Retailers Are Betting on Mobile Despite Low Conversion Rates

We're looking at redesigns, heavier marketing and, hopefully, faster shipping.
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Eliza Brooke
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We're looking at redesigns, heavier marketing and, hopefully, faster shipping.
Photo: iStock

Photo: iStock

Don't be surprised if your favorite e-commerce site gets a makeover or launches an app in the near future. According to a new survey conducted by Forrester Research Inc. and Shop.org, the growing numbers of consumers shopping on smartphones and tablets are making mobile strategy a top priority for retailers this year.

Of 70 retailers interviewed in October and November of last year, 53 percent ranked developing their mobile strategy as the main objective for 2014.

Despite this intensified focus, conversion rates on mobile are still very low, in the range of 1 percent. That's compared to 2.7 percent for online retail overall. That said, it's the overall rate at which sales on mobile devices are growing that has caught retailers' attention: Average smartphone revenue grew 113 percent in 2013, while tablet revenue grew 86 percent, according to Forrester. At this point, smartphones and tablets account for 21 percent of online sales revenue.

To boost that number and minimize the number of abandoned mobile shopping carts, retailers should consider positioning mobile in tandem with web shopping, Forrester says. "Retailers need to not only optimize the site experience but also think of mobile payments and perhaps even simple ways to pass session data to another device (for example, enabling customers to email a cart to themselves). These kinds of solutions can help ensure that customers who intended to buy when shopping on a mobile device don’t disappear because they were distracted or didn’t find the experience consistent across devices," Sucharita Mulpuru, vice president and principal analyst at Forrester, writes in the report.

Expect website redesigns, too

Redesigning e-commerce sites is also a big priority for retailers in 2014, with 46 percent of companies planning to do so this year. Improving a site's personalization functionality and overall usability — and, hey, making it look more appealing — can boost conversion rates, the metric that shows what percentage of site visitors ultimately go on to purchase a given product. At the moment, conversion rates average roughly 2.7 percent among the retailers surveyed.

"While the vast majority of site visitors do not complete transactions online, even minor improvements in a site’s conversion rate can have a major impact on revenue," Mulpuru writes.

Repeat customers spend more than first-time shoppers

As far as customer retention goes, a little over half of web revenue is generated by repeat customers, which account for 40 percent of web shoppers. 63 percent of retailers surveyed are reporting that those clients drove more web sales in 2013 than 2012.

Return customers are an important group to keep engaged with the site or app, as they tend to spend more than first-timers: The average basket size for repeat customers was $178, as compared to $158 for customers who only shopped once. For retailers that have been online for less than four years, the average order value for repeat customers was $96, which rises to $175 for retailers that have been online for four to 10 years. For sites that have been around for over a decade, the average order sits at $169.

According to Mulpuru, one customer acquisition and retention strategy that works well for fashion brands is to update images frequently and make a lot of them available, since consumers are visiting those sites and apps when they have downtime.

Thirty-six percent of retailers expressed that web marketing will be another high-priority area for them this year, since it feeds into both customer acquisition and retention. That includes allocating more of the budget for search marketing, branding and loyalty programs.

Another bonus for shoppers new and old? Better, faster shipping. Mulpuru recommends that retailers consider an omnichannel approach to their businesses, specifically the advantages of shipping from local stores to save on delivery costs and speed up delivery time. That could be especially helpful to retailers as free shipping becomes more standard — and more expected by consumers — and as delivery costs across states rise.