Aggressive competition will not destroy a small e-tail business. Many small businesses thrive under the shadow of the online conglomerates.  To succeed when the SEO gurus say you can’t is not only possible, but probable, if you understand the fundamentals of conversion rates and ROI.

The conversion rate refers to the number of people who finalize their purchase. Several things can lose a sale including shopping carts that do not suit the target demographic, a complex or intrusive shopping cart, broken links, and lack of security features.

ROI is not the mark up. Unlike retail, the ROI includes lost customers, abandoned shopping carts, exit pages, and relationship building.  The ROI is not the profit earned from a sale. It is the money invested in making a sale subtracted from the profit generated from a sale.

There are several players in the ecommerce industry.

The publisher collects traffic. They attract and keep members (shoppers), pre-sell them, then send them to e-tailers. The publishers include small niche communities, mammoth entities such as myspace.com, Content Management Systems and small blogs.

Advertising agencies work as the middle man. They bring together the Content Management System owner with the online merchant. They include PayPerClick giants, search engines, directories, small joint venture communities, and ‘web traffic’ sellers.

The merchant offers a product for sale. They may work alone, or with an Internet Marketing firm to reduce abandoned shopping carts, eliminate exit pages, increase landing pages, and expidite the profit path.

Very few people open their browser, click a link, and make a purchase.  The initial contact is rarely made at the merchant’s site.  Even the big shopping sites receive their traffic through secondary venues such as affiliates and comparison shopping sites.

 The shopper may read an article visit youtube.com, join a forum, surf a comparison shopping site, and then click a keyword anchored link. They may read a Pay Per Post blog ad and then click the link.

This step of the conversion is where the customer is pre-educated, and pre-sold.  The customer is encouraged to become a member, opt-in to a newsletter, or subscribe to an RSS feed. This is vital as it takes from 3 visits to six months before the many shoppers make a purchase. 

From the group they click through to the merchant’s site, or an affiliate site.

Merchants often create different profit paths depending on the type of consumer they are targeting. They may invite an impulse buyer to a squeeze page, and send a prime shopper to a private member’s forum. 

Each step of the conversion path needs constant attention. They can never be left to stagnate. They need to be reworked, improved, and shortened. The merchant needs to attach a dollar value to each step. The least profitable steps need to be redesigned or removed. The profitable steps should be duplicated.

There are several common mistakes in the conversion process. The biggest is asking for too much private information from the consumer. The conversion process is not a Market Research tool. If a shopper is asked to fill out a long form half way through the ‘buy now’ process they will abandon the shopping cart.

Another common mistake is not including a free number, live chat, or fast-track sales path.

Misdirection can also result in abandoned shopping carts. Do not inlcude a ‘buy now’ button that leads to a six step shopping cart. The site should be clearly marked at every stage.

The last mistake is assuming that customers will not return to buy at a later date.

The conversion is a process. It may take several visits. ‘No sales’ may later return from a newsletter or forum. These customers were never true ‘no sales.’ Keep this in mind when calculating ROI and conversion rates. A customer who reached the web site, then returned to the CMS community, but returns within in six months to buy is not a ‘no sale’ when the affiliate publisher, or CMS, is considered part of the conversion process.

It is easy to track customers who bounce back and forth between a CMS affiliate publisher and the merchant’s website using the cookies left on the visitor’s computer browser.