What is Conversion Rate in Retail?

Conversion rate is the number of people who buy from you out of the total number of people who entered your store.

Conversion Rate Formula

Conversion Rate = no. of transactions ÷ traffic x 100

Let’s say 1000 people entered your store, out of which 40 people bought. The conversion rate will be 40 ÷ 1000 x 100 = 4%

Conversion Rate Formula in Excel

You can create the formula in excel sheet by dividing the no. of transactions by traffic and multiplying by 100 or setting the result field to show as percentage.

You can also use our free online Retail KPIs Calculator

How Does Conversion Rate Affect Retail Sales?

You will be impressed how much one point increase in conversion rate can add to your top line as we will show with examples now.

Sales = Traffic x conversion x average transaction value

Let’s look at an example and assume traffic and ATV are fixed.

Traffic x conversion x ATV = Sales

2500 x 20% x 200$ = 100,000 $

2500 x 21% x 200$ = 105,000 $

Improving conversion rate by 1 point only has Increased sales by 5%

How to Measure Retail Store Traffic?

Retail stores measure foot traffic by installing people counters at the entrance. These devices use infrared technology and are calibrated in way to count anyone passing by a designated area in the entrance. Retailers usually adjust this area to allow for a small passage at both ends for store staff to use, so that they will not be counted. They are also usually calibrated in a way to measure above a certain height, so that toddlers will not be counted.

If these counters are not calibrated correctly they might capture traffic out of the store, by counting people just passing by in the mall. That’s why they are usually set in the beginning and compared against a manual count for a short period and based on that the set up area will be confirmed.

In order for the results to be accurate, store staff should strictly use the non-counted area or use a backdoor to enter and exit the store. However; retailers usually allow for a room for error when reading footfall results and take that into account.

Read Also: 6 Free Ways to Increase Your Store’s Traffic

What is a Good Conversion Rate for Retail Stores?

A good conversion rate for a retail store is 20% or more. Stores that are located in a busy mall or street can have a lower conversion rate at around 15%, due to the fact that more people pass by the store while being in the mall for other purposes, such as entertainment or dining.

We have also seen stores that delivered higher conversion rates, and these stores were located at lower traffic malls or are stand-alone stores in a small neighborhood. This is because most people who visit these stores have the intention to buy. In this case the conversion rate went up to 40%.

How to Increase Conversion Rate in Retail?

The key to increasing conversion rate in retail & ecommerce is to find out exactly why customers are leaving the store without buying and fixing those issues.

You will find that the main reason people leave your store without buying is because they didn’t find what they want. Most of the ways to increase conversion will focus on this aspect.

1. Improving Product Knowledge

Having a sales team that knows the ins & outs of the products they are selling will improve conversion rates. Many times your customers will ask for a certain product that is not available, but has lots of alternatives. Having a trained sales team with good product knowledge will guide the customer towards those alternatives and successfully completing the sale.

Just think about how many times you went shopping for a certain product but came back with a different one that fulfills the same function, maybe even in a better or cheaper way, and you were equally satisfied.

2. Hiring The Right Sales People

There might be certain frictions in the selling process, especially for high ticket items, that only your most skilled people can resolve and complete the sale.

You will find that if you have a sales team and have a lead generation program in place, those who achieve the highest sales have probably received the same number of leads, but they converted more people because of their persuasion skills.

So having skilled sales people will improve your conversion.

3. Changing Store Layout & Navigation

In many cases you will have the product in the store, but because customers couldn’t find it quickly and easily they just left without buying.

You will not always have a sales person available to assist the customer, especially on high traffic days. That’s why a simple tweak as putting clear navigation signs could make a big difference.

Also make sure you design your store layouts to be based on how customers actually shop, rather than pure aesthetics (visual display).

For e-commerce, consider how you display categories, related products, and use of filters (by size, by color..etc).

4. Avoiding Analysis Paralysis

Research has shown, over and over again, that giving the customers too many choices actually paralyzes their mind and makes them more likely to stop the buying process altogether.

You will also find that, according to The 80/20 Principle, 80% of your sales will come from only 20% of your products.

That’s another reason to optimize your product offering and focus on products that are actually in demand and hold the varieties that sell the most.

To do this you will need to keep monitoring and analyzing your sales reports by SKUs and tweak your buying process accordingly.

5. Capturing Missed Opportunities

Because the main reason customers leave without buying is that they couldn’t find what they wanted, you will find that having a system in place to capture missing sales opportunities and working on making these products available in the future will improve your conversion rate and your sales.

Fo e-commerce you can find this out by analyzing the keywords that customers used to reach your store, or the keywords they used in your internal search engine, as well as the keywords they searched for on google but didn’t click on your link.

In Google Search Console you can see the queries that customers used in searching items that are relevant to your store, and see the ranking your page has for these keywords.

In many cases you will find products that are related to what you sell (that’s why you show up in the results) but you don’t carry the exact product (that’s why your ranking was low and you didn’t get many clicks).

Chances are, many customers that came and left your store were looking for these products and didn’t find them. Sourcing these products will then improve your conversion as well as your traffic.

For brick & mortar stores, it’s a good practice to ask store managers to keep a notebook and record the products that customers asked for and the store doesn’t carry.

6. Implementing Easier, Faster Checkout

Many customers will leave the store, despite needing the product, if they find out they will have to wait too long to check out. Same applies to e-commerce, make your checkout page simple & fast and highlight payment methods that people prefer & trust. Also consider guest check out, if it will work for you.

7. Reviewing The Store’s Return Policy

Having a relaxed exchange & return policy removes a lot of friction from the buying process, and in return can improve conversion.

More Resources

Thank you for reading this article on Conversion. We recommend the below free resources as well:

• Average Transaction Value
• Units per Transaction
• Retail Math Formulas