The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet. The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.
Barack Obama

I was fascinated recently to observe the average online conversion rates, coming from the United States top 500 retailers, showing an average across 15 retail categories at 3.46%. These categories ranged from apparel/accessories through to toys and hobbies. (Please call me if you wish to compare your category). Perhaps a slightly less charitable perspective might be that 96.54% of us don’t actually buy online at present on average across the year, that is convert the research to an actual online purchase.

Perhaps the point can be made by comparison to our current physical store conversion rates where we see an average of between 18 to 25% conversion (in some cases skewing significantly lower and higher depending upon individual circumstances).

Despite this marked difference in conversion, I hear that many more millions of dollars are being invested into online growth projections above the recapitalization so urgently required in some of our physical store networks. Yet does the business case, based purely on conversions actually cut the mustard?

Candidly, in the short run, we might argue that this investment in online retail is not justified, although the broader view would be that there is no more powerful advertising and consumer touch point than online.

What is also interesting is that we see that over 80% of big ticket items are pre researched online and interestingly, according to Google, we find that currently 40% of shopping related searches originate from smart phones or tablets.

So although we are still seeing reasonably low conversion, internet/online/virtual retail or whatever we may call it has a very dominant role as a predominately research and convenience tool. Number of unique visits/hits etc is interesting and important primarily for understanding the power of the brand site to attracting people to the site but these do little to explain anything about the customers actual want or need.

Our own RDG Insights research into this topic show us that 63% of those that prefer to shop in store than online say this is because they “like to see, feel and touch the product before buying it”. We like to have our 5 senses stimulated in extraordinary ways as we see highly successful retail brands reflecting in their newer ‘fitter’ retail formats.

It becomes more apparent why we see globally that success for pure online retailers, minus the ‘”Amazons” of this world, is particularly narrow, because the volume numbers game to a narrower conversion. In isolation, an online differentiated play is extraordinarily challenging.

Is this difference the sole reason why physical conversion from online ‘researcher” and in store shopper to customer is so marked or is the difference so fundamentally embedded into the central difference between the channels themselves?

One channel is about process and convenience, the other channel is about people and experience. Clicking to convert is not enough, we need to engage further with the customer and touch them in a more meaningful way. The answer for a “fit” retailer is the merging of both channels. It’s not about a single metric in a single channel, rather both touch points working together in accord that will lift conversion for the business as a whole.


First published by SmartCompany February 2014