Originally published by Causal Signal on Substack, April 15, 2024.

In the fast-paced world of online retail, every second counts. Just as a cheetah's speed determines its hunting success, a website's load time can make or break a sale. The research paper "Need for Speed: The Impact of In-Process Delays on Customer Behavior in Online Retail" by Gallino, Karacaoglu, and Moreno delves into this critical aspect of e-commerce, revealing the profound impact of website performance on customer behavior and sales.

Following are the key findings and practical applications on how they can be applied to boost online retail conversions.

Key Findings

  1. A 10% increase in website load time leads to
    • 4.2% decrease in sales,
    • 2.4% decrease in revenue per visitor, and
    • 2% decrease in conversion rate on average.
  2. Customer sensitivity to website slowdowns decreases as load times increase, exhibiting diminishing sensitivity.
    • An additional 1% slowdown decreases sales by 0.31% for load times below a threshold, but only by 0.18% for load times above the threshold.
  3. Customer sensitivity to slowdowns varies across the shopping journey i.e., customers are most sensitive to slowdowns at the checkout stage and least sensitive on the homepage.
    • A 10% increase in load time at the checkout stage increases abandonment rates by 1.7%, compared to 0.15%, 0.6%, and 0.8% on the homepage, catalog, and product pages, respectively.
  4. Increases in the number of third-party content providers significantly deteriorate website performance.
    • A 10% increase in the number of third-party increases load time by 2.04%.
  5. The main drivers of reduced sales from website slowdowns are decreased conversion rates and number of visitors. Average order value is only marginally affected.
  6. Website slowdowns do not cause customers to delay purchases to a later date. The sales are lost rather than shifted in time.
  7. The impact of slowdowns on sales is larger on mobile devices compared to desktop.

Practical Applications

  1. Prioritize website speed optimization at the checkout stage to minimize customer abandonment and maximize conversions.
  2. Simplify the checkout process by providing only essential information and offering faster payment options like Apple Pay or Google Pay.
  3. Carefully select and minimize the number of third-party content providers to improve website performance.
  4. Optimize content and website design for mobile and desktop channels separately, considering the different user behaviors and sensitivities to slowdowns.
  5. Invest in website performance improvements to minimize potential negative spillover effects on online marketing efforts.
  6. Devote more resources to redesigning website speed and improving sensitive stages of the online shopping process.
  7. Consider tailoring website speed and accessibility according to customer characteristics or time of day to improve profitability.
  8. Explore the impact of website speed on different product categories, price levels, and purchase frequencies to make informed decisions on website optimization efforts.
  9. Analyze the impact of website speed on customer behavior in different countries with varying internet and online retail penetration levels to adapt website performance strategies accordingly.

Limitations/Challenges

  1. The study focused on low to mid-price level products that are not frequently purchased. The impact of website speed may vary for different product categories and purchase frequencies.
  2. The analysis was limited to the US market. Customer sensitivity to website speed may differ in other countries with varying internet and online retail penetration levels.
  3. The study did not explore how customer sensitivity to website speed across the shopping journey may be influenced by factors such as customer demographics or familiarity with the brand.

Conclusion

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Photo by Christian Thöni on Unsplash

Just as a tree's ability to efficiently transport water and nutrients is vital for its growth and survival, a website's speed is essential for the success of an online retailer.

The "Need for Speed" paper provides a wealth of insights and practical applications for retailers looking to optimize their website performance and enhance customer experience.

By prioritizing website speed, particularly at critical stages like checkout, and carefully managing third-party content, retailers can minimize customer abandonment, boost conversions, and ultimately drive online sales growth.

As the e-commerce landscape continues to evolve, investing in website performance will be crucial for retailers to stay competitive and meet the ever-increasing expectations of online shoppers.

PhotonIQ Performance Proxy (P3) speeds up websites and apps for faster, easier customer browsing and purchasing. To learn more about how you can automatically optimize your website performance, please view a demo, or chat with an expert.

A slow website is like a leaky faucet – it drains potential sales drop by drop.

First photo by Unsplash+In collaboration with Planet Volumes.