Conversion Optimization

The Right Way to Calculate eCommerce Conversion Rate (& How to Improve it)

May 8, 2023

The Right Way to Calculate eCommerce Conversion Rate (& How to Improve it)

For eCommerce store owners, ‘conversion rate’ is the most talked about term.

Understanding the ins and outs of conversion rates help eCommerce stores to measure return on investment (ROI).

In this article, you’ll learn:

Conversion rate metrics
eCommerce conversion rate benchmarks
How to improve conversion rate results

1. Is conversion rate a KPI or metric in eCommerce?

A metric and KPI are terms often used interchangeably.

The key difference between a metric and a KPI is that a metric tracks the status of an eCommerce business process and a KPI offers information about whether you hit a predefined business goal.

Conversion rate is considered the most important KPI in eCommerce.

2. What is the eCommerce conversion rate formula?

Here’s how to calculate a conversion rate in eCommerce:

the number of conversions/the total number of visitors

For instance, if an eCommerce store receives 200 visitors in a month and has 50 sales, the conversion rate would be 50 divided by 200, or 25%.

Further reading: 24 Scientific Strategies to Increase your eCommerce Conversion Rate

3. Which conversion rate metrics should you track?

Here are some key metrics to calculate conversion rates accurately for your eCommerce store.

While the eCommerce conversion rate formula only considers certain metrics, here are additional metrics that are necessary to calculate the conversion rate in eCommerce.

a. Page Visits and Completion Rate

In eCommerce, page visits and completion rates refer to the number of shoppers interacting with your store and how many shoppers turn into customers.

If a particular product page is receiving a high number of visits, it may be an indication that the product is in high demand, or that the marketing campaign is successful in driving traffic to the page.

The completion rate can be tracked for various actions on an eCommerce website, such as adding products to the cart, initiating checkout, and completing a purchase.

A low completion rate for any of these actions can indicate that the website may have usability issues or that there are barriers to conversion that need to be addressed.

eCommerce stores should monitor page visits and completion rates to identify areas for improvement and implement strategies to increase user engagement.

b. New Visitor Conversion Rate

The new visitor conversion rate in eCommerce is a metric that measures the percentage of first-time visitors who purchase the store.

Here’s how the new visitor conversion rate is calculated:

the number of new visitors who make a purchase/the total number of new visitors to the website during a specific time x 100

A high new visitor conversion rate indicates that the online store is successfully engaging and converting first-time visitors into customers.

On the other hand, a low conversion rate may indicate that barriers are preventing new visitors from completing a purchase.

eCommerce stores can track and optimize the new visitor conversion rate to increase and retain customers.

c. Returning Visitor Conversion Rate

The returning visitor conversion rate is a metric that measures the percentage of visitors who return to the store and make a purchase.

Here’s how the returning visitor conversion rate is calculated:

the number of returning visitors who make a purchase/the total number of returning visitors to the website during a specific time

A high returning visitor conversion rate indicates that your store successfully retains customers and encourages them to make repeat purchases.

A low conversion rate may indicate that there are issues with the online store's user experience or customer service.

eCommerce stores should track returning visitor conversion rates and improve customer loyalty and retention.

d. Average Revenue per Buyer

The average revenue per buyer or ARPB is a key metric that measures the average amount of revenue generated by each buyer over a specific time.

Here’s how ARPB is calculated:

the total revenue generated/the number of unique buyers during the time

A high ARPB indicates that your store effectively drives revenue from its customer base. On the other hand, a low ARPB indicates that it’s time to take a relook at your CRO strategies.

e. Average Order Value

Average order value (AOV) tracks the average amount spent each time a customer places an order on a website or mobile app.

Here’s how to calculate the average order value:

total revenue/the number of orders.

f. Checkout Abandonment Rate

The checkout abandonment rate is a metric that measures customers who go beyond the shopping cart and start the checkout process but do not complete a purchase.

Here’s how to calculate the checkout abandonment rate:

Completed purchases / Number of checkout processes started but abandoned X 100

Don't forget to read: 21 Clever Ways To Reduce Checkout Abandonment Rate

g. Customer Acquisition Cost

Customer acquisition cost is the total overall cost to acquire a new customer.

Here’s how to calculate the customer acquisition cost:

Total marketing and sales expenses / Number of customers acquired

h. Average Time on Site

According to a report, the average time on a page across all industries is 54 seconds.

Furthermore, a report shows that half of all online purchases occur within 28 minutes of the initial click. 75% occur within 24 hours, 90% by day 12, and the remainder occurs more than 4 weeks after the initial click.

The average time spent on a website changes due to certain factors that influence a shopper’s behavior, and factors on your web page will either have them scrolling through or clicking away.

i. Customer Lifetime Value (CLV)

Customer lifetime value measures the total amount of revenue your company receives from an average customer over the entire time they are a customer.

Here’s how to calculate customer lifetime value:

Average order value in a period x Purchase frequency per period for average customer x Number of periods average customer is retained

j. Refund and Return Rates

Refund and return rate metric tracks how often customers return products as a percentage of your total sales.

Here’s how to calculate refund and return rates:

Returns company accepted in a period / Total number of products sold in period x 100

Recommended reading: 10 Sure-Shot Ways to Boost Your eCommerce ROI

k. Bounce Rate

Bounce Rate is defined as the percentage of visitors that leave a webpage without taking an action, such as making a purchase, clicking on a link, or filling out a form.

Bounce rate is important for three main reasons:

You can increase your website’s conversion rate by stopping a visitor from bouncing.
Websites with low bounce rates have better Google ranking.
A higher bounce rate indicates underlying issues with your website such as copywriting, page layout, or content issues.

