Online conversion rates drop by 55% in 5 years as purchasers become shoppers

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Online conversion rates in the UK have fallen by 55% over the past five years as consumers have taken to browsing, researching and comparing products on more engaging retailer sites, rather than just viewing the internet as another purchasing channel.

In 2006, the average online conversion rate for retailers in the IMRG Capgemini e-Retail Sales Index was 8.4%, but that figure has steadily declined and the latest results reveal the rate to be 3.8% now. (see chart 1 below)

Total e-Retail Market

Chart 1: The average online conversion rates each year since 2006

In 2006 the average online conversion rate for the total e-retail market was 8.4% and this figure has steadily declined over the past five years: 7.4% in 2007, 6% in 2008, 4.5% in 2009, 4.1% in 2010 and 3.8% year-to-date in 2011, although this is expected to rise in Q4. Since 2008, online conversion rates in the UK have fallen by 37%. (see chart 2)

Although the shift from ‘online purchasing’ to ‘online shopping’ has resulted in a drop in conversion rates, still the Index has recorded strong growth in sales throughout the whole period of conversion rate decline. This is logical because, as the market has almost doubled from £30.2bn in 2006 to £58.8bn in 2010, there are now far more shoppers visiting retailer websites, meaning that the percentage of people browsing without buying has risen.

Essentially, browsing, researching and comparing products and services across multiple retail sites has become the norm. Mobile is even making this possible in-store, and the ability to share products and ideas across social media sites has introduced an element of discussion to the online shopping experience.

Tina Spooner, Chief Information Officer at IMRG said: “The steady decline in online conversion rates in recent years is evidence that consumers’ purchasing behaviour has changed. The average online shopper today is making more considered purchases, often visiting several websites in order to compare products before deciding to buy.
“With the advent of mobile shopping and the popularity of tablet devices, consumers now have the freedom to browse online stores at any time of day, even while on the move. This will inevitably result in a considerable increase in visits to online retail sites, and therefore we may see conversion rates continue to decline
.”

Chris Webster, head of retail consulting and technology at Capgemini says:  “To understand why the online conversion rates have halved in the last five years we need to consider the various factors which have influenced consumer behaviour over the same period. The growth of the multi-channel retailer is certainly a major factor - shoppers can browse at their leisure and then buy in store. This behaviour has been encouraged by the recession which has driven greater price sensitivity and the need to research items before making a purchase.

“The e-retail space itself has also evolved - consumers are now offered far greater interactive content than they were five years ago, which means shoppers don’t just go online to shop. Retailers need to draw the window-shopper in to buy, by developing a customer experience which is personal and provides relevant offers based on their shopping habits.”

Total e-Retail Market Fig. 2

Chart 2: The average online conversion rates each quarter since 2008

Widespread broadband and higher bandwidth availability have been instrumental in enabling this shift, as rich media functionality has made for a far more engaging experience on a retailer website. The market has also grown to become the most competitive in the world, meaning that retailers have to do more in order to win and retain customers.

Clothing and fashion retailers have generally seen higher conversion rates than the overall e-retail market, with rates rising between 2009 and 2010 during the overall decline in the total market. This trend is continuing in 2011, with clothing retailers recording an average conversion rate of 5.3% in H1, compared with 5% in H1 2010 (up 6% year on year). Between 2009 and 2010 the average conversion rates for clothing retailers grew from 5% to 5.5%.

This can perhaps be accounted for because fashion products work particularly well with rich media tools such as video, 3D rotation and zoom, and the capacity to personalise and edit products such as selecting colours from a palette. In previous years, retail sites largely had to rely on fairly basic, static images and text product descriptions, which did not engage shoppers as much or encourage browsing and product comparison.

In the upcoming fourth quarter, online conversion rates are typically expected to increase as many people have a fairly good idea of what to buy for family and friends for Christmas. In Q4 2010 the overall average conversion rate was up 4.6%, compared with 4% in Q3.

During the same period, the conversion rate for pureplay retailers increased from 4.4% in Q3 to 5.6% in Q4. But there was no growth in the conversion rates for multichannel retailers (both quarters recorded an average of 3.6%), which may have been influenced by the adverse weather conditions and consumers using click and collect services to be certain of getting their gifts before Christmas Day.

The overall year-on-year growth for the total group of retailers was 6% between December 2010 and December 11.

Editor’s Note:
The online conversion rates are calculated by taking the average conversion rate of each retailer participating in the IMRG Capgemini e-Retail Sales Index and then taking the average of the overall group of retailers. Each retailer’s online conversion rate is calculated by taking the number of monthly gross orders as a percentage of the total number of monthly unique website visitors.

Survey Information
Participation in the IMRG Capgemini Index is available to reputable e-retailers of all sizes. Retailers supplying data for the Index get access to in-depth data on the market’s performance, in addition to a personalised data file benchmarking their own performance within their sector. For further details, or to enquire about joining the Index, please contact Tina Spooner, Chief Information Officer, via tina.spooner@imrg.org or call 0207 716 5604.

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