Conversion is the crux of revenue generation online. As online holiday sales grew just 3.5% year over year, according to Adobe Analytics, retailers have their work cut out for them.

73 sellers completed Digital Commerce 360’s 2023 Performance and Conversion Retailer Survey in January and February. Questions focused on holiday results, KPIs, an exploration of investment strategies, growth opportunities and potential challenges while also looking to understand year-round conversion drivers.

57% of retailers surveyed saw revenue gains over the holiday season while 22% were flat and a similar number reported down revenues (21%).

According to surveyed retailers, some achievements were forthcoming this holiday, including better customer service (29%) and an improved site performance (22%).

Other customer experience aspects noted included:

• Optimized customer experience: 15%
• Heightened customer satisfaction: 10%
• Upgraded site experience including performance: 8%
• Elevated mobile experience: 5%

Growth was strong, with 27% citing topline and increased revenues. Meanwhile, marketplace sales growth hit 25%. Greater profitability (18%) and mobile sales growth/penetration (14%) were called out less frequently. Of course, managing one’s workforce in a difficult environment, which 21% cited, is certainly commendable.

Marketing was also notable for its achievements. 26% of surveyed retailers cited new marketing initiatives and 22% a more efficient marketing spend. Significant customer acquisition was a factor for 15%, and the same percentage reported improved customer retention.

As the supply chain was still top of mind for many, 23% included their handling of supply chain issues. Logistically speaking, retailers also cited faster fulfillment (18%), improved warehouse operations (11%) and onboarding new suppliers.

From a technical perspective, 7% of survey respondents reported making a platform change.

Key performance indicators (KPIs) are an excellent starting point

KPIs help retailers benchmark their performance relative to their peers. Our research indicates that conversion rates were up year over year for 64% of retailers along with website revenue (57%) and profitability (51%). Just less than half of those retailers surveyed saw their average order (AOV) up 47%, with marketplace performance trailing at 44%.

Moving on to conversion revealed that 57% of retailers who responded to our survey saw conversion rates at 2% or less. On a positive note, the 44% who achieved conversion rates over 2% shaped up as follows:

• 1% to 5.0%: 21%
• Over 5%: 13%
• N/A: 9%

Looking specially at marketplace conversion rates including Amazon finds they are relatively consistent and lower than one’s own website.

Conversion rate results by website

0%-1%: 

• Retailer’s own website: 25%
• Amazon: 30%
• Other marketplace: 30%

1.1%-2.0%

• Retailer’s own website: 32%
• Amazon: 20%
• Other marketplace: 20%

2.1%-5.0%: 

• Retailer’s own website: 21%
• Amazon: 6%
• Other marketplace: 8%

5.1%+: 

• Retailer’s own website: 13%
• Amazon: 7%
• Other marketplace: 9%

N/A: 

• Retailer’s own website: 9%
• Amazon: 37%
• Other marketplace: 33%

Retailer AOV rates are almost evenly split with 54% above and 46% below $100, and of course, that is directly related to one’s assortment and shopper buying behavior.

Retailers are focused on optimizing conversion

In order to invest smartly, it’s always wise to assess one’s own situation. When asked to assign a number from 1-10 where 10 is the optimal user experience, only 9% graded themselves a 9 or 10, while 57% of online retailers assess their current UX between 6-8. The remaining 34% scored themselves below a 6. There’s work to do.

Positively, online retailers are aspirational. 67% hope to achieve a user experience of 8 or more on a 10-point scale and just 33% less than an 8 in what they hope to achieve. Retailers strive to close the gap on their user experience as the chart below indicates:

8-10

• Current: 24%
• 2023 Goal: 67%

6-7

• Current: 42%
• 2023 Goal: 23%

5 or Below

• Current: 34%
• 2023 Goal: 10%

Investing in ecommerce will be up across the board with customer experience, ecommerce platform, digital marketing and personalization topping the list of priorities.

Survey respondents cited customer experience as the top investment they expect to make in 2023 compared with 2022, coming in at 71%.

The top investments that are expected to be “up” in 2023, cited by survey respondents, was the customer experience which came in at 71%.

Meanwhile, personalization (51%), web design (45%) and customer service (45%) followed. From a technology standpoint, increased spending levels retailers expect are as follows:

• Ecommerce platform: 58%
• Mobile commerce: 47%
• Advertising technology/adtech: 38%
• Website performance/speed: 38%
• Payment/security/fraud: 30%
• PIM/data management: 26%
• Artificial intelligence: 26%
• Augmented reality: 7%

Online retailers are ready to invest

Marketing also will see gains, starting with the 55% of participants focused on digital marketing. Social media at 49% and SEO will also see strong investments at 44%. From a channel perspective, marketplace initiatives are on the board, as 49% hope to grow this channel. Meanwhile, omnichannel takes a backseat at 18%. Operational investments are increasing for 43% and logistics including warehouse and fulfillment management are at 39%. And logistics including warehouse operations at 31% are up, along with the supply chain at 18%, both of which should deliver important improvements.

Driving conversion requires that retailers make critical investments in the customer experience, topping the list of likely investments at 66%. Others in that realm include customer service (46%), personalization (27%) and free return shipping (14%). Technology’s role is critical as well when it comes to driving conversion. The ecommerce platform topped that list for 54% while website performance/speed came in at a strong 45%. Web analytics/data also was important for 38%.

