What is the sales conversion rate in retail?
The conversion rate has become a commonly adopted KPI in retail companies because it answers a simple question: What percentage of the people who visit my points of sale decide to buy?
Imagine that you have a store and you notice that 25 people come in one day, but none of them make a purchase. In this case, the conversion rate is 0%, which is a cause for concern. The expectation would be that at least 3 or 4 of those 25 people make a purchase, which is equivalent to 16%. This is what we call the conversion rate.
Basically, the conversion rate is calculated as the number of buyers divided by the number of visitors to your store.
The sales conversion rate is typically defined as:
Conversion rate = Number of tickets / Number of customers
Some retail companies prefer to compare the percentage change in sales from one year to the next. However, others find it more useful to measure traffic and conversion to compare themselves to their current sales potential.
These metrics are vital for businesses as they indicate how many people actually make purchases from your store, which is the main goal.
There is no single percentage that applies to all businesses, since each company is different. However, knowing, measuring and understanding this metric is crucial to making informed decisions to improve your business.
Why is it important to measure the conversion rate?
Although it may seem simple, calculating the conversion rate is not that quick or easy. We recommend that you continue reading if you have a professional team determined to implement a data-driven decision approach
Retail companies often use traffic counting solutions due to their defined ROI. By measuring traffic and conversion, you can set specific KPIs that translate into increased sales:
Traffic * Conversion Rate * Average ticket = sales volume.
That means that if you increase any of these indicators, your sales will increase.
The conversion rate also allows you to know the sales potential from store traffic.
There is an inverse relationship between traffic and conversion rate, that is, when traffic is high, the conversion rate tends to be lower. There are several reasons why traffic and conversion rate are inversely related, chief among them the level of customer service in the store.
How to improve the conversion rate?
The goal of these efforts is to minimize the negative relationship between traffic and conversion rate. It is essential that you study qualitatively (and if possible quantitatively), which are the factors that are degrading sales conversion.
An example of a qualitative evaluation is determining how much sales conversion falls due to waiting lines in stores. Usually, if a customer perceives that they have to wait, they are more likely to abandon the purchase, so the conversion drops.
A quantitative way to evaluate sales conversion degradation is to measure how much your conversions drop when there are waiting lines in your stores
From a qualitative point of view, the essential elements that determine the effectiveness of your stores are: how visitors arrive at your store and how your stores can convert those visitors into buyers.
Although there are several factors that influence the purchasing decision such as products and displays,the most variable and potentially most relevant factor for the conversion rate is the store staff. p>
Therefore, the most common way to improve conversion rate is by scheduling staff and measuring service intensity, that is, the degree to which store employees are available to serve customers. customers. A customer who can be served quickly and effectively is more likely to make a purchase.
Separate your team into work shifts based on the daily and hourly flow of customers to maximize opportunities for customer-employee interaction and facilitate purchases. To do this, it is helpful to analyze the traffic patterns in your store during different times of the day and different days of the week.
In addition to ensuring adequate staffing, sales staff training is a crucial factor in improving conversion rates. Well-trained employees will be equipped to answer customer questions, offer product advice, and overcome any objections a customer may have to making a purchase.
In addition, the design and layout of the store can have an impact on the conversion rate. An intuitive design will make it easier for customers to find what they are looking for or discover new products.
Effective marketing also plays a role in improving conversion rate. For example, well-advertised product offers can attract more visitors with the intention to purchase.
It is vital to experiment with different strategies to improve conversion rate, measure results and adjust tactics as necessary. If you're not sure where to start, consider hiring an advisor or agency with experience in conversion rate optimization.
In summary, the conversion rate is an essential metric in the retail sector to evaluate and improve the effectiveness of your stores. However, it's important to remember that each store is unique and there is no such thing as a "perfect conversion rate." Instead, you should focus on understanding your own metrics and working to improve them.
