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Are you missing the most important e-commerce metric?

web_sales_iceberg

Major retailers are sharing some remarkable data about the cross-channel behavior of their shoppers:

“45% of in-store visitors pay a visit to homedepot.com first”

– Hal Lawton, President Home Depot Online.

“We know that 60% of our U.S. store sales are influenced by our customers’ experience on bestbuy.com”

- Brian Dunn, CEO Best Buy

Applying those ratio’s to publically available data, you get some startling facts:

Home Depot Best Buy
Online Sales $500M $2,458M
Web Influenced Sales $29,500M $25,500M
Web Conversion 1.0% 2.2%
Cross-Channel Conversion 61% 25%

For every dollar in orders on HomeDepot.com the site also influences $60 in brick and mortar sales.  For every dollar spent at BestBuy.com the site also generates $10 in brick and mortar sales.

Traditional e-commerce metrics report that HomeDepot.com converts 1% of it’s traffic to customers, while BestBuy.com converts 2.2%.  But those metrics only tell part of the story… When you factor in the sales that start online and finish in the store, the true conversion rates are 61% for Home Depot and 25% for Best Buy. Yet, the overwhelming majority of eCommerce leaders manage their business’s for on-line sales, even though they are vastly more successful at creating brick and mortar sales.

What if retailers to started thinking about cross-channel success criteria?  Would features like “Store Availability”, “Store Locator”, and “Store Hours” become more important than “Buy Now”?

Think how you might approach webstore feature sets, information architectures, user personas, usability testing, content development strategies, and ROI calculations if you knew your “happy path” was a shopper that started on-line and finished in the store.

It’s time to stop talking about “Buy Now Conversions” and “Online Sales,” and start thinking about “Cross-Channel Conversions” and “Total Influenced Sales.”

What are your favorite cross-channel metrics?

Comments

  1. Erik Engstrom says:

    Jason,

    Do you have any thoughts, or have you seen any response from industry towards the loss of brick and mortar channel sales towards online and mobile shoppers? Claims I’ve seen are as high as 13% nationally. Not seeing much response or press around that.

    Erik

  2. Hi Erik,

    Forrester says online retail sales are 6% of total sales in 2009 and forecast 7% for 2010 (the data isn’t in yet). They project that online and offline will both continue to grow, and that online will be 8% of total sales by 2014.

    The actual ratio varies a lot based on the retail category. Some categories are much more appealing to online shoppers than others.

    So music (and soon video) have all but gone completely to online. To quote The Social Network “want to buy a Tower Records?” Consumer Electronics and Office Products have a lot of online buyers (Best Buy’s online sales are about 5.5% of their total sales), while Home Improvement does not have as many online shoppers (Home Depot online sales are about 0.75% of offline).

    My perspective is that a sale isn’t “lost” because a shopper chooses to buy online (or via mobile, call-center, catalog, etc…). Best Buy still gets the sale regardless of if you buy online or in the store. The customer can pay at whatever touch-point they choose. What the data shows me, is that the web plays a major role in helping the shopper decide, regardless of which touch-point the shopper ultimately uses to pay.

  3. Erik Engstrom says:

    Jason,

    See your point and I’ll try and post-coffee clarify:

    I believe the “lost” statement is due to transparent price availability and that shoppers are spending elsewhere, outside the vendor’s multi-channel lob.

    How does price transparency effect a shopping marketer’s job? I’ve been reading a lot about competing with user and retail shopping experience, but does a good experience beat a better price to merit wholesale investment in experience?

    Thanks!

  4. I totally agree that price transparency is a game changer for retailer. A large number of standard practices for every retailer are based on lack of pricing transparency, and that bubble is in the process of bursting.

    I wrote about it in my post: Retailers race to low prices

    Interestingly, even online retailers have been counting on lack of price transparency (Home Depot adjusts the online pricing you see based on the location of your IP address). And of course thanks to mobile and social, pricing transparency is going to happen in-store as well as online.

  5. Erik Engstrom says:

    So I was just catching up on “BrainTrust Query: Mobile Is a Distraction” and shockingly enough, the only comment I felt was spot on (including the original thesis by Phibbs)was… yours.

    Thanks for the comments and your insight.

  6. Good points. Here at Dydacomp, we work with a number of small businesses and i think they often over get excited to make the transition to eCommerce that they can lose sight of the cross channel opportunities they are missing.

    Thanks for sharing this!

    Molly Griffin
    http://www.dydacomp.com

  7. Just wanted to point out that the quote I found from Home Depot went something like this: “we think about 45% of our website visitors each day are coming online, researching, getting additional product and project information and then going to our stores. That equates to about 225 customers a day per store. And I think
    roughly that’s about 15%, 20% of total store transactions per day.”

    45% of online visitors end up visiting the store. It’s not that 45% of people in stores went online first.

  8. Can you please direct me to the source of your information about web conversion rates. Also if you can suggest where can I find such data for other retailers, it would be great!

  9. Hi Ali, thanks for your question.

    Hal Lawton has used the 45% statistic several times and each time I’ve seen him use it, he’s been pretty clear that he means 45% of ALL in-store visits started on-line. I’m not sure where you saw the version of the stat you mentioned, do you happen to have a link?

    I got to see Mr. Lawton live at the IRWD conference in Orlando this year, and asked him several questions about his cross-channel business, and I an confident that he believes that almost half of his store visits start online. Here is a link to his presentation at IRWD: http://www.internetretailer.com/2011/02/15/how-home-depot-provides-consistency-store-and-online. As you can see from the above article, his intent is pretty clear: “45% of store visitors start online” (not the “45% of online visitors end up in the store” that you suggest).

    I do agree with you that it’s an important distinction.

    Regards,

    Jason aka Retailgeek

  10. Hi Nit, thanks for your question. The conversion rates came from the 2010 version of the Internet Retailer Top 500 list (now available in 2011 version).

    I’ve worked with enough retailers on that list to tell you that there is a wide variance in the accuracy of the Internet Retailer numbers, but they have always been in the right order of magnitude. It’s a great source for estimated conversion rates for all of the top 500 retailers.

  11. Great article thank you! Could’nt have said it better myself. My company is betting the storehouse that a lot of retailers will come to these conclusions. A great example is what guitar center has done with building major bridges between the sites and the store. They basically put “store locator” on steroids. They build 250 different sites for each store with up to the minute available merchandize info, local events, special store sales, local expertise etc…. Today 50% of the total GC revenue is from customer you entered the individual store communicated with the associates and eventually came to the store just to pick up. We envision the day where your e-commerce site are equivalent of the old times storefront windows where merchandize is displayed with two “minor” difference you can see the windows from anywhere in the world and if you don’t feel like walking in you can tough the “glass” and buy!

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