14 Critical eCommerce KPIs to Track in 2023
14 Critical eCommerce KPIs to Track in 2023
Choosing the right eCommerce KPIs to track isn’t easy. Your choice will depend on your individual strategies and goals. With the huge amounts of readily available data to modern businesses, it’s easy to become overwhelmed and miss what is important. You can’t track everything, so it’s crucial to sift through and select the information that is relevant and will be the most beneficial to report on regularly.
There is no one-size-fits-all solution, but there are some top metrics and eCommerce KPI benchmarks that prove useful for most online businesses. Here’s everything you need to know.
What are eCommerce KPIs?
eCommerce KPIs (Key Performance Indicators) are key metrics that help you to understand where your eCommerce businesses successes and failures are coming from. eCommerce KPI benchmarks enables businesses to measure their performance across industries and competitors.
In 2022 there is a mountain of data for marketers to get to grips with. Demographics, devices, browsers, keywords, goal values, conversion rates, bounce rates, exit rates, acquisition, behaviour, time – the list goes on!
Google Analytics and Amazon Seller Central will provide your business with the data you need, but without useful eCommerce KPIs you won’t be able to translate these into targets that quantify success.
Why are KPIs for eCommerce important?
eCommerce KPIs allow you to make informed decisions about revenue, marketing tactics, customer experience, and other important areas. They help determine which strategies work, and which don’t.
eCommerce key performance indicators also let you know where to focus attention and can help provide insights into how to rectify problems. Ultimately, they will help you determine what changes you need to make to build your customer base and generate more revenue.
Without these kinds of eCommerce performance metrics, you’d need to rely on your gut instinct or personal opinions to make decisions. Relying on data to determine your choices is a better recipe for business success. It’s more likely to please senior stakeholders, shareholders and lenders too.
How to choose which eCommerce KPIs to measure?
Firstly, you need to choose KPIs which are central to your eCommerce store’s success. To do this, you should first clearly state your highest priority business goals. With this in mind, you can work backwards from your desired endpoint to figure out which eCommerce metrics are most relevant to achieving this.
Examples of top eCommerce KPIs to track
We’ve pulled together some high level eCommerce KPI examples that most top online retailers will be watching closely. These metrics provide insights to indicate the success of most eCommerce businesses, regardless of their online maturity.
Just keep in mind your business goals as you read through and you’ll be sure to find some KPIs worth tracking.
1. Conversion Rates
Conversion rates tell you what percentage of your target market are taking a desired action. This is could relate to click through rates on social media, click throughs on Google search engine results pages, or conversion rates on your website.
There are many different conversion rate KPIs to track on your website, including how many people subscribe to your newsletter, create an account, sign up to your loyalty programme, or purchase a product.
If your conversion rates are increasing, your other eCommerce metrics will usually perform well too, so they are a great indication of overall performance. Similarly, if you are seeing your sales and revenue trending down, if you have a good set of conversion rate KPIs, you’ll be able to identify where the issues are.
eCommerce conversion KPIs are particularly useful as an insight into the engagement level of your website. You can use Google Analytics to see exactly how consumers are moving through your sales funnel, and where they’re dropping off.
If you’re using Where to Buy technology you will be able to access an astonishingly detailed level of data into the conversion stage of your conversion funnel. This goes beyond your website and will show if they convert or abandon their cart on a retailer site or online marketplace, like Amazon. You’re also able to which other products they decide to purchase, whether they purchase from you, and even if they decide not to!
Conversion rates are important to watch if you’re making changes to your website or third-party product listings. This will provide a clear insight into content performance, which isn’t skewed by traffic dips or spikes.
eCommerce conversion KPIs can help you to identify instances of product cannibalization which you’ll be prone to if you’re launching a new product range, for example.
To calculate the conversion rate of a particular channel or cohort, divide the number of conversions by the number of visitors and multiple by 100 to get a percentage.
