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What does conversion rate mean in retail?

by Nick Hughes

If you own or run a retail store either online or offline the amount of traffic that turns into sales otherwise known as your conversion rate is a crucial metric for the success of your business. Today we are going to discuss what your conversion rate means for online retailers.

Before we start talking about Conversion Rate Optimisation, we need to define what a Conversion Rate actually is.

For eCommerce stores, your Conversion Rate is typically defined as the percentage of unique visitors that make a purchase.

To illustrate, it’s probably easier to use some numbers. Let’s say your eCommerce store receives 20,000 unique visitors each month, and 400 of these visitors make a purchase.

That means 2 out of every 100 people who visit your site go on to buy, making your conversion rate 2%.

What are the easiest ways you can measure the conversion rate of your online store?

1. eCommerce Tracking with Google Analytics

Firstly what is e-commerce tracking?

eCom Tracking

E-commerce tracking is within Google Analytics and is what allows you to measure the number of transactions and the amount of revenue generated by your website.

The e-commerce tracking code is placed on the confirmation page when a user completes a successful sales transaction.

The e-commerce tracking for Google Analytics involves a four step process (if you aren’t at all tech savvy this can be a little difficult for many people):

a) Creating a transaction object
b) Creating an item object and adding it to the transaction object
c) Adding currency to the transaction
d) Submitting the transaction to Google Analytics For further information on how to set this up click here.

2. Manually

If you want to quickly get an idea of your websites conversion rate you can crunch some numbers, back of the envelope style.

To determine your websites conversion rate in the last 30 days do the following:
a) Log Into Google Analytics
b) Click Audience > Overview then record the users number. Lets say this number is 5,000 for the sake of this example. c) Work out how many sales you have had in the last 30 days. Let’s say you’ve had 100 sales for the sake of this example. d) Divide 100 into 5000 (100/5,000), which equals 0.02 x 100 which is a 2% conversion rate.

Being over your conversion rate is crucial for understanding basic business metrics such as what it costs you to acquire a new sale and if your website is worth throwing advertising dollars at.

Let’s look at an example if your average sale is worth $200 and your profit margin is 100% you’re making $100 Gross profit per sale.

If it is costing you $0.50 per click with Adwords and your conversion rate is 2% then you know it costs you $25 to generate a new sale. Assuming your overheads are low if it costs you $25 to generate a new sale and you make $75 profit on each sale you should spend as much money as you can on Adwords until it starts to cost you more than $25 to acquire a new sale.

Your website will have it’s own unique sales funnel and depending on the product that you sell your industry will have it’s own unique buying cycle.


If you do not address or understand your industries buying cycle and your customers journey from research phase to successful payment I’d suggest you better learn to navigate Google Analytics or speak to a Conversion Expert.

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Nick Hughes

Nick loves working with people and has been in the Digital Space for over 6 years, in this time he has worked closely with over 400 different clients. His passionate about travelling, psychology, business & sports.

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