The era of brick and mortar stores may be coming to a close, but models show that eCommerce continues to boom. Statista reports that last year, Australians spent a total of A$28.6 billion on online shopping, or 9% of Australia’s total retail sales, making Australia the 10th largest eCommerce market in the world.
Although calculating that figure is not as simple as one might think:
eCommerce Revenue = Traffic x Average Order Value x Conversion Rate
A decade ago, most businesses were still focused on building awareness, with increasing online traffic their key objective. But times are shifting, and the market is now completely aware that virtually all brands have an online offering. This shifts the focus to the latter two thirds of the equation – average order value and conversion rate.
Research suggests that the current conversion rate for eCommerce is a staggeringly low 2%. This is because, for every $92 spent on acquiring customers, only $1 is spent on converting them. One-third of the eCommerce equation is getting a whopping 99% of your marketing budget.
As the law of diminishing returns suggests, this traffic-centric approach is just not the best bang for buck anymore. How can we boost conversion rate and average order value?
We’re missing a sales foundation
Only 2 out of every 100 people coming to your website with an intent leave with a product, yet in-store the average conversion rate is 40%. 40 people that walk into a store walk out with a product. Why? The sales consultant.
Most consumers have little to no idea what product suits them, but being guided instore to find out more about each item increases instore conversions to 40%. The sales consultant helps guide customers through the maze of products and their complex specifications to make it easy to understand what’s best for them.
The science of conversations
Have you ever heard of choice paralysis? The stress that comes from decisions might be the reason you’re not hitting your eCommerce KPIs.
A study carried by Iyengar and Lepper tested the effects of choice paralysis on conversions. In their study, they set up a “free sample” table at a grocery store and displayed customers with either 6 or 24 flavours of jam. They found that when shown just 6 options, almost a third of customers made a purchase, compared to only 3% when they were shown an overwhelming 24 options.
This results in a 12% conversion rate for the 6 jams table and 2% conversion rate for 24 jams table. That’s a 600% increase in conversion rate, simply by putting less on the consumer’s plate. This study indicated that more choice often leads consumers into a “choice paralysis” where they cannot decide which product to purchase.
What can eCommerce do to solve this issue? It’s simple, bring the sales consultant online and provide users with that guided selling experience. Help your customers easily and quickly understand and find the products that best suit them and their individual circumstances. At Preezie, we call it “Guided Conversion”.
Here’s a real-life example: I wanted to buy a wine for my mother’s birthday, but I know nothing about wine. All I know is that Mum likes to drink heavy reds, likes supporting local businesses and I have a $50 budget.
How do I find the best wine to buy online given that criteria set? Simply put – you can’t, as filters and navigation are still very limited. But a virtual sales consultant like Preezie can provide all eCommerce brands the technology they need to integrate guided selling and conversion straight into their platforms. In some cases, this function increases conversion rates by 400%.
Does guided conversation really work?
Let’s look at the numbers: One of Australia’s leading online eCommerce brands, Nicks Wine is widely known for having one of Australia’s best ranges of beverages, with over 5,000 products in its lineup. Because of this, the risk of customers being paralysed by choice is high, so Nicks uses Preezie to minimise this and increase conversations.
Since implementing the guided function, Nicks Wine has seen a conversion rate increase of 652%. In other words, when customers use the Preezie conversion workflows on its site they are 6.5 times more likely to make a purchase. The company also saw an 81% completion rate and a 43.5 times return on investment. Money well spent.
With such easy access to eCommerce facilities and an historically high awareness from consumers of their online purchasing options, brands don’t have to worry about whether or not their audience will engage with their eCom site. The question is, are you guiding your customers to convert?
If you’re not focusing on conversion rate and average order value, you’re ignoring a huge chunk of the eCom equation.
Michael Tutek is Founder and CEO at Preezie