How often do you measure the performance of your ecommerce store?
Oftentimes, small businesses push this task under the rug because they don't know how to do it. Well, if that's your excuse, we're glad you found this article.
In short, ecommerce metrics are key to running a profitable online business.
They help you remove the guesswork from your organizational objectives, and they give you answers to your most burning questions, such as:
- Is there an improvement in sales?
- What are the most or least purchased items?
- What opportunities are available to increase sales?
- How is your online store performing on KPIs?
When you don’t track and measure your performance, it becomes tricky to determine which strategies are working and how you can improve the ones that aren’t. Following your gut and opinion might work in certain situations, but it’s not a data-driven approach that informs you on how effective your efforts are.
A survey by McKinsey reveals that companies that use ecommerce performance analytics frequently are more likely to outperform their competitors on popular metrics such as profit, sales, sales growth, or return on investment (ROI).
It's no surprise that all ecommerce companies are after this success, including your competition right now. To get ahead, you have to balance your desire to succeed with maximizing key metrics to improve your business performance.
There are several metrics you can track and measure to supercharge your efforts.
We’ve put together a list of 10 KPIs that we can bet top dollar on.
1.) Traffic source
Traffic sources tell you where your customers are coming from; organic, paid, direct, referral, earned, social, and email marketing. It also helps you identify which source brings you customers that drive revenue. This is information you can use to make decisions about the sources that contribute the most to your growth.
2.) Sales conversion rate
This metric helps you identify how many of the people who visited your ecommerce store actually bought products. It helps you understand whether your ecommerce site and products appeal to your targeted customers.
How to calculate: number of sales ÷ by the number of visitors × 100 = SCR.
3.) Customer retention rate (CRR)
Customer retention rate is a metric that tells you the number of existing customers that you’ve managed to retain over a period of time. These are returning customers who keep coming back to buy from you. This may be because you offer quality products they love, value-added loyalty programs and campaigns, 24-hour customer service, and an overall good customer experience.
If you have a high rate, it indicates that you’re able to support customer satisfaction. If it’s low, there’s an opportunity to improve your retention efforts.
How to calculate: no matter which time frame you’re looking to measure, you have to follow this formula, E − N ÷ by the S × 100 = CRR
- E- total customers at the end of the period
- N - new customers gained within a time frame period
- S - existing customers at the beginning of time period
4.) Net promoter score
This metric is as important as product reviews in measuring customer satisfaction and whether or not your customers are likely to recommend your business. You can collect this information through a survey by asking them how likely they are to recommend your business to others, on a scale of 0-10 (10 being most likely). From there, you can segment the feedback into three responders;
- Promoters (8-10)
- Neutrals or passives (6-8)
- Detractors (0-6)
The feedback should tell you all you need to know where customer satisfaction and loyalty is concerned.
5.) Cost per acquisition (CPA)
In an ideal world, you’d prefer to gain customers organically. But in the real world, the ecommerce space is a maze with intense competition. To get prospects’ attention, you have to spend money on various marketing and advertising campaigns that run over a period of time. Tracking this spend for each prospect shows you just how many customers you manage to bring in through your campaigns. It also shows you whether you’re spending more than you should.
How to calculate: total marketing expenses ÷ by the number of customers acquired = CPA
6.) Average order value (AOV)
Average order value refers to the average total price your customers pay for in a single order at check out. It’s an important metric to track because it shows you how much revenue you generate per transaction. It also gives you insights on customer behavior, for example, the details on what type of shoppers they are, what they shop for, and how much they’re likely to spend with you.
This will help you determine opportunities to encourage your customers to go out of their typical habits to buy the items they usually browse without ever buying.
How to calculate: total sales ÷ by total orders = AOV
7.) Customer lifetime value (CLV)
This ecommerce metric allows you to learn how much total revenue an average returning customer generates for you over a certain period of time. Whether they’ve been with you for six months or six years, you’ll get an idea of the average amount they spend on your online store.
How to calculate: AOV × by average purchases per year × by the average period a customer is retained for = CLV
8.) Shopping cart abandonment rate
Sometimes customers will load up their virtual carts and decide to leave your ecommerce store without finalizing the transaction. This can hurt a little because one of your business objectives is to make sales. But you’re not the only online shop owner to experience cart abandonment. This study suggests that the average cart abandonment rate is 69.80%, which indicates that it is a very common occurrence. If you want to speed up your eCommerce cart process, you should think about developing automation software to help you better organize orders and deliveries. You should speak with the best software development company for the implementation of the performance guarantee solution.
There are a number of reasons why customers abandon their carts, and these include;
- Consideration stage, looking at the total cost of items
- Poor checkout experience
- Payment security concerns
- High shipping costs
- Unexpected extra costs such as taxes and fees
- Signing up for an account to complete the checkout process
How to calculate:
Step 1: number of completed purchases ÷ by number of shopping carts created × 100 = completed cartsStep 2: 100 − completed carts = abandonment rate
9.) Return rate
Returns are painful to every online shop owner. But they’re common in the general ecommerce space, in fact, the average return rate hovers around 20 to 30% across all industries. Tracking this metric shows you how many items were returned within a specific period. Learning about this number will encourage you to find out the ‘why’. If you have a low return rate, you may breathe a sigh of relief but if you have a high return rate, you have to dig deep into the why.
Typically, customers return purchased items because;
- They changed their minds after receiving the item
- The item does not match what’s described on the product page
- The product arrived damaged or defective
- They bought or received the wrong item
- They bought the wrong size or color
So, check your return policies to find out what they look like.
If you offer frictionless returns, it may be the reason why your customers return items. But this isn’t a bad thing because according to this report, 92% of customers say they will buy again if the product return process is easy. But if you realize that the returns have more to do with incorrect sizing or color issues, it indicates a serious problem with the content on your product pages.
How to calculate: total number of items returned ÷ by total number of items sold × 100.
10.) Social media engagement
You want to have a stay updated on how your social media is performing, and exactly which social channels are driving high referrals, look at click-through rates and social conversions. The success of Facebook Shops, for instance, means you’re also able to review your delivery performance, customer service performance and get insights about customers and popular items. This is a great option if you’re looking to measure metrics from a social commerce perspective.
Tracking and optimizing with quality tools
In ecommerce, everything hinges on content.
If your content doesn’t resonate with your existing and potential customers, your traffic, sales conversion rate, retention rate, and the average order value will be lower than they should be. Meanwhile, your shopping cart abandonment rate and return rate will be high, which is the opposite of what you want. That’s where an affordable product information management (PIM) tool comes into play.
Plytix helps you optimize content to ensure that it’s high quality. This is inclusive of everything from product descriptions, color or sizing attributes, images, and videos. It’s more organized than manual updates on tons of spreadsheets, and it lets you and your team create ecommerce product catalogs that convert.
When it comes to analytics, not all PIMs have this feature. This means that customers need a tool such as Google Analytics to track these metrics. But why rely on one tool when you can have two for free? What makes Plytix PIM perfect is that it makes product analysis as easy as making a cup of tea. Our product analytics tool is integrated with Google Analytics to save you time and give you a full view of how your products are performing across all your channels. It allows you to track metrics on a centralized system, offering you flexible segmentation of product and channel groups, with comparison charts and data table views.
Keen to learn more? Download our FREE extensive guide below!