There was an interesting story on The Independent today that cited a study about how badly designed websites have cost businesses around £500 million in sales over the past 3 years. At first glance, that’s a statistic that makes you think that the phones would be ringing off the hook at design agencies around the country as marketing managers frantically look at CRO solutions that might help them get back some of the business that they’re losing.
It’s a great headline – £500 million is a lot of cash, but … it’s over 3 years, which means that it’s around £167 million per year. According to IMRG, online retail represented £31.5 billion in the first six months of this year, and is growing at around 15% per year, the £500 million suddenly seems like a lot less – let’s say that cumulative sales over the last 3 years have been around £155 billion, the £500 million is just 0.3% of the total.
Also, it’s important to note that according to online retail expert Jonathan Marsh:
Companies need to realise that it is not like the high street, people who are not sure do not have to walk 100 yards down the road to go to someone else’s store; they just have to click ‘back’.
It’s not necessarily the case that those sales have been lost – they’ve just been mopped up by people further down the rankings. If Jeff doesn’t find it easy to buy what he wants on the shop that ranks number 1 for a product, he simply goes back to the SERP and clicks on the next result. And lets be honest, even if the second (or third) result is still lacking in conversion friendly web design, at some point he’s probably going to battle through and buy anyway. Sales happen, customers just need to be able to buy.
There are ways of estimating conversion rates for different sites even when they’re not publicly available, and understanding where your site sits on a league table is an important starting point for how conversion friendly your design is.
The double digit growth in online retail in the UK over the past few years has probably masked a lot of the effects of conversion rate. I can imagine marketing teams talking up a 10% increase in sales as a success, but failing to take into account the wider market.
If you’re spending £100,000 per month to get 10000 sales and your top competitor is only spending £50,000 to do the same volume, then in effect they have a huge tactical advantage in terms of how much they can discount their products to improve sales further., or reinvest the difference in budgets into other channels and grow their marketshare more efficiently than you.
The real surprise is how little work to make a website more conversion friendly costs as a share of the overall marketing budget, and you often raise an eyebrow when a company looks to spend more money rather than spending money more wisely. The fact is: a poorly converting website is leaving money on the table. A site that converts at half the rate of a competitor is effectively spending twice as much on each sale.