Plugging the 14% of revenue leaking from every ecommerce site

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A massive amount of time, effort and money is spent driving traffic to ecommerce sites. Hitting sales targets is based on simple math: For every, say, 100,000 visitors, 3% convert, spending on average $100, resulting in $300,000 of revenue. From this, a treadmill of customer acquisition starts, constantly trying to find a fresh way to reach the same audience, find new audiences and get them to click through to your site.

But there’s a problem: Where visitors land — and the experience they have on landing — has a very big impact on what happens next. Today, 25% of traffic lands directly on the product detail page, something that it was never designed for. As a result, traffic bounces off 79% more and converts at only 1.5%, half the rate of every other page. In total, this amounts to 14% of site revenue leaking from your product pages, and $700 billion in lost revenue across the industry. But all is not lost; understanding why consumers are bouncing off leads to some practical solutions that ecommerce teams can implement relatively quickly.

In order to fix this, we need to go back to how we got here and why customers are bouncing off product pages so frequently.

Believe it or not, we’ve been working with the same ecommerce conversion funnel concept for over 30 years. Over time, we’ve optimized ecommerce sites and standardized the different types of pages, bringing familiarity and reassurance to new visitors arriving on a brand’s site for the first time. Most homepages follow the same basic layout, as do category pages, product detail pages and checkout flows. This familiarity makes sites intuitive to use and helps shoppers to trust the site, which is critically important in converting a browser to a buyer. This works well: Of every 100 visitors arriving on the homepage, 11 will make it to the shopping cart and three on average will make a purchase. As mobile commerce became increasingly important, we’ve adapted these pages to work well on portrait touchscreens rather than being designed for landscape desktop use. But other than adapting to mobile, there’s been little change to how a typical ecommerce site sales funnel works.

But now there’s a different problem, accelerated by the pandemic: Shoppers are changing the way that they buy, and the traditional ecommerce funnel comes up short. Many shopping journeys now start at the edge, with customers discovering brands and products on social media, not on the core ecommerce site. This also means that the start of the shopping journey is completely different, and customers are landing on category and product detail pages halfway down the funnel. These pages were never designed for landing traffic and, as a consequence, don’t work well for this type of traffic.

We also need to understand why customers bounce off product pages so frequently before we can think about fixing it. The product detail page deliberately removes distractions from the customer, presenting her with everything she needs to know about a specific product and one simple call to action: buy now. This works well for traffic that has flowed down from the homepage, through category pages, and onto the product detail page. But it doesn’t work well for new customer acquisition, where a social media user may have just discovered the brand for the first time and clicked on an interesting product. At this point, she’s still in discovery mode and not yet ready to buy. Landing on the product page with all distractions removed and presented solely with a “buy now” call to action frequently leads to a bounce for this type of traffic. For her, the product page is a dead end, and it’s not obvious how to explore other similar products, adjacent categories, compare products, and generally go about the pleasurable process of exploring a new brand, choosing, comparing and deciding.

Another major cause of the high bounce rate off the product page is product availability. There is a direct link between promoted posts on social media, increased traffic, and out-of-stock products. The act of promoting a product drives a disproportionate increase in traffic and frequently a spike in sales. Unfortunately, ads are generally not connected to inventory levels, resulting in the ad being shown for an extended period after the product has gone out of stock. This is extremely frustrating and a daily experience for many consumers who have a justifiable expectation that a promoted product should be available. Why would a brand promote products that are out of stock?

Most social media product catalogs are set to import a refresh of product and inventory data every 24 hours. For fast-moving items and items on promotion, this creates synchronization issues between the inventory that is available to sell on the ecommerce site and items shown as available on social media.

The quality of experience the visitor has on landing has a significant impact on whether she will return at a later date and whether or not she will buy. A typical sale requires a sequence of touches, so we need the shopper to want to return to the site, and that means delivering a good experience. Profitability in e-commerce comes from repeat purchases (due to the very high cost of new customer acquisition), so we need everything from the landing experience through the purchase, fulfillment and post-purchase experience to be excellent. Getting this right is also one of the easiest ways to increase the effectiveness of your current marketing spend. Want to improve your return on ad spend (ROAS) by 25%? Start focusing on what happens after the visitor clicks the ad.

