Therefore, for an operator, it is not only necessary to always pay attention to the transaction amount and traffic of the online store, but also to make statistics on the conversion rate and calculate the average conversion rate of the store in a year. This can be used to predict future revenue or plan work for the next year.
Why focus on the conversion rate? Isn't discussing the turnover more meaningful for an online store? Yes, any online store needs overall turnover, and the conversion rate is just a ratio. However, knowing and accurately measuring this ratio is more meaningful than knowing the turnover. The conversion rate is the golden ratio that determines the efficiency of operation. For online store operators, ratios can explain some problems. For example, if the conversion rate drops, even though the total business increases, the promotion costs the owner pays may have increased significantly. Conversely, if the conversion rate improves but the traffic decreases, it indicates there are issues with the store's promotion, product structure, or webpage optimization.
What are the ways to improve the conversion rate? What is a reasonable conversion rate?
Many people would say, of course, the higher the better. But in reality, that's impossible. Moreover, what the store owner pursues is the operating profit of the online store, not just a number like the conversion rate. However, determining a reasonable constant can help the owner judge whether the store’s operation is reasonable, thereby improving the store. Generally speaking, different online stores operate different products, with varying degrees of product scarcity or regional advantages, so the conversion rates differ. Currently, no authoritative institution has provided the average conversion rate for online stores. However, the owner can calculate the average conversion rate of their own store for a month and use it as a parameter to deduce the conversion rates of the top five best-selling stores, and finally determine if their store's conversion rate is reasonable. If it is significantly higher than theirs, it proves that the direction of the store's operation is correct. If it is lower, it means the store still needs improvement.
For how to define the conversion rate, first, the conversion rate should be a ratio. But how do we determine the numerator and denominator of this ratio? When running an online store, you may encounter whether the store needs a statistical system. Generally, integrated e-commerce systems come with built-in statistics, which can be activated by yourself. However, since it consumes website server resources, many integrated e-commerce systems also use third-party statistical systems. A statistical system is the eyes of an online store. It can show how many people visit the store each day, which pages they browse, thus obtaining two basic data: IP and PV. IP represents the number of visitors (third-party systems identify through IP address or computer terminal), and the amount of IP is similar to the foot traffic of a traditional store. The volume of transactions refers to how many deals were made, usually measured by how many people successfully shopped. Therefore, the conversion rate = number of successful transactions / number of visitors = number of successful transactions / IP volume.
What is the significance of the conversion rate? How to make the online store profitable and earn more money essentially revolves around improving the store's conversion rate. Online stores allow all kinds of data to be quantified and statistically analyzed, and every customer visit represents real existing demand. A smart store owner must be fully aware of everything and should skillfully master the tool of the conversion rate.
Most online stores make profits from the price difference. Since the profit comes from the price difference, naturally, the higher the sales volume, the more profit is made. Therefore, the purpose of Taobao store owners promoting their stores is to increase the sales volume.
There are many factors that determine the conversion rate, some controllable, some uncontrollable, and some in between. Specifically, the factors that determine the conversion include: webpage content structure, product price, product brand, overall store product structure, store credibility, customer recognition, logistics fees, promotional efforts, and the quality of online customer service, etc. To improve the conversion rate of an online store, one must first distinguish which of these factors are controllable and then optimize and enhance them accordingly.