Marketing and digital content

Digital marketing remains key to driving conversion for 40%. Looking at conversion logistically, 37% cited warehouse operations, while the supply chain at 23% and marketplace initiatives rounded out the list at 19%.

From a content perspective, one in three online retailers see web design and showcasing brand values as critical to optimizing conversion in 2023. Other elements only saw traction among one in five surveyed, starting with video/livestreaming content at 21%, loyalty programs (19%), blog/editorial content at 16% and the about us page at 14%.

Beyond the tactics, marketing initiatives will be most important to improving online conversion rates. Those begin with SEO (48%), email (39%) and social media at 18%. From a product standpoint, optimized inventory levels at 36% and private label/exclusive products at 26% are important. A consistent experience across channels came in at 36%, with logistics continuing to play a vital role at 34%, as did user testing at 22%. Customer service numbers were lower, with live chat at 19% and virtual consultations/appointments a low 8%, likely a post-COVID casualty.

Website tactics online retailers use to improve conversion

Retailers find many on-site tactics important to improving conversion rates. For 47% of those online retailer surveyed, that starts with site search (47%), key page upgrades (44%) and an improved mobile site (38%). Improved call to action buttons can also be a factor for 21%.

Turning to the product, better product information and imagery received a formidable 42% penetration, while more sophisticated product imagery came in at a strong 37%.

There is always room for improvement when it comes to checkout, and 29% suggested a reduced number of steps while similar numbers of retailers noted a simplified sign up and checkout.

Education that can drive conversion, including interactive product match tools, came in at 21%. This tactic tends to be more niche and is likely to work in categories like home and apparel so the penetration is lower. The same number of retailers also cited embedded links from social media posts. In the case of social, its appeal and usage will be more prevalent among younger audiences making it more valuable for certain retailers who target that demographic.

Issues online retailers face in 2023

The most significant issues online retailers will face in 2023 focus on profitability, cost-effective marketing, improving the UX and achieving planned growth while still grappling with inflation and consumer behavior shifts.

To provide perspective, I thought it might be interesting to integrate some of the answers we received to the most important action retailers will take in 2023 to positively impact their business.

A look at what lies ahead centers on the No. 1 answer, profitability, which 62% of those surveyed suggested. Profitability comments included increasing profitability and a review of distribution strategy to ensure it coincides with profitability KPIs.

Respondents said cost-effective marketing, at 60%, would contribute to the bottom line. Here, an array of activity about what was most important ranged from optimizing marketing spend and customer segmentation to growing profitable revenue.

For some, that included more marketing, while another retailer suggested they would be looking to lower digital marketing costs. Several retailers mentioned investments in search marketing, along with growth enablement into new marketing initiatives. They also suggested more specific targeted areas such as expanded social advertising, Facebook audience testing and adding more effort with sale affiliates. Lastly, one focused on finding the right customers while another hoped to extend loyalty programs and customer retention.

Beyond those, 53% selected achieving planned growth and 21% said growing marketplace sales.

Customer experience: Online and offline

From a customer experience point-of-view, improving the user experience was a strong 55%. Additionally, customer service policy adjustments at 21% were also cited. Customer experience was one of the highest callouts as most important, and some of the most interesting statements included:

• A reorganization of the team
• Improved online experiences
• Changing the buyer journey
• Enhancing customer engagement

People were a factor where retailers cited hiring more staff, upgrading platforms and integrations, a better hiring process, lean management, organizing teams and goals, and upskilling employees.

Strategically speaking, almost half of surveyed retailers said they will still be grappling with inflation (49%), while similar numbers (44%) continue to be confronted with consumer behavior shifts. Given the inflationary times, adjusting product pricing (27%) and optimizing the inventory assortment remain factors for 25%, as do omnichannel offerings (23%). For some, it was a refinement of inventory; for others, it was a reduction or increasing of average unit price.

A range of plans were cited with some positive and others more negative in nature. Those ranged from distribution growth to increasing funding in the business to taking it in a different direction. Several suggested continuing to move more toward ecommerce as a significant channel, selling direct to consumer (DTC) or participating on more marketplaces including Walmart and Target. Some felt they needed to eliminate low performance, needed a corporate restructuring or would shut down existing their ecommerce site due to insurmountable fraud.

The supply chain and logistics also remain top of mind for retailers with concern.

They cited concerns including:

• Shipping delays from carriers: 27%
• Supply chain concerns: 23%
• Meeting fulfillment demands: 22%
• Viability of same-day delivery: 15%
• Adapting warehouse operations: 12%

There, retailers cited top plans as warehouse upgrades and moving to a multi-carrier shipping system.

Though not directly addressed, technology deserves a mention as well as a number of retailers highlighted:

• New ecommerce platforms
• Improving analytics
• Site search
• AI and deep learning
• Better processes and workflows

The issues are unlimited, and retailer resolve is necessary to grow ecommerce in 2023. Monitoring the user experience is essential in hopes of continuing to deliver increasing KPIs. As funds are always limited, smartly directing investment will have important consequences. From the site experience to marketing and the underlying technology, there is still work to be done for retailers whose goals are greater conversion and profitability.

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