For leaders of e-commerce businesses, understanding purchase conversion rates is key to long-term success. "Conversion rate" refers to the percentage of website visitors who ultimately move from browsing or scrolling to completing a particular action, such as making a purchase.
Checkout, which is one of the most important stages in a customer's journey, offers many opportunities for improving conversion rates. However, there are a variety of ways for e-commerce companies to think about conversion rates and how to optimise them at each stage of the conversion funnel.
A thorough plan to improve your payments funnel will address complex issues that could slow the purchase process or prevent customers from completing a purchase, including false card declines, friction at checkout, fraud risk and more. When done well, your payments funnel can increase customer satisfaction, overall conversion rates and revenue.
Here is what you need to know about e-commerce conversion rates and how a fine-tuned payments funnel can help to improve yours.
What's in this article?
- What are common e-commerce conversion actions?
- How can I calculate the conversion rate for my e-commerce business?
- What is a good e-commerce conversion rate?
- What is e-commerce conversion rate optimisation?
- Strategies to increase your conversion rate
What are common e-commerce conversion actions?
Website visitors may take many types of actions that businesses can measure as conversions. Beyond e-commerce, website conversion actions could include anything from signing up for an email newsletter to downloading a report or completing a purchase, depending on the business goals. But for e-commerce websites, web orders are the most meaningful conversion action to measure.
Businesses can also collect additional analytics related to website visitor behaviour – including bounce rate and exit rate – to provide context to conversion rates and help determine the best conversion optimisation strategy.
How can I calculate the conversion rate for my e-commerce business?
The e-commerce conversion rate is the percentage of site visits that resulted in an order (the key conversion action) during a given period of time, relative to the total number of site visits during that same period of time. To calculate the conversion rate for your business, you must first establish a set period of time to look at. Then, determine the number of conversions that were completed – as well as the total number of unique visitors to your website – during that time.
Divide the number of orders by the number of total visits. Then multiply the total by 100. For example, if your website has 50 orders out of 1,000 unique visitors, you will have a 5% conversion.
What is a good e-commerce conversion rate?
In 2023, the average global e-commerce conversion rate was 3.68%. New e-commerce businesses often aim for a conversion rate of 1–2% and try to increase it from there. That said, what constitutes a good e-commerce conversion rate can vary according to factors outside of your control, such as industry and seasonality, as well as actions within your control, such as refining your payments funnel and maintaining a well-functioning website.
Other metrics, such as time on site, bounce rate, return on ad spend, cost per acquisition, click-through rate and interactions per visit, all indicate the health of your conversion funnel.
What is e-commerce conversion rate optimisation?
E-commerce conversion rate optimisation (CRO) refers to a wide range of strategies that can increase the percentage of website visitors that convert. This can be conducted at any customer touchpoint on your website, from your homepage to product pages and the checkout experience.
E-commerce conversion optimisation is an ongoing and evolving practice, not a one-off fix. Conversion is affected by many aspects of your business. Embrace a diverse array of optimisation approaches – and continually experiment and refine these approaches – to increase your conversion rate.
Strategies to increase your conversion rate
Because so many elements of your business can affect your conversion rate, it can be difficult to know where to start.
Think about the most important steps in your conversion funnel, including the moment of purchase. There are a variety of strategies that you can employ to make your customer's purchase experience as quick and easy as possible, which will increase your conversion rate and, ultimately, grow your business.
Here's an overview of tools and strategies you can use to help boost your number of purchases and conversion rate:
Create an exceptional payments infrastructure and interface
Details are important when improving your business's payment experience. In this respect, you'll need to refine each infrastructure component, policy and operational workflow. But make sure that you consider the customer experience as a whole, reviewing the interconnected functionality of all of these pieces and processes. For e-commerce companies in particular, the purchase experience should be smooth, which requires an efficient and reliable payments infrastructure, as well as an intuitive user interface. Here are a few solutions that make this possible:
- Stripe Checkout gives businesses access to pre-built, hosted payment pages that are optimised for conversion straight out of the box.
- Stripe Payment Links allows businesses to sell online without a website by generating a link or QR code to a stand-alone payments page that can be sent to anyone with browser access.
- Stripe Elements is Stripe's suite of rich UI building blocks that help businesses to design a secure payments experience which matches their site perfectly and drives conversion.
Reduce friction at checkout
If customers face barriers at checkout, they might leave without completing the purchase. Creating a frictionless checkout experience doesn't just improve your conversion rate, it also leads to a higher customer lifetime value (LTV).
Ultimately, optimising your checkout process for conversion is about speed and ease of use. The less work that customers need to do, the more likely they are to complete the transaction. So, reduce the number of clicks that customers need to make and fields that they need to complete manually.
For e-commerce businesses, it's important to invest in solutions that support an effortless checkout experience. For instance, Link auto-fills customers' payment information, which can drive up conversion rates by over 7% for logged-in users. With Link, customers can check out with one click.
Tackle fraud and prevent false declines
Online fraud can cause significant financial losses and have serious consequences on your business operations. In 2022, Stripe found that more than 70% of business leaders around the world have had to divert resources to combat fraud. Although fraud prevention should always be a top concern for e-commerce businesses, overcompensating in your approach can have major costs, too. Often, businesses that work to mitigate fraud inadvertently block legitimate charges (called "false declines"), which can drive away customers for good.
Businesses should proactively address fraud prevention while preventing false declines. Stripe Radar is a fraud detection and mitigation solution that uses machine learning (ML) trained on data from millions of companies around the world. Stripe updates Radar's algorithm continuously to address changing fraud patterns and evolving business needs. It also fully integrates with other Stripe products, making it quick and easy to access other payment information, such as delivery addresses or other customer details.
Tools that make it easier for customers to quickly authenticate themselves help to prevent false declines. Stripe Adaptive Acceptance uses ML to reduce the likelihood of a false decline and recover the revenue that false declines often block.
Offer a variety of payment methods
Businesses can suppress their conversion rate by failing to provide a sufficient variety of payment options. Stripe data shows that card payments drive just 40% of global e-commerce. If your business accepts payment methods that match your customers' preferences, you will be able to reach more customers globally, reduce transaction costs and increase conversion rates.
International businesses will need to consider a wide range of preferred payment methods within different countries and regions. It can be difficult to know which payment methods are relevant for your business and are preferred by local customers. With Stripe, you can accept over 50 of the most popular payment methods across the world, including cards from major card networks.
Buy-now-pay-later (BNPL) payment options allow your customer to finance their purchase and pay it off in instalments, often without interest or additional fees. This gives your customer more flexibility at checkout. BNPL services, such as Affirm, Afterpay and Klarna, are presented alongside other payment options at checkout.
Customers are more likely to make a large purchase if they can pay it off over time. BNPL allows businesses to reach more customers, as people who may not be able to buy a certain product – or put a large purchase on a credit card – will be able to make a purchase and complete checkout quickly. Your business will also be paid up front and will benefit from a boost in average order value and conversion rate.
BNPL services make purchases less daunting for customers without requiring businesses to manage financing, which can help your business with increasing conversion and growing revenue.