So how do we fix this and plug that massive 14% revenue leak? There are essentially three approaches:

1. Change the product detail page

The first option is to change the product detail page to make it more suitable for landing traffic; this means lengthening it significantly with other products and categories that may tempt the visitor not to bounce. While this seems like a simple solution, there are a couple of challenges with it. You may not want to change a page that works well for your traffic coming down the traditional sales funnel. You may have already tested your product page and optimized it for conversion and be reluctant to add in additional content. Adding potential distractions from the buy button could reduce your conversion rate, and therefore, this is something you should test — not just roll out without running a proper A/B test. The second issue to think about is what should those other products and categories be to tempt the visitor? In an ideal world, they should reflect the context that got the visitor to click on the social post in the first place, which requires dynamic, visitor-specific content rather than a generic “You might also like” recommendation. This increases complexity significantly.

2. Send social traffic to a different destination

If you don’t want to change your product detail page, then the other option is to route your social traffic to a different page. Traditionally, this would be a landing page dedicated to that campaign, but the short-lived nature and the number and frequency of social campaigns make this especially hard.

Building a dedicated landing page for each social post or ad isn’t practical for most brands due to the time and effort required to create one. An alternative is to create a version of your product detail page specifically for landing traffic. This enables you to experiment to find the formula that works well for social traffic without affecting your regular conversion funnel traffic. It also means that you can tweak this page for each campaign without having to create a page from scratch each time.

Another route is to test social checkout. Most social media platforms now have the ability for customers to buy without leaving the social platform. This is something that you could try, but there are some pitfalls that likely make this a non-starter for any but the smallest brands. Ignoring the cost (Instagram, for example, charges 5% of GMV), the biggest issue is the ownership of customer data. Not having the ability to contact your newly acquired customer is a big concern for most brands and goes straight to the issue of profitability. Like other marketplaces, letting the social platforms take the order can drive volume, but it doesn’t build a lasting brand-customer relationship beyond the transaction.

You also need to think about the effort of maintaining different stores on each of the social platforms and keeping them in sync with the main e-commerce site.

There’s another potential fly in the ointment as well: Only 13% of online shoppers prefer checking out on social compared with almost three-quarters who prefer actually buying on the brand’s e-commerce site.

Given this, creating a “social” version of your product detail page is the best route at present.

3. Fixing inventory frustrations

While out of stocks will always be frustrating for both the brand and the customer, there are some simple, quick fixes that can prevent a bad situation from becoming worse. Monitoring stock levels of products on promotion enables you to pause ads for those campaigns and divert the budget to products that are in stock. This can be done by setting up an alert in your analytics system to notify you when order numbers drop dramatically for any product. (The data signature for a product that’s on promotion followed by an out-of-stock event is quite distinctive — much higher sales than normal, followed by sales dropping suddenly to zero/near-zero). Linking these alerts with live campaigns as well is a bit more complicated but can be done. While pausing ads will enable you to drive a higher ROAS, the main benefit is that customer frustration levels will be much improved since most landing traffic will be to products that are in stock. Remember that customers expect that products you are promoting will be in stock.

Another quick fix is to avoid promoting fast-moving products with low stock levels on social in the first place. Because inventory data on social is almost always out of date, it makes sense to reserve promotions for products in plentiful supply.

Ultimately, the trend of discovering products on social is going strong, with almost half of online shoppers stating that social is a great place to discover products. Brands will spend 25% of their digital ad budgets on average this year promoting on social, and this is not only an area of growth but also the best opportunity currently to find new customers. But because the conversion rate for traffic landing on product pages is only 1.5%, there is also a lot of opportunity here after they click. Small incremental changes in conversion rates can make a massive difference to overall e-commerce revenue. Here we’re targeting perhaps the biggest revenue leak of all, at 14% of site revenue, so this is definitely worth investigating and optimizing. We know it is common for product detail pages to underperform, especially for landing traffic, so they are a great place to start clawing back lost revenue in order to restore overall page performance to the expected 3%.

Charles Nicholls is founding director and chief strategy officer of SimplicityDX.

Originally appeared on: TheSpuzz