You must also read: 27 Practical Ways To Reduce eCommerce Bounce Rate

4. What is a realistic conversion rate in eCommerce?

The average conversion rate across sectors within eCommerce in 2023 is 2% to 4% average eCommerce conversion rates depending on the industry.

However, a disclaimer – some industries might see better conversion rates depending on product demand while some industries might be niche and don’t see a good conversion rate.

While eCommerce conversion rates by industry statistics offer an overall idea, there is no universal benchmark for eCommerce conversion rates.

An eCommerce conversion rate benchmark helps you to understand if there’s room to improve.

For instance, if your industry sees a 2% conversion rate on mobile, and your eCommerce store converts only at 0.5%, then it’s time to make some changes.

Further reading: eCommerce conversion rate by industry (2023 update)

5. How to see eCommerce conversion rate calculation in Google Analytics?

a. Can Google Analytics measure conversion rate?

In Google Analytics, you can define any actions that are valuable to your online store as a conversion.

Google Analytics monitors eCommerce goals such as purchases, adds-to-cart, sign-ups, etc.

b. How to see the eCommerce conversion rate in GA4?

In Google Analytics 4 (GA4), the ‘goals’ have been replaced by conversions based on events you send to your property (online store).

To configure a conversion in GA4, head to the ‘Events’ report and select which events you would like to mark as a conversion.

In GA4, conversions are based on event_name.

Every event has at least one parameter in common: event_name. The value of this parameter is the name of the event.

When you mark an event as a conversion, Google Analytics registers a conversion every time that event_name is sent.

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eCommerce - How to Calculate Conversion Rate in GA4

Here’s a step-by-step guide to get started: GA4 for eCommerce Sites with a Shopify Example

6. How to see eCommerce conversion rate calculation in Shopify?

a. How do I see the conversion rate on Shopify?

Shopify's conversion summary offers an overview of a customer's previous visits and behavior leading up to purchase from your online store.

Here’s how to view an order's conversion summary:

Step 1: From your Shopify admin, go to Orders.

Step 2: Click an order number to view its information. On the order page, you'll see a section called Conversion Summary.

Step 3: To view conversion details, click View conversion details.

The conversion summary appears on the order details page and includes an overview of:

the customer's total number of orders from your store
the customer's total visits to your store in the last 30 days
the origin of the customer's first visit to your store

Furthermore, click on ‘view conversion details’ to see additional conversion details for that customer:

the total number of visits the customer has made to your store
the number of days between the first visit and the most recent visit
an overview of customer activity, including visits between the first and most recent visit

You also need to read: 27 Founders/Store Owners Share eCommerce CRO Best Practices

b. Shopify conversion rate by industry

According to a report, the average conversion rate for Shopify was 1.4%.

Anything above 1.4% can be considered a good conversion rate.

Furthermore, a conversion rate above 3.2% will put you in the best 20% of Shopify stores and more than 4.7% will put you in the best 10%.

A conversion rate (all devices) of less than 0.4% will put you in the worst 20% of Shopify stores and less than 0.0% will put you in the worst-performing stores.

7. What if your online store receives high traffic but still no conversions?

Many eCommerce store owners ask us:

Why am I getting clicks but no conversions?

Why is my website traffic not converting to sales?

Why is my conversion rate dropping?

Here are some of the most common reasons why your online store receives high traffic but still doesn’t get conversions:

Your store doesn’t seem to have a clear USP
Your website copy is failing to persuade browsers to shop
Your shoppers are experiencing choice paralysis
Your shoppers are not happy with the shipping time
Your online store is not mobile friendly

Read more: Why is your conversion rate dropping: 24 possible causes

8. How to optimize conversion rates on your eCommerce store?

eCommerce stores can effectively implement conversion rate optimization strategies throughout a buyer’s journey.

CRO strategies can help to increase the eventual conversions by making certain tweaks on different web pages.

Do read: Seasoned eCommerce Leaders Predict CRO Trends for 2024

a. Home page

According to research, you have 10–30 seconds to convince your visitors to stay on your webpage.

First impressions matter. So think of your homepage that makes the first impact on a shopper's mind. If it’s engaging, has the right incentives, and looks visually appealing, then they’ll come back to shop or browse, even if they bounce off in the first session. - Luke Perry, CRO specialist, Convertcart

On the homepage, make sure the following elements are prominent:

An easily visible search option
A dynamic category navigation bar
Social proof to build brand credibility
Clear USPs to motivate the next step

We love Joy + Glee homepage:

eCommerce - how to calculate conversion rate | joy + glee homepage

Further reading: 14 must-have elements for your eCommerce homepage

b. Product page

An eCommerce product page helps shoppers discover the specifics of a product.

The specifics include:

Name of the product
Features
More detailed visuals
The price component
Shipping and returns policy,
Recommendations on similar or complementary products
Wishlisting options
Important CTAs such as Add-to-Cart or Notify Me

We love JC Penney’s product page keeps building as a shopper keeps scrolling:

eCommerce - how to calculate conversion rate | JC Penneys

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Don’t know your product page conversion score? Take this test.

c. Checkout page

At checkout, only half the battle is won. Your shoppers have browsed, liked something, selected it, and added it to the cart. But if your checkout is complicated and there are obstacles (sign up or fill in details like contact number), then it’s all for nothing. - Mike Hale, UX Strategist, Convertcart

A staggering proportion of shoppers drop off from the checkout page — but what’s interesting is — the reasons are easily improvable. Stuff like: