The Taobao Conversion Rate is More Important Than We Think

When we talk about website, people always think about traffic. The same situation also happens in Taobao, however the conversion rate is just as important as traffic on Taobao. Sellers on Taobao know that conversion rate is important, but really how important it is? and how it affects traffic?

Sales = traffic * conversion rate * average per consumer transaction.
In this formula, the three parameters are in proportional to sales, which means if one increase with the other two remain unchanged would lead to the increase of sales. Our question is: Is the conversion rate simply in linear proportional to sales? I'm going to talk about conversion rate and traffic in Taobao, and as it turns out, conversion rate is even more important than we supposed.

The traffic on Taobao is just like the traffic on search engine, it can be divided into two, free traffic and paid traffic. Firstly, let's start with paid traffic:

Zhitongche, A Taobao paid search ranking system, which is also the most popular traffic driving method on Taobao. It is paid per click, so higher conversion rate leads to higher sales. However, higher conversion rate requires higher impression, and higher impression requires higher quality score.

(quality score:
The basic Taobao Zhitongche algorithm is just like Google Awards: ranking = bidding price * traffic* conversion rate. According to the chart above shows that quality score is directly related to Zhitongche cost and ranking. Quality score is defined by category relevance and property relevance and other factors. Other factors include keywords bidding, transaction, collected items and CTR(click though rate). Ranking is in proportional to conversion rate, so that means Zhitongche cost is proportional to the square of conversion rate. High conversion rate makes high impression and transaction, however, if conversion rate is low, your impression would not be too high even with pay per click.

Taobaoke & Ruyitou
Taobaoke is a promotion method paid by commission in proportion to transaction, where qualified people can help sellers to promote their products. These people are scattered on the whole site, they would often like to choose sellers based on their conversion rate and transaction. In other words, if products with low sales volume will likely having no attraction to them. For sellers in this stage, they can use another new promotion method called Ruyitou.
Ruyitou is a special promotion method which belongs to Alimama, and it very similar to Google AdSense, which allows sellers to display their products to buyers from other sites. The chart below shows the relationship of conversion rate in Ruyitou.

We can tell from the chart that product composite quality score is calculated on conversion rate and other factors. Ruyitou cost is proportional to the square of conversion rate.

 How to Improve Conversion Rate
Since the conversion rate is important, but can we improve it? Although, Taobao search results are determined by category relevance, store rating, product quality and product popularity, product quality score is directly related to conversion rate, and product popularity is indirectly related to conversion rate.
Moreover, product information is sometimes related to conversion rate. When some consumers search uncommon keywords, when the titles don’t match for the keywords, search engine would crawl the words in product descriptions. In this case, comprehensive product information would help increase ranking in search results and conversion rate.

For New Taobao Sellers
Sometimes, Taobao Sellers may face the difficulty of promoting new products, and many new Taobao sellers also face the this situation. New products mean no sales volume and zero conversion rate, so how to break this dilemma?
Actually, Taobao has a very large daily free traffic (over millions). But the problem is Taobao has 6 million sellers and 1 billion products. When these free traffic break down to single product, it seems rather less. However, what sellers could do is to try to make the few free traffic buy your products, be attractive and offer coupons, discounts and whatever means to keep these visitors. Gradually, more and more traffic will be attracted to your store.