Report: $20B in lost online sales

By Kristoffer Bohmann, Bohmann Usability

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A report from Creative Good (warning: 2.35 MB; registration required) estimates that over $19 billion will be left unrealized in 2000 because of poor dotcom customer experiences. The estimate is calculated as follows (conversion rate is the number of transactions divided by the number of visitors per month or year):

Ecommerce industry 2000-revenue (estimate): $37 billion
Average conversion rate (estimate): 1.8%

40% increase in conversion rate
Added revenue: $37 x 40% = $14.8 billion

10% increase in order size
Added revenue: ($37 + $14.8) x 10% = $5.18 billion

Unrealized revenue: $19.98 billion

The formula has an error as the effect of 40% conversion rate increase (10% of $14.8 billion) should have been excluded. Otherwise both the added revenue and a percentage of it are included. So, the correct unrealized revenue estimate is $18.5 billion.

I do, however, find the formula realistic as conversion rates and order sizes often are improved through well-done usability work. But it should be kept in mind that estimates of industry revenues and conversion rates are highly uncertain. If ecommerce industry revenues fall short of expectations and drop from $37 to $20 billion, potential added revenue will only be $10 billion, and vice versa.

Nicole Rubin from Creative Good replies: In terms of the calculations, we purposely chose to calculate them the way we did because the improvement in customer experience makes more orders and larger orders at the same time. In hindsight, we could have done a better job of explaining that these are compound effects, not separate. (October 19, 2000)

Kristoffer Bohmann

Report: $20B in lost online sales

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