{"id":101976,"date":"2022-11-02T15:10:59","date_gmt":"2022-11-02T22:10:59","guid":{"rendered":"https:\/\/thegood.com\/?post_type=insights&p=101976"},"modified":"2024-12-03T08:51:55","modified_gmt":"2024-12-03T16:51:55","slug":"ecommerce-benchmarks","status":"publish","type":"insights","link":"https:\/\/thegood.com\/insights\/ecommerce-benchmarks\/","title":{"rendered":"Why Industry Benchmarks are Bullshit"},"content":{"rendered":"\n

Key Takeaways<\/h3>

By the end of this article, you should have the knowledge and resources to \u201ccheck the box\u201d in these areas\u2026<\/p><\/div>

  • Why competitor data is unreliable and inaccurate<\/li>
  • The value of studying your customers over your competitors <\/li>
  • Goal-setting, testing, and learning are better alternatives to benchmarks<\/li><\/ul><\/div>\n\n\n\n

    \u201cWhat is a good conversion rate?\u201d is one of the most common questions we get from clients. In fact, it comes up once in nearly every project, as if there\u2019s a mythical number that can be achieved with the right collection of strategies and techniques.<\/p>\n\n\n\n

    You\u2019ve probably Googled something like, \u201cWhat is a good conversion rate for auto parts ecommerce?\u201d or similar. You want to know how to measure the success or failure of your optimization efforts. You\u2019re looking for a growth ceiling, hoping to identify the version of your website that performs the best.<\/p>\n\n\n\n

    We don\u2019t blame you for this line of thinking. Industry benchmarks are an obvious starting point for anyone looking to set goals. Unfortunately, comparing your conversion rate to the rates of other companies (or the industry as a whole) is meaningless.<\/p>\n\n\n\n

    We know you want to be data-driven, but simply having<\/em> data and a goal isn\u2019t enough. How you use that data is what separates a typical company from an exceptional one. And while we love a good goal, craving a singular, decontextualized benchmark is the opposite of organizational maturity.<\/p>\n\n\n\n

    In this article, we explain why comparing your conversion rate with industry averages and competitor data is impossible and unwise. Then, we give you some super smart alternatives to a typical conversion rate benchmark.<\/p>\n\n\n\n

    Understanding the Dynamic Nature of Conversion Rate<\/h2>\n\n\n\n

    Most ecommerce store owners and managers ascribe to a particularly reductive view of conversion rate. They assume up is good and down is bad; up means more revenue, and down means less revenue. They toil to boost their conversion rate and fret when it falls. But this kind of thinking ignores the dynamic nature of a conversion rate.<\/p>\n\n\n\n

    Like many marketing metrics, the number on its own isn\u2019t helpful. The number requires context. Any discussion of conversion rate should focus on the question, “Why?” Why did it change? Why is it good or bad for you? There are plenty of cases where a falling conversion rate could be the expected outcome of building your brand ecosystem.<\/p>\n\n\n\n

    For instance, suppose your brand sells through multiple sales channels, including your own website, Amazon, big box stores, and other brick-and-mortar retailers. You sell through those channels because the increased exposure creates higher revenue.<\/p>\n\n\n\n

    If you were to remove all of your products from those additional channels and only sell through your website, some customers would seek out your online store directly, but many wouldn\u2019t. They would find a similar product that meets their needs wherever they prefer to shop. In this case, your site\u2019s conversion rate would increase, but your overall revenue would fall.<\/p>\n\n\n\n

    Similarly, we can imagine a situation where a low conversion rate could help you meet your organization\u2019s goals. A new brand, for instance, may not care about its conversion rate as it focuses on building awareness. They might purchase billboards, acquire social visits, and invest in other far-reaching but hard-to-track marketing endeavors. Countless ecommerce organizations care more about their share of voice than the percentage of users who convert into customers (at least for a while). They want an audience today that they will monetize tomorrow.<\/p>\n\n\n\n

    This makes conversion rate benchmarking particularly problematic. When you compare your conversion rate to your competitors, there\u2019s no opportunity to explore the \u201cWhy?\u201d There\u2019s no way to pinpoint the causes of change. Your competitors operate in a completely different ecosystem with maturity and marketplace dynamics that make comparison meaningless.<\/p>\n\n\n\n

    Furthermore, conversion rate benchmarking implies that there\u2019s a ceiling to be reached, a maximum point where your ecommerce site operates at peak performance. But who\u2019s to say that any of your competitors have identified the peak? How can you be sure there isn\u2019t room to grow beyond what anyone has achieved?<\/p>\n\n\n\n