Conversion rate = (Conversions ÷ Visitors) x 100
2. Average Order Value (AOV)
How much income does your site generate on each order? AOV (Average order value) tells you how much each customer spends in your store per transaction.
This is one of the simpler eCommerce KPIs, but it’s really important to track as it can inform how much you spend on customer acquisition and can help you to understand customer purchasing patterns. Increasing AOV is one of the most effective (and cheapest) ways to increase revenue and profit. Ideally, you should be spending much less to acquire a customer than they spend on their order.
Ensure you’re constantly working on increasing your average order value by encouraging your customers to add more items to their order. You can do this by upselling, selling product bundles, or offering discounts on a minimum spend threshold.
You can calculate your average order value by dividing your revenue by the number of orders you’ve received in a set time period.
Keep an eye on this performance metric to see how changes to bundle deals, product recommendations and free shipping thresholds are impacting orders.
AOV = Revenue ÷ total orders
3. Customer Lifetime Value (CLTV)
This is one of the top eCommerce KPIs to track, particularly if you want to increase customer retention. It’s also useful if your business is focused on selling high-end products.
Customer Lifetime Value tells you how much money, on average, someone will spend with your business during their time as a customer. So if someone spends $100 a year over five years, their CLTV is $500.
eCommerce metrics like average order value, conversion rate and customer retention are all reflected in this KPI so it offers a great insight into your store’s overall performance.
The closer your CLTV is to your AOV, the lower your repeat business will be. In this case, it’s advisable to make some changes to improve the customer experience and bring customers back to buy something else.
Think of building long-term relationships with targeted marketing campaigns and superior customer service. You can also create brand loyalty by maintaining very high standards for your products. Use upselling and cross-selling techniques and offer irresistible incentives and rewards to keep them coming back for more.
4. Net Profit
As eCommerce performance metrics go, net profit is often overlooked but it is a clear key indication of your eCommerce store’s overall health.
Making a profit is a major milestone for startups and knowing how exactly how much you’re taking in will tell you how much you can spend on marketing, customer experience and other growth activities.
Likewise, for large organizations, maintaining a high net profit high is an eCommerce KPI worth keeping an eye on. It may not have the same stakes in terms of the viability of the business, but you can be sure that it’s something that is front of mind for members of the marketing and sales department.
It’s particularly important to note how big changes to shipping, special offers, discounts, low-margin product lines and advertising bids impact this figure. These strategies can all boost conversions but they can also impact your bottom line negatively so, if you’re pursuing them, carefully monitor your net profit and profit margin.
Net profit = total revenue – total expenses
5. Customer Acquisition Cost (CAC)
Customer Acquisition Costs tells you how much you need to spend to acquire one new customer.
You should factor in your overheads and marketing and sales costs associated with customer acquisition. For example, if your CAC is $20 but your Average Order Value is only $10, this means you’re losing money fast. But if your AOV is $100, you’re in the green. This KPI is useful for calculating price points too, so it’s particularly important for stores that sell low-margin product.
As a brand builds visibility and awareness, Customer Acquisition Costs should reduce so it is a great KPI to set targets for. However, the cost of acquiring new customers on its own doesn’t provide enough information to make decisions. So, look at your CAC in relation to other metrics like your AVO to get a better understanding of your performance.
To calculate CAC, you divide the amount of money you spent on acquiring new customers (usually, most of your marketing expenses) by the number of customers acquired in the same period of time.
CAC = Cost of customer acquisition ÷ customers acquired
6. Cost per Acquisition (CPA)
This is similar to the above CAC KPI. But, with Cost per Acquisition, you measure the cost of acquiring new leads and non-paying users, rather than just the cost of acquiring paying customers.
So if your business strategy aims to build awareness through free samples, newsletter campaigns or gated content, this is a great KPI to monitor your progress. It’s ideal for early stage eCommerce businesses and stores that sell big-ticket items. They may even want to delve deeper and monitor this KPI on specific channels, like Facebook or Instagram.
To calculate, you simply divide the total cost of acquisition by the number of conversions acquire.
CPA = Costs of conversion acquisition ÷ number of conversions
7. Cost of Goods Sold (COGS)
Cost of goods sold (COGS) is a really important metric for online retailers of all sizes. Sometimes known as ‘cost of sales’, it is an assessment of the direct costs associated with producing the goods that you sell.
COGS is a retail performance metric that helps online retailers understand their manufacturing and production costs. It doesn’t take overheads or marketing spend into account. It’s worth noting that COGS will vary, depending on the accounting standards that are used in the calculation. For more detail on COGS, check out this article from Investopedia.
COGS = Beginning Inventory + Sales − Ending Inventory
8. Return on Ad Spend (ROAS)
Return on ad spend (ROAS) is a crucial eCommerce metric that digital marketers need to keep an especially close eye on.
It is a similar KPI to cost per acquisition (mentioned above) but there is an important distinction between the two. ROAS is related specifically to the revenue that ads generate, whereas cost per acquisition refers to the total cost required to generate a customer. This means that ROAS feeds directly into CPA, so these eCommerce KPIs are linked.
Despite this, they have differences that mean they need to be considered separately. For example, CAC doesn’t take order value into consideration. It might cost a lot to acquire a customer, which might seem like a warning sign. But if that customer spends a considerable amount on your site, the picture gets a bit brighter!
In the scenario above, ROAS would take this into account (providing they came in from a paid source). ROAS provides a monetary value comparing the amount spent to generate the sale, to the amount received in return. By incorporating two values that vary considerably, this eCommerce KPI is more volatile than CAC, but is certainly worth taking into consideration.
ROAS = Total sales / Total ad spend
9. Shopping Cart Abandonment Rate (SCAR)
Shopping cart abandonment rate (SCAR) is an essential eCommerce KPI to track, as so many shoppers don’t finish this part of the consumer journey. Whether your priority is sales, customer experience or branding, a high rate of shopping cart abandonment will hurt your business.
This eCommerce metric is often an indicator of how intuitive and trustworthy your checkout process is. If your cart abandonment rate is high, it might be time to overhaul this area of your site. If a high percentage of shoppers add something to their basket without checking out, they may be unhappy with your shipping fees, payment options or the checkout process. You may need to offer more payment options or employ the services of a trusted payment service provider like PayPal or Stripe to encourage consumers to convert.
But the good news is, reducing this rate is one of the easiest and most cost-effective ways to increase revenue, conversions and customer satisfaction. It should reduce customer acquisitions costs too. So set ambitious targets for this KPI.
To calculate your abandonment rate percentage, simply divide the number of sales on your store by the number of carts created and multiply by 100.
SCAR = (Sales ÷ Carts) x 100
10. Product Performance KPIs
Breaking your eCommerce KPIs down to a product level will help you to understand each products’ performance. It’s a very beneficial exercise for an eCommerce marketing manager. You might also want to consider category specific KPIs
If you sell your brand through a third-party retailer (e.g. Amazon, Tesco etc.), then it is imperative for you to consider your product performance on the third-party retailer sites.
You need to consider which of your products are selling the best on third party retailer sites. What can you do to increase the numbers sold? Identify what products are being purchased, and where they are being bought.
The ability to measure the success of each product sold through third-party retailers means you can take charge of your brand on retailer sites. Dig deep and get insights on product-specific conversions for all the brands the retailer features.
Understanding which retailer is performing or converting traffic at a higher rate can be hard if you’re trying to use multiple attribution platforms. With the use of a Where to Buy Solution, you’re able to get this insight (and more) in an easy digestible report. Check out the video below to see it in action!
11. Basket Level Performance
Basket level performance metrics are the key to understanding the holistic composition of your customers online shopping carts. By identifying complementary brands/products, you can get insights on which competitor brands are customers choosing over yours. If my customer didn’t purchase my product, what did the customer purchase? Where did I lose the sale and to whom?
