Simple Ways Operations Can Help Improve Checkout Conversion
Lots of design literature has been written to document e-commerce shopping best practices. User experience (UX) and user interface strategies, like checkout flows or microcopy, matter for increasing purchases.
The role operations can play with improving conversion and revenue is often ignored because of its multiple levels of difficulty. Unlike a button, whose color can be easily changed, iterating on UX elements linked to operational dependencies is really hard. Most companies just skip it.
It's hard for a chief marketing officer to quickly test if showing two-day shipping will improve conversion if the chief operating officer hasn’t yet set up a two-day shipping program, for example.
However, it turns out there are many small little design tweaks throughout the customer journey which are dependent upon operations that can help improve not just conversion percentage, but customer loyalty, too.
Let's look through some of them.
Transparency Around Shipping
The easiest way for operations to help marketing is to expose the things they already know, like costs, timing and specific fulfillment details.
For shipping, simply showing the price among delivery options matters a lot. The National Retail Federation (NRF) noted in its 2019 Winter Consumer View report that 68 percent of customers look up shipping costs before placing an order. If shipping costs aren't shown up front, conversion decreases as shoppers look elsewhere. Marketing and ops can work together to ensure those details are shown.
Shipping dates factor as much as cost. Giving an accurate delivery date is critical. Consumers interpret it as a promise, and if they trust the promise, conversion will go up. We saw conversion rates increase between 5 percent to 10 percent during our initial rollout of a delivery promise while I was at Amazon.com. A Retail TouchPoints report from early 2020 said 27 percent of consumers are more likely to buy if a delivery date is promised up front.
The flip side matters, too. If a promise is broken, loyalty can be crushed. A 2018 Pitney Bowes study showed that 36 percent of consumers will shop elsewhere after one poor e-commerce buying experience, of which shipping problems was rated a frequent frustration.
Want better customer acquisition cost to customer lifetime value ratios? A focus on customer loyalty is the best advice. To which, who would have thought consistently hitting delivery dates that were promised was a key unlock to loyalty? As product and price competition intensifies online, these little things can be the differentiator.
Here's the last transparency item which helps improve conversion: fulfillment center cut-off times. It's a best practice to list the cut-off time for shipments (like next-day options) as a countdown timer. Doing so increases the probability of a purchase based on urgency. According to data analyzed from The Baymard Institute reports, only 4 percent of e-commerce sites currently do this well.
Speed and Costs Matter
We know from history how the investments by Amazon and Walmart have changed consumer preferences — i.e., they expect delivery to be cheap and fast.
Industry data bears this out:
- Baymard shows 18 percent of consumers abandon a cart if shipping options are too slow. Operations has an obligation to ensure a fast shipping option is available.
- The NRF 2019 study showed 39 percent of consumers expect two-day shipping, and 29 percent will back out of a purchase if it's not available. Wow!
- Baymard cites that 50 percent of consumers abandon checkouts if shipping costs are too high. Operations has a similar obligation to keep shipping rates low.
- The 2018 version of the annual NRF Consumer View study showed 47 percent of consumers back out of a purchase if it doesn't qualify for free shipping.
Consumers almost always want either a free shipping option or a fast shipping option — and both, if they can get it!
Merchandising Your Innovations
There's a trend here: As operations innovates — e.g., creating a free shipping program or accurately determining delivery dates — total purchases and overall conversion rates dramatically improve if marketing is able to merchandise them.
What matters is if a company has marketing and operations collaborating and communicating so that these simple inclusions on e-commerce sites can help improve the business.
Jason Murray is co-founder and CEO of Shipium, a supply chain platform for e-commerce companies.
Related story: How Brands Can Create Winning Omnichannel Experiences
Jason Murray is co-founder and CEO of Shipium, a supply chain platform for ecommerce companies. Prior to Shipium, he was a 19-year veteran of of Amazon with his last role as VP Retail Systems where he built the supply chain technology that powers Prime and Fulfillment By Amazon.