    Imagine, for a moment, that you know – without a shadow of a doubt – the conversion rate average of your industry. You also know that your own conversion rate is higher. You win! No need for optimization, right? Of course not. Even if your conversion rate is higher than everyone else\u2019s, you still want to push it higher. This means everyone else\u2019s conversion rate is irrelevant for your purposes because you\u2019ll strive to beat yourself anyway.<\/p>\n\n\n\n

    All in all, focusing on your competitor\u2019s conversion rate (whether you\u2019re looking at a single competitor or the aggregate of an industry or sector) isn\u2019t helpful. In many cases, it\u2019s actually a distraction. Yes, some competitive research is helpful, but it shouldn\u2019t dictate your strategy.<\/p>\n\n\n\n

    In the next two sections, we\u2019ll talk specifically about the limitations of benchmarking yourself against your competitors and your industry: lack of context and questionable accuracy.<\/p>\n\n\n\n

    Lack of Context: Contributing & Limiting Factors of Comparing Conversions Rates<\/h3>\n\n\n\n

    One reason your competitors’ conversion rate metrics aren\u2019t comparable is that they lack context. That context is affected by dozens of contributing and limiting variables, such as the differences between brands, their organizational maturity, acquisition strategy, product mix, and dozens of other factors. In fact, it only takes one difference to make comparison impossible.<\/p>\n\n\n\n

    Suppose your organization sells eyeglasses for smart professionals and high-income earners. Another eyeglass vendor offers affordable options targeted at young people and families. In this scenario, the different products, price points, and target audiences create such a difference between the two organizations that comparing conversion rates (or any metric, for that matter) is unhelpful. It’s like comparing apples to snow shoes. There are just too many uncontrolled variables.<\/p>\n\n\n\n

    \"benchmarking:<\/figure>\n\n\n\n

    The following is a list of many limiting and contributing factors that affect how your site converts. This might seem like an exhaustive list, but there\u2019s even more to be considered (if you can believe it). You may identify factors that relate specifically to your products, audience, and business model. As you read each item, consider how your brand differs from your competitors.<\/p>\n\n\n\n

    Product<\/h4>\n\n\n\n
      \n
    • Product features<\/li>\n\n\n\n
    • Price (including fees, shipping, etc.)<\/li>\n\n\n\n
    • Variations and options<\/li>\n\n\n\n
    • Expanding\/shrinking product lines<\/li>\n\n\n\n
    • Audience target<\/li>\n<\/ul>\n\n\n\n

      Market conditions<\/h4>\n\n\n\n
        \n
      • Appetite for the product \/ need variability<\/li>\n\n\n\n
      • Retail partnerships (partnerships, distribution deals, etc.)<\/li>\n\n\n\n
      • Competitors (number and type)<\/li>\n\n\n\n
      • Education around the need<\/li>\n\n\n\n
      • Brick and mortar availability<\/li>\n\n\n\n
      • Economic conditions<\/li>\n<\/ul>\n\n\n\n

        Acquisition strategy<\/h4>\n\n\n\n
          \n
        • Referral program<\/li>\n\n\n\n
        • PPC spend and strategy<\/li>\n\n\n\n
        • Third party endorsements<\/li>\n\n\n\n
        • Unbranded keyword strategy<\/li>\n\n\n\n
        • Billboard strategy<\/li>\n\n\n\n
        • Social media presence<\/li>\n\n\n\n
        • Retargeting strategy<\/li>\n\n\n\n
        • Paid placements<\/li>\n\n\n\n
        • Partnerships<\/li>\n<\/ul>\n\n\n\n

          Traffic Quality<\/h4>\n\n\n\n
            \n
          • Promotions (time and strategy)<\/li>\n\n\n\n
          • Email program (timing, list size, send frequency, etc.)<\/li>\n\n\n\n
          • Search engine discoverability (blog, SEO strategy, etc.)<\/li>\n\n\n\n
          • Brand awareness<\/li>\n\n\n\n
          • Word of mouth<\/li>\n\n\n\n
          • In-person (physical) visibility<\/li>\n<\/ul>\n\n\n\n

