Do you have what it takes?
In Formula One racing, you don't show up at the start line with a fancy car and no gas in the tank. When I meet with e-commerce prospects I ask three key questions
1) How many unique visitors do you get in an average month?
2) What is your average sale (or what do you anticipate)?
3) What is your sales goal on a yearly basis?
Then I crunch the numbers to do a reality check.
I assume a conversion ratio of 2% to determine how many sales they can expect to have with current traffic.
Why 2%? It is a good benchmark and the math is easy. Multi-channel retailers without an aggressive online strategy have half that conversion rate because their products are available in stores and people pre-shop. Online only customers can get as high as 10% or more, but 2% is a great starting spot and as I said, the math is easy.
Why do I take existing traffic? Because that is what they are going to start with. Simply improving an existing site or creating a new store is not going to increase your traffic significantly. Current traffic is your current audience.
I take the sales goal and divide it by the average sale to figure out how many orders they need in a year to hit their goal. Sometimes I have to use a calculator but most of the time I round up or down a bit to get an approximation. I am not launching a satellite. Divide that annual number by 12 and then see what the gap is.
For a prospect I met with recently, they had about 3000 visitors a month with an average sale of $75 and a goal of getting the site to $250,000 per year in online sales which they had determined was sustainable based on COGS, staff, and transaction costs. They had a tragically low conversion rate but laid a lot of that on their current cumbersome site.
At 2% conversion they can expect about 60 orders a month with their current traffic (wasn't that easy? Aren't you glad I didn't use 2.3%?). Their financial goals and average sale requires about 280 orders a month though so they have a gap of 220 orders. Put into site traffic terms that is about 11,000 visitors per month or growth of close to 400%.
Then I ask the most important question: Where are those 11,000 additional users a month going to come from?
All technology, design, seo, and conversion optimization aside, this is what makes or breaks most eCommerce sites: Lack of traffic and a reasonable plan to get more. Your site is the car, but marketing is the fuel you need to win the race.
Faced with the stark reality of what it was going to take to hit his goals, our prospect has decided to stick with his existing platform and start to work on doubling his site traffic with content marketing and other initiatives. That will help close the gap between where he is at and where he needs to be to succeed.