by Andre Bourque

Ditching passwords and increasing ecommerce conversion rates by 54%

May 01, 2017
InternetRetail Industry

If you want to dominate ecommerce, focus on removing friction — especially from the checkout process.

amazon no checkout app primary
Credit: Thinkstock

According to the latest data by the U.S. Department of Commerce, ecommerce sales jumped 15.1% last year, while total retail sales increased by only 2.9%. Admittedly, ecommerce as a percentage of total retail sales is only 8.3%. The implication is that most people still shop in physical stores, but the ease and simplicity of ecommerce continues to fuel its growth at a much faster clip. 

Census Bureau chart: estimated quarterly U.S. retail e-commerce sales Credit: U.S. Census Bureau

Screenshot of a chart that appeared in the U.S. Census Bureau report on quarterly retail e-commerce sales for the fourth quarter of 2016, issued Feb. 17, 2017.

This week, a new entrant appeared on Gartner’s ecommerce Magic Quadrant that you’ve probably never heard of: VTEX, a provider of a cloud-based ecommerce platform. In 2016, VTEX systems processed $1.8 billion worth of gross merchandise volume (GMV), and the company claims that its technology is 68% faster to implement, delivers a 30% boost in organic traffic and increases conversion rates by as much as 54%.

Any double-digit increase in ecommerce conversion rates is always interesting, but how they accomplish the 54% increase may actually be the beginning of a new trend: ditching the checkout password altogether.  

Removing password friction from checkout

“When we launched our password-free checkout, we had around 600 online stores,” says Alexandre Soncini, VTEX’s general manager for North America. “They were already using our regular VTEX platform checkout process. For that sampling, they had a 28% increase in revenue… not just conversion rate.” 

“We then measured a sample of new clients migrating to VTEX and looked at their conversion rate one month before migrating and three months after the migration,” Soncini says. “We measured an average 54% increase in conversion rate for these new customers. One of the main reasons is the seamless checkout experience.”

Fortune noted that Amazon, considered the world champion in removing friction, captured a staggering 53% of all ecommerce growth last year. From its patented one-click technology to its dash button to Alexa (its artificial intelligence engine), Amazon has dominated ecommerce sales through its obsession with removing friction — especially at checkout. 

The issue has been, however, that you must build your online storefront within the Amazon-controlled playground. But with password-free checkout, VTEX is providing thousands of clients with faster checkout options — including the elimination of passwords. 

Smarter checkouts mean happier customers and higher conversion rates

VTEX isn’t alone here. The general trend in ecommerce is about figuring out all the new and interesting ways of streamlining the shopping experience, which includes bringing the store directly to customers. Engadget reported that Facebook has partnered with Shopify so that people can shop multiple stores without ever leaving Facebook Messenger. And many have speculated that SnapChat is rolling out its own social commerce platform. This is especially important because the majority of social media is consumed via mobile devices and often inside of mobile apps like Facebook Messenger and SnapChat.

The implications here are significant. Why force people out of their chat or social media platforms just to buy something? As online retailers continue to fish where the fish are, they are looking for creative ways to integrate tomorrow’s shopping experience directly into the media platforms where most people spend the majority of their time already.

The bottom line is that when retailers remove the friction from the online shopping experience, they will see a significant increase in conversion rates and revenue. At the same time, they’re making customers happier — and happier customers will be more likely to return and buy more.

Creative solutions such as completely removing the password from the ecommerce process will pave the way to new and improved shopping experiences that deliver happier customers and higher profits.