For example, you’re driving a large volume of traffic to a particular retailer product page. However, you see that the customer is buying a competitor’s product instead of yours, you know then you know that something is not right.
Or if you see that most consumers are also adding a particular brand to their baskets alongside yours, it may make sense for you to approach that brand and establish a complementary partnership to help increase sales of both products.
12. Net Promoter Score
Most of the eCommerce metrics we’ve explored so far relate to the financial aspect of generating revenue and profit. Net promoter score is an important retail performance metric which takes a different perspective, measuring the customer experience.
Customer experience is a difficult aspect of an eCommerce business to measure, as it’s somewhat intangible by its nature. You also don’t have the ability to simply analyze your data for this eCommerce key performance indicator. For Net Promoter Score, you need to ask your customers a question.
To calculate your NPS you need to find out how many of your customers are promoters, passive or detractors. For this, you must ask a question, typically “how likely are you on a scale of 1-10 to recommend this company to a friend?” All answers of 6 and lower are considered detractors, 7-8 are passives, and 9-10 are promoters. Your NPS can then be calculated using the equation below:
NPS = % of Promoters – % of Detractors
13. Non Branded Product Performance
Non branded product performance metrics are the key to understanding how your brand compares to that of your competitors. This is when a consumer clicks through to buy your product on a retailer site, but ultimately ends up choosing a competitor product.
Understanding this metric will discover what is the ultimate persuading factor between your competitors’ products and your own. Learning from this will help guide the development of your USP.
In order to combat this, your brand should perform informed competitor research. Through competitor analysis, your brand will be able to combat your product not being bought over its substitute. If you find a competitor brand is continually chosen over yours, it’s time to start comparing how you describe, picture, advertise or even price your product.
Tracking this KPI can be achieved through ChannelSights ‘Where to Buy’ and ‘Shoppable Media’ solutions.
14. Device of Choice
It is of utmost importance to understand where your content and brand are being consumed, whether that be desktop, mobile, tablet or any other internet enabled device. Recognising your consumers device of choice and how they interact with it, has a direct correlation to customer experience and conversion rate.
With the continuous increase in mobile shopping, the optimisation of your mobile website is becoming more essential than ever. Failing to optimise your website or content to all internet enabled device will ultimately lead to a direct lose in sales.
Device metrics are the key to understanding how consumers are consuming your digital content and making their online purchases. Where your users are accessing your website is important to know when designing your website for an optimal user experience.
Brands should observe what is your most successful and least successful device for conversions. From this information, allocate their advertising budget across devices in the most cost-effective way.
Which eCommerce Key Performance Indicators are the most important?
There is no single online retail performance metric that is the most important, as each one measures something slightly different.
Some, like net profit and cost of goods sold, give an insight into the overall profitability and how expensive it is to have an item ready to sell. Others, like customer acquisition costs and return on ad spend will drill down into the cost required to generate revenue and customers.
By measuring every one of these important eCommerce key performance indicators, and tracking their trends over time, you’ll be able to keep your finger on the pulse of your online store’s performance. This way you will be able to identify areas for improvement, and diagnose potential issues before they spiral out of control.
Importance of eCommerce benchmarks
Another crucial component of properly tracking eCommerce KPIs is eCommerce benchmarking. Understanding how your metrics line up with the industry standards will ensure you stay competitive. There are various sources available for brands to learn about the eCommerce KPI benchmarks for their particular industry. For example, at ChannelSight, we provide our clients industry benchmarks through extensive brand performance data. This enables clients to see precisely how they stack up against competitors.
Covering conversion through to retention, some of these KPIs are sure to help your business. But there are countless other KPIs for eCommerce out there. We dig deeper into the vital KPIs that you should be measuring for your eCommerce strategy in our downloadable ebook.
For more information on how to analyse each of the metrics discussed or learn more about eCommerce benchmarks, talk to a member of our team today.