            Site content and efficiency<\/h4>\n\n\n\n
              \n
            • Ease of decision-making (bundling, cost, etc.)<\/li>\n\n\n\n
            • Brand values alignment<\/li>\n\n\n\n
            • Product descriptions<\/li>\n\n\n\n
            • Popups and overlays<\/li>\n\n\n\n
            • Load time<\/li>\n\n\n\n
            • Ease of navigation<\/li>\n\n\n\n
            • Competitive differentiators<\/li>\n\n\n\n
            • Product discovery<\/li>\n\n\n\n
            • Proof in numbers<\/li>\n\n\n\n
            • Price to value<\/li>\n\n\n\n
            • In\/out of stock products<\/li>\n\n\n\n
            • Site bugs, errors, and disruptors<\/li>\n\n\n\n
            • Social proof<\/li>\n\n\n\n
            • Shipping (speed of fulfillment, options, etc.)<\/li>\n\n\n\n
            • Confidence (guarantees, certifications, etc.)<\/li>\n\n\n\n
            • Ease of product selection<\/li>\n\n\n\n
            • Price point (in general and vs. competitors)<\/li>\n\n\n\n
            • Payment options<\/li>\n\n\n\n
            • Incentives<\/li>\n\n\n\n
            • Competitor advertising<\/li>\n\n\n\n
            • Third-party guarantees<\/li>\n<\/ul>\n\n\n\n

              Fulfillment<\/h4>\n\n\n\n
                \n
              • Fulfillment timeline<\/li>\n\n\n\n
              • Order communications (post-purchase emails\/texts, etc.)<\/li>\n\n\n\n
              • Unboxing experience<\/li>\n\n\n\n
              • Shipping partner execution<\/li>\n\n\n\n
              • Unforeseen weather<\/li>\n\n\n\n
              • Product quality and functionality<\/li>\n\n\n\n
              • Expectation-setting during pre-purchase<\/li>\n\n\n\n
              • Order accuracy<\/li>\n\n\n\n
              • Conflict resolution<\/li>\n\n\n\n
              • Surprise and delight<\/li>\n\n\n\n
              • Incentive to return to site<\/li>\n<\/ul>\n\n\n\n

                As you can imagine, those variables create distinct differences between you and your competitors, making comparison pointless. It\u2019s best, therefore, to plan and execute a strategy without trying to imitate your competitors because you are different<\/em>.<\/p>\n\n\n\n

                Questionable Accuracy: The Flaw of Self-Reporting Among Competitors<\/h3>\n\n\n\n

                In order to compare your organization\u2019s conversion rate to the conversion rate of another brand, you would first have to convince the other brand to release that data, either to you or some publication that combines it together as an industry average. This kind of self-reporting is rife with incorrect data.<\/p>\n\n\n\n

                First, your competitors have no incentive to offer accurate information. What\u2019s to gain by releasing honest numbers? If their conversion rate appears high, it may convince the market that the ceiling is higher than expected, causing other brands to invest deeper into optimization. Ultimately, the reporting brand could lose sales.<\/p>\n\n\n\n

                Nor do brands want to report a conversion rate that\u2019s too low, lest their stakeholders, investors, and even their employees lose faith in the organization. They don\u2019t want people banging on their door, demanding to know why the company performs so poorly.<\/p>\n\n\n\n

                Besides, true conversion rates aren\u2019t impressive numbers by any means. They are usually just a low, single digit. Without understanding what that really means in terms of revenue and in regards to site traffic, it\u2019s easy for the uninformed to misidentify a good conversion rate as low performance.<\/p>\n\n\n\n

                Therefore, the true conversion rates of your competitors are usually kept hidden. Whatever they publicize is often a sanitized, public-friendly version that avoids causing any problems. In most cases, however, your competitors don\u2019t publicize anything at all. When a publication surveys them for their performance metrics, brands typically refuse to answer.<\/p>\n\n\n\n

                What\u2019s worse is that when some publications can\u2019t obtain conversion data for the companies they want to report on, they resort to some obscure, ad hoc calculation to work it out for themselves. They\u2019ll grab whatever data they can (such as revenue and site traffic volume), make some assumptions, and then publish their best guess. As you can imagine, these estimates are woefully inaccurate.<\/p>\n\n\n\n

                Furthermore, even if a competitor offers their true conversion rate, you have to wonder if they calculated it properly in the first place. Do they make incorrect assumptions about what should or shouldn\u2019t be included in their conversion rate? Would it be higher or lower if they used different criteria? Most importantly: Do they calculate their conversion rate the same way you calculate yours?<\/p>\n\n\n\n

                For instance, suppose Acme Soap (a fictional company) offers a special user account for wholesale partners to place wholesale orders directly through their ecommerce platform. These kinds of sales aren\u2019t usually calculated with the conversion rate because those buyers aren\u2019t the same as traditional shoppers. You might wonder how Acme Soap converts so high, when in truth, they\u2019re just using bad math\u2013including wholesale purchase with their direct-to-consumer ecommerce conversion rate.<\/p>\n\n\n\n

                This means that any conversion rate offered by another organization is, at best, inaccurate, and at worst, deliberately dishonest. Short of getting yourself hired by one of your competitors and making friends with whomever guards the marketing data, there\u2019s no way to obtain a volume of reliable conversion rate numbers on similar organizations.<\/p>\n\n\n\n