How well is your Etsy store or your online shop doing?
If you’re starting out there’s really not an easy way to answer that question. If you’re making some sales…then that’s good…right?
If you’ve been selling online for a while you may have a general feel of what number of sales is “normal”.
But is normal is good as it could be? Is there an objective, measurable way to tell if your website or Etsy store is doing well or needs some work?
The answer is yes. It just involves a bit of simple math that you can use to figure out if your Etsy store, online store, or individual listings are doing well or you need to improve a few things.
How well are you converting?
Big retailers use sales numbers all the time not only to tell them how forecast how much inventory they will need for the Christmas rush, when to start stocking certain merchandise, and how much they need to spend on advertising and marketing. There’s one statistic in particular that you should pay attention to when you’re selling online. It’s called a conversion rate.
Most people don’t simply arrive at an online store and just buy something. Only a fraction of the people that visit your Etsy store or online shop will become a customer. The percentage of people that are converted from being a visitor to a buyer is called a conversion rate.
Figuring out conversion rates involves some really simple math. Take the number of sales you’ve gotten during a particular time period and divide it by the number of visits you got to your website during the same time period. If you’re on Etsy you’re going to divide the number of sales by the number of views you got to your store. Then take that number and multiply it by 100. That will give you your conversion rate.
# of sales / # of views x 100 = conversion rate (%)
So, if for example you got 100 views to your Etsy store last month and you got 4 sales, your conversion rate would be 4%.
4 sales / 100 views x 100 = 4%
An average online conversion rate for the entire retail industry is approximately 2 – 3% (thanks to Lisa Jacobs for that stat!). That is, if you get 100 visitors to your website, on average 2 to 3 people out that 100 will buy something. Try running this formula for last month’s sales and see what figure you come up with.
Okay…so what does this number mean?
Did you figure out last month’s conversion rate for your store? If it’s higher than 3% percent, then it’s likely that you’re doing fairly well. If it’s below 2%, then this can be an indication that there’s some work that needs to be done on your store, whether it’s improving your product photos, your listing copy, or your pricing.
It’s important to remember that this number is just an indicator. When you’re looking at your conversion rate you also have to consider other factors as well. If you’re selling higher priced items, then your conversion rate will likely be a bit lower because a high ticket item can be harder to sell. Seasonality may be a factor.
Your sales conversion rate can indicate:
- If your store is underperforming– A low conversion rate can mean that your product pages or your store overall isn’t doing a good job of convincing people to buy.
- That you need more traffic– If you have a good conversion rate, but your total sales still seem low…then this can be an indication that you need to get more people to your store.
- If a particular item is doing well or underperforming– You can calculate conversion rates for individual items to see what your real superstars are. It may seem like both items are performing the same, but you may find that one is converting better than the other. Or it may be an indication that a particular product listing or page converts better.
- What your overall trends are throughout the year– You may find that your conversion rate dips to about 1.5% in the summer, climbs to about 4% during the holidays, and flattens out to about 2% during the months between. Tracking your conversion rate month by month will give you a clue as to when you need to increase your marketing efforts and when you’re likely to already have momentum.
- Which venues are performing better– If you’re selling your items on multiple online venues…say your selling items on Etsy and on your own website…comparing the conversion rates of each venue can tell you where you should be spending most of your effort.
Forecasting with conversion rates
If you ever tried doing a business plan, there may have been one section that was probably the rear. The financial part where you had to predict how much money you were going to make in a year. Unless you have a track record of several years, that’s a hard one to forecast.
Fortunately you can use conversion rates to do just that. Simply divide your conversion rate by 100, then multiply that number by the number of your average views.
# of views x (conversion rate / 100)
Let’s go back to our first example where our conversion rate is 4%. Let’s say that you look over your Etsy stats and see that your store averages about 400 views per month.
400 views x 0.4 = 16 sales per month
Now, let’s say your typical order is about $25 per sale. You then use that number to forecast out your average monthly sales:
16 sales x $25 per sale = $400 per month
To get a rough estimate for the year, simply multiply that number by 12.
$400 x 12 = $4,800 for the year
Now of course this is a rough estimate. This isn’t a guarantee of what your sales will be…it’s only a forecast. Factors like spikes and dips in traffic or views will effect whether you met or exceed this number or not. If you know that your sales are seasonal, figuring out the highs and lows in your conversion rates can help you be more accurate.
Now what if you want to work towards making a certain amount of sales? Perhaps at the beginning of the year you resolved to make a certain dollar amount by the end of the year…or you resolve to increase your sales by 10%. What would that take really? If you want to take your yearly sales from $4,800 to $12,000 how can you do that? Your current conversion rate can give you a clue.
So, if your goal is to make $12,000 in one year, let’s figure out your sales amount for the month:
$12,000 x 12 = $1,000 per month
Again, assuming that your average sale is $25 per sale, divide that by your sales amount for the month:
$1,000 / $25 = 40 sales
Instead of 16 sales per month, you’ll need to make 40 sales per month to reach your goal of $12,000 in a year. Now how much traffic do you need to your Etsy store to make 40 sales a month? Assuming your current conversion rate of 4% (remember to take your conversion rate and divide it by 100), let’s figure it out using the conversion rate formula:
40 sales / .04 = 1,000 views per month
So order to increase your sales to $12,000, you need to increase your views from 400 to 1,000 views a month.
Remember…that this is a forecast. But it’s also a useful because it gives you a specific target to aim for other than just sales. It’s a little easier to aim for increasing your views or traffic than it is to aim for a specific number of sales. And breaking things down into a specific number can also help you figure out if your goal is realistic.
Great…but is there an easier way to do this?
Remember that this is all just simple arithmetic. But when math of any type is involved I like to make it as convenient as possible. One tool that I set up for myself is a conversion calculator in Excel (also works in Google Sheets). I simply plug in some numbers and the calculator automatically figures out the numbers for me. I included sections for the entire store and individual listings as well. I even included the traffic forecasting calculator as well.
I used this calculator to forecast how much inventory I needed for the holidays based on past traffic and I was surprised at how accurate it turned out to be. I shared this tool in my holiday giveaway 12 Days of Goodies. If you missed it you can still download the calculator here. Just add your name and email and you’ll get a download link to the calculator.
Keeping an eye on your conversion rate can help you monitor the health of your Etsy store or your online shop. Take 15 minutes or so to calculate your current conversion rate and make it a point to check it once a month.
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