issues « DaveLindberg.com Says:

    […] for keyword traffic. Combine these greater potential costs for generating traffic with average conversion rates still lagging at 2 to 3 percent, and the wake up calls from Grehan, Bryan Eisenberg, and others simply […]

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