I've worked for retailers with 3,000 stores and ecommerce businesses with none. The KPIs are the same. To grow sales you need more traffic, a higher conversion rate and a bigger basket. Simple really. The hard part is knowing where to start.
One formula for shops and websites
In a store we talk about footfall, conversion and ATV. Online it's traffic, conversion rate and AOV. Different words, same maths. Multiply the three together and you have your sales line.
The truth is we need to optimise all three to create a step change in commercial performance. But with finite budget and resource, we have to decide which lever to pull first.
Market data can show where you're underperforming against competitors. Like-for-like sales against last year show where the gaps are. There's usually big variation between channels, and between stores. That's exciting in a way, because it tells us there's opportunity. If store X can do it, why can't store Y?
Fix the leaky bucket before you pour more in
My sense is we spend too much time on acquisition, driving more traffic online or to store. The reward from converting the customers we already have is often greater, and cheaper.
Think of it like a leaky bucket. We pour water in the top, only for it to leak out the bottom. It's really hard to move the needle, and the CFO starts to get itchy feet.
The numbers make the point. The average ecommerce conversion rate is only around 3%. Physical retailers typically see something closer to 40%, and in high-ticket, low-frequency sectors it can be nearer 30%. Either way, most people who visit leave without buying. Improving conversion by just one or two percentage points is material.
Acquiring a new customer can cost up to five times more than keeping an existing one. So understanding why browsers don't become buyers is usually the fastest route to growth.
Lever 1: Conversion
Conversion improves when buying is simple, easy and frictionless. Get the basics right first:
- A great range with good availability. Customers can't buy what isn't there.
- Fair pricing, so customers feel they're getting value for money.
- Easy navigation, a fast site and quick payment options.
- Help on hand. In store, that's knowledgeable colleagues. Online, it's rich content, reviews, comparisons, video and live chat for high-ticket items.
Then test. A/B testing online and trials in a handful of stores will tell you which changes actually move the numbers. That could mean changing a store layout, adding colleague hours at peak times, or reworking a product page.
Lever 2: Traffic
Once the house has solid foundations, invite people in. I'd always start with owned and earned channels, because they show your natural performance without spending a bean:
- SEO, on-site and off-site.
- CRM: personalised email and SMS, abandoned basket journeys and a programme that tells your brand story. I've seen CRM deliver 30% of total online sales for clients.
- Social and PR, which build awareness and give customers a reason to visit.
Getting SEO and CRM right means you spend less on everything else. After that, add PPC, Performance Max, paid social, affiliates and traditional media. In every case, set ROAS, lifetime value or CPA targets up front so you know what good looks like.
A compelling reason to visit helps, and it may need some urgency to change behaviour. Brand-led content will give a smaller jump at first but builds adstock that pays back over a longer period. Plan performance and brand together.
Lever 3: Basket
Basket size is often the quickest win. Just one extra item per customer can make sure budgets are exceeded. The tools are well known, but few retailers use them consistently:
- Bundle offers and multi-buys.
- Personalised "might likes" based on what similar customers bought.
- Essential add-ons and accessories at the point of purchase.
- Impulse lines at the till.
- Clear good, better, best ranges that show the benefits of trading up.
- Higher attachment of services, such as care plans, installation or delivery.
Which lever should you pull first?
It depends on your sector:
- High ticket, low frequency (furniture, electricals, kitchens): focus on conversion. Every lost sale is expensive.
- High frequency, low basket (grocery, convenience): if conversion is already healthy, focus on footfall, retention and basket.
- Fast-growing businesses: acquisition matters, but plug the leaks first.
Whatever you choose, start with the customer. Having a visceral understanding of what makes them tick, and what gets in their way, is what tells you where the money is. And the trump card is always ROAS. No point spending if we don't see a profitable return. Busy fools comes to mind.