Experimentation creating extraordinary impact for profitability and sustainability

Kronans Apotek, Sweden's largest pharmacy chain by number of locations, operates approximately 500 pharmacies, including around 45 franchise outlets, spanning from Skåne to Lapland. Their e-commerce platform, supported by a warehouse in Enköping, offers over 20,000 products.

The Challenge

Kronans Apotek needed help optimizing its e-commerce to increase profit margins. They had identified three business challenges in relation to the delivery pricing strategy and sustainability.

• First, low order value purchases were found to affect the profit margins.
• Second, product revenue margins weren’t enough to cover the costs of deliveries.
• Thirdly, Kronans Apotek consumers faced little incentive to choose greener delivery options.

Together with Conversionista Kronans Apotek started an experimental journey to reach these objectives.

Using CRO to make sustainable choices profitable

Conversionista assisted Kronans Apotek in reducing unprofitable low-order value transactions impacting profit margins. Concurrently, Kronans Apotek incentivized customers to select more sustainable delivery options, ensuring delivery costs were offset by product margins.

Conversionista developed a strategic hypothesis to help Kronans Apotek achieve their objectives of increasing profit margins and boosting the adoption of greener delivery options.

The Implementation

A team was formed, specializing in behavioral insights and sustainable CRO to encourage customers to opt for preferred delivery methods. Conversionista developed a strategic hypothesis to help Kronans Apotek achieve their objectives of increasing profit margins and boosting the adoption of greener delivery options. We started experimenting with the built-in A/B testing functionality of the checkout.

We replaced the pre-selected free delivery option with a greener delivery method, presented at the top of the delivery checkout. Then explored five delivery cost combinations to identify which price would give the best conversion outcome.

The A/B tests conducted including:

• randomizing customers to view different delivery price combinations
• all free for orders over 199 SEK
• with a more sustainable option preselected

The best-performing variant, now implemented, positively impacted the share of Instabox deliveries, in-store pickups, total revenue, and net profit.

The Results

The top-performing variant significantly reduced costly low-order value purchases, minimized the total climate impact from deliveries, and was the primary driver behind an 11% increase in net profit and a 2% revenue uplift. Additionally, the test led to a 25% increase in green deliveries.

Business Experimentation focus on driving bottom line profitability

Profit optimization through business experimentation involves reducing the volume of net negative orders and potentially enhancing revenue. E-commerce retailers often face net negative orders due to high shipping, handling, and return costs outweighing the revenue per order. Additionally, discounts and promotions can erode product margins, further impacting order profitability.

Traditional CRO practices emphasize increasing transactions and average order value (AOV). In contrast, business experimentation targets improvements in bottom-line profitability. Key focus areas for business experimentation include optimizing delivery, returns, and payment options.