COVID-19 has served as a catalyst for companies to expedite digitalization of their sales channels. With an increasing emphasis on e-commerce and direct-to-consumer (D2C) channels, companies need to understand how their digital sales funnel performs and how to identify potential weak points. This can be very challenging for brick-and-mortar companies with significant retail footprint, because of the vastly different customer and purchase experience. Moreover, the digital metrics to be measured are quite different from those of a retail store. Without an effective diagnosis, companies may be wasting resources to work on solutions that may not address the problem.To start, we need to define the structure of the sales funnel for the e-commerce/D2C channel (see figure). The funnel starts with traffic that comes to the website or the app of a business. The traffic can come from different sources, including organic/direct, search engine optimization (mobile or desktop), paid media, paid search, and so on. To drive traffic, there are two main types of marketing campaigns: brand awareness marketing and direct response marketing. Marketing and media teams use common digital media management platforms including Google Ads and Facebook Ads Manager to measure direct response campaign effectiveness (for example, cost-per-click).However, not all traffic will stick around. Only a portion of the traffic will continue to shopping pages, where customers with strong purchase interest will start a cart and move through the subsequent stages of a sales funnel, or the purchase flow. Some businesses may have additional steps in the purchase flow, such as background checks or account creation, which could be important points of friction resulting in cart abandonment. The more streamlined the experience, the easier it is for customers to flow through the funnel resulting in a higher conversion rate.To track the volumes and conversion rates across an e-commerce funnel, businesses typically rely on analytics tools such as Adobe Analytics, Mixpanel, Heap Analytics, or Google Analytics. These tools allow managers and analysts to examine volumes and conversion rates to pinpoint strengths and weaknesses.There are two important aspects to diagnosing an e-commerce sales funnel:Step conversion. It is imperative to track conversion rates of each funnel step, ideally on a weekly or monthly basis, if not daily. This way, digital managers understand how each component of the funnel performs, and thus can better identify the root cause of underperformance.Historical and product trends. It is not meaningful to only look at these conversion rates in silo, without comparing to historical trends or those of similar product lines. By examining changes and gaps quarter over quarter, or year over year, companies can determine whether it’s internal or external factors that are driving business performance.After identifying where the problem is, digital business managers should plan accordingly to improve the sales funnel performance with a few different levers, such as traffic volume and quality, conversion, retargeting, and so forth.Even though each digital e-commerce business is different, with a structured approach to diagnosing and improving their sales funnel, even traditional brick-and-mortar companies can be more efficient and effective in driving digital growth by making the most of the resources at hand.