How Not To Lose $147 Billion At Checkout

One could argue that the shopping experience, from the consumer perspective, doesn’t get more convenient than when it’s online. But there’s a downside to that perception, as eCommerce merchants that presume that that their operations are “as good as they can get” might be missing out on as much as 42 percent of their sales due to friction in the checkout process.

There’s a way for merchants to find out just how much of their potential online transactions they are failing to convert — and a way to regain those sales.

PYMNTS and BlueSnap have collaborated to create the Checkout Conversion Index (CCI), which measures the friction that consumers experience when they shop online.

In the Q4 2015 edition of the CCI — a Jan. 2016 revision of which has been released today — an analysis of more than 650 U.S.-based eCommerce sites across 14 merchant categories shows that those businesses may have lost a total of $147 billion as a result of transactions that consumers abandoned before completion due to friction in the checkout experience.

From the latest CCI, BlueSnap (in partnership with PYMNTS) has devised the Checkout Conversion Calculator, a simple tool that can help retailers identify where there is friction in their checkout process and take the steps necessary to make the process a more seamless, and therefore profitable, one moving forward.

Simplicity Can Be Complicated

When a merchant’s online checkout process is mitigated by unnecessary and complicated elements, it is missing the very point that is driving so many consumers to begin that process to begin with: the aforementioned convenience.

The CCI found that the time in which most successful merchants take customers from the “discovery” phase of their shopping experience to checkout is 134 seconds — just over two minutes. The worst-performing sites in the index, on the other hand, make consumers take nearly twice that optimal range — 220 seconds (or close to four minutes).

While speed is of the essence in online shopping, the CCI additionally determined that the amount of information a merchant provides runs part and parcel with convenience. Offering “live” help — be it through chat, phone and/or text — is another differentiator in completing transactions, as is the availability of free shipping. A seemingly minor but surprisingly uncommon differentiator is the ability for consumers to duplicate their billing address as their shipping address with the click of a button.

Establishing trust is another essential element in closing an online sale. In addition to providing trusted security logos in the checkout process, merchants that ask customers to provide a profile — instead of requiring them to do so — save consumers time while building trust.

The final key element of convenience sussed out by the CCI is the range of payment options that an online merchant provides. On average, the best-performing sites offer 6.8 payment types versus 4.0 for the underperformers, and accepting coupons emerges as another potential dealbreaker.

Git Fit Wearables, though it received an above-average score of 61 (out of a possible 100; the average was 55) in the index, stands as an example of an online merchant that lost an estimated $6 million in sales, in part by requiring too many steps and not accepting coupons.

The Trouble With Digital

Given that they’re both in the digital realm, eCommerce merchants that offer digital goods inherently have a leg-up on those dealing in physical products — right?

Wrong.

The CCI shows that merchants in the digital categories scored significantly lower than those in product categories, with the highest-scoring category being Sporting Goods at 68.9 and the lowest being Gaming at 47.5.

The three major factors contributing to this disparity are coupon redemption — 85 percent of Sporting Goods sites allow for it, while only 52 percent of Gaming sites do; mobile capabilities — 75 percent of Sporting Goods sites analyzed have them versus only 52 of Gaming sites; and rewards — while 31 percent of the top-scoring sites offer reward programs, a mere 9 percent of the lowest do the same.

Hardy’s Software Co., a subscription-based SaaS provider, is in a position for growth in the digital realm, but it falls into some of the common traps plaguing its category — currently losing $8 million in annual revenue as a result.

Bigger Isn’t Necessarily Better — And Neither Is Smaller

Unlike what is commonly the case with physical retail, in the digital realm — being that it is, by definition, virtual — the size of a merchant is not a determining factor in its success. The CCI found differentiating aspects that give smaller online merchants an advantage over their competitors, as well as those that help the bigger ones.

For smaller eCommerce merchants, the biggest advantage is time of sale completion: one minute less, on average, than larger ones. The more successful of the smaller online merchants, it was determined, also require fewer address fields — at a difference of 98 percent to 86 percent. Lastly, security logos are present at 74 percent of smaller merchants versus 56 of larger ones.

Where the bigger eCommerce merchants have the advantage, on the other hand, is in the areas of customer incentives — the CCI found that large merchants, in addition to offering free shipping significantly more often than their smaller counterparts, reward customers for returning 36 percent of the time compared to 22 percent of the latter — and flexibility — larger merchants more frequently offer mobile apps or mobile-optimized sites and accept more payment types than do smaller ones, and they are also slightly better at providing product reviews and recommendations.

The average ticket price for IT services provider Fix IT Services is $2,000 — meaning that the company can play with the big boys. The company’s current CCI score of 53, however, places it below average. Incorporating elements such as additional payment types (among other steps) could help it regain some of its $8 million in estimated lost sales.

BlueSnap’s Checkout Conversion Calculator, which can help online merchants locate and address the points of friction in their checkout process, can be downloaded here.

To get the full details on best practices for improving online checkout conversion, download the Q4 2015 Checkout Conversion Index — Revised January 2016, from PYMNTS and BlueSnap here.