Tag Archives: Business Performance

Customer shopping behaviour is an important concept in retail.

This is why.

How do you grow your retail business? You sell what customers want. How do you know what customers want? Well, you observe how they buy.

When customers buy a product or service, they do certain things. First, they search for the product online or in stores. Next, they try to seek more information and compare prices. Then, they check product ratings and seek feedback from friends. Over time, they engage with brands through social media.

All the actions mentioned above describe customer shopping behaviour.

Customer shopping behaviour in e-retail refers to how customers interact with your website. It involves understanding the actions a customer performs between landing on your website and leaving.

So, how exactly do we “observe customers”?

We do this using the various Key Performance Indicators (KPIs). KPIs help us get a sense of real-situation quantitatively.

Previously, we saw that e-retail and physical retail have different KPIs.

Now, we can measure the customer shopping behaviour in e-retail using the following KPIs:

• Total visits
• Bounce rate
• Shopping cart abandonment rate
• Shopping cart conversion rate
• Sales conversion rate
• Average duration on page

The flowchart in the figure below illustrates these actions. The little boxes on the right of each process show the corresponding KPI.

Customer Shopping Behaviour KPIs in e-retail

Here is a brief explanation of each KPI.

Total Customer Visits

Total visits KPI is the total number of visitor landings on a website.

According to Google, 63% of all shopping begins online. That makes ‘Total Visits’ the vital first KPI for an e-retail sale. E-retailers try to increase this KPI to increase sales.

Bounce Rate

Bounce rate is the proportion of visitors landing on your website and leaving without taking any action.

If the website is engaging for customers, they interact with it. More the interaction, lower is the bounce rate, and better are the prospects of making a sale.

There are various reasons for a high bounce rate. Moreover, a high bounce rate doesn’t tell the entire story. Also, there are ways to improve it.

Shopping cart abandonment rate

This KPI means a customer added products in their e-retail shopping cart but later abandoned the order.

According to Statista, 63% carts were abandoned because shipping cost was too high. While these customers have not yet purchased, they are most easy to convert to a sale.

Shopping cart conversion rate

Similarly, this metric helps e-retailers measure the number of completed orders compared to the total number of shopping carts initiated by potential customers.

It is calculated as a ratio of number of visitors who placed an order, to the total number of visitors who started a shopping cart. It is expressed as a percentage.

Sales conversion rate

Google defines sales conversion rate as the ratio of transactions to sessions, expressed as a percentage.

The recent Adobe Digital Index 2020 report pegs average global conversion rate in retail at 3% of the total visits. The sales conversion rate varies across various retail categories. Conversion of consumer electronics is only half at 1.4%. Gifts, and Health & Pharmacy generate the highest conversion rates at around 4.9%.

Average duration per page

One e-retail KPI to measure is the time spent on each webpage. This is tracked as ‘average duration per page’.

This KPIs is based on similar one in traditional retail. In physical retail store, more the time a customer spends inside a shop, higher are the chances of purchase.

So, what do you think? Do you track these metrics? If yes, which ones do you think are the most important for your business?

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• e-Retail Innovations – How e-Retail is Changing?

<– How E-Retail KPIs different from traditional Retail KPIs?

Online Business Growth – The Easy or The Right Way? –>

Author: Sumit Patil

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How are E-Retail KPIs different from traditional Retail KPIs?

What is E-Retail KPI?

E-retail is the online website of a retail store. KPI means Key Performance Indicators. So, the key performance indicators for an online website of a retail store are e-retail KPIs.

Traditional retail is a physical brick-and-mortar retail store. Let’s call their KPIs, traditional retail KPIs.

E-retail and traditional retail by their nature are different. The difference exists from two perspectives: the customer perspective and the retailer perspective.

Let us see the customer’s perspective first.

The customer perspective drives their shopping preferences and buying behaviour. For instance, customers who value convenience, price comparison, time-saving, and the ability to shop 24×7 prefer to shop online. Whereas, customers who want to touch, feel, and try the product first tend to shop in physical stores.

Increasingly, customers are buying in an Omnichannel environment. Omnichannel means all channels work seamlessly as one. That is, they discover a product in one channel, check it out in another one, and buy through a third. Such as shown in the figure below.

Now, the retailer perspective.

The retailer’s perspective influences their business operating behaviour. Traditional retailers focus on maximizing the in-store experience for their customers while optimizing store space. While e-retailers focus on the online shopping experience and user personalization.

These two perspectives influence their KPIs.

How E-Retail KPIs Differ?

Many e-retail KPIs are common with traditional KPIs. Some of these are the various financial ratios, customer retention, and conversion rate. However, e-retail KPIs are different from traditional retail KPIs in two major areas:

1. Customer Acquisition Channels
2. Customer Shopping Behaviour

Let us see how.

Customer Acquisition Channels

This is the source of customer traffic to your business. Understanding where your customers are coming from is extremely important for business growth.

E-retail channels are primarily organic search, direct search, referral, e-mails, and social media. These channels actually lead customers to e-retail stores (i.e. the website). So, e-retailers can easily measure the percent of customers acquired from these channels. They can then devise their deliberate strategy around these insights.

For example, Facebook generates 13.9% of e-retail website traffic, but actual sale happens in only 4.7% of cases. This is a critical piece of information in two ways: First, it allows you to allocate resources efficiently. Also, it improves ROI.

Traditional retail channels are different.

They are mainly word of mouth or advertisements in print, television, radio, and social media. For traditional retailers, it is nearly impossible to accurately calculate the percent of customers acquired from these different channels. This is because these channels do not ‘redirect’ them to the store.

For example, a customer actually visiting a store may have seen an ad or may have been referred by word of mouth. But, they may not even remember this information when they visit the store.

Customer Shopping Behaviour

Customer behaviour varies a lot between in-store purchases and online purchases. Understanding customer behaviour is central to acquiring more customers.

In e-retail, KPIs like Shopping Cart Abandonment (SCA) and Customer Lifetime Value (CLV) are important and helpful. The analysis of the shopping cart abandonment rate and the list of discarded items can help improve our understanding of the purchase intent of customers. Similarly, understanding a customer’s lifetime value helps in targeting profitable customers more effectively.

Whereas for traditional retail, understanding shopping behaviour for every customer is tricky and costly. We can only perform market basket analysis. This will only analyze the products added together in the cart. But there is no definite way to measure discarded items from carts in the physical stores. Moreover, physical space-oriented KPIs like sales per square foot are not relevant to e-retail.  

In a nutshell, it is essential for retailers to rethink the right KPIs while taking the retail business online. This is especially true since omnichannel shopping is becoming the norm.

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• e-Retail Innovations – How e-Retail is Changing?
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<– Are you survival-oriented or a growth-oriented executive?

Know customer shopping behaviour KPIs in e-retail? –>

Author: Sumit Patil

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Cover Photo courtesy: Blue Planet Studio