Choosing the right KPIs to track isn’t easy. Your choice will depend on your individual strategies and goals. There is no one-size-fits-all solution, but there are some top eCommerce KPIs that prove useful for most online businesses. Here’s everything you need to know.
What are eCommerce KPIs?
KPIs – or Key Performance Indicators – are key metrics that help you to understand where your businesses successes and failures are coming from.
In 2021 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 KPIs you won’t be able to translate these into targets that quantify success.
Why are KPIs important for eCommerce?
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 KPIs for eCommerce 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?
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.
The 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 seven 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 Rate
Conversion rates tell you what percentage of your store visitors are taking a desired action on your website. You can track how many people subscribe to your newsletter, create an account, sign up to your loyalty programme or purchase a product.
You can choose which conversions to track, which means this KPI can be tweaked to monitor what matters most to you. If your conversion rates are increasing, your other eCommerce metrics will usually perform well too so it’s a great indication of overall performance
This KPI is particularly useful as an insight into the engagement level of your website. 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.
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? 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 KPI 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 clearly a key indication of your eCommerce store’s overall health and viability
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.
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.
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.
It’s also really useful for startups. 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. 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
8. Product Performance
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.
Understand which retailer is performing or converting traffic at a higher rate wherever you’re selling your product. While this can be complicated, you can get access to this data in a digestible manner with a Where to Buy Solution.
9. Basket Level Performance
Basket level performance metrics are the key to understanding the holistic composition of your customers online shopping carts. In addition to getting insights on your product performance, it’s also vital to identify non-brand items that were bought whether alongside or instead of your product. You can get basket level insights using a Where to Buy Solution.
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?
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.
With many retailers, brands can access an itemized breakdown of the shopping basket where branded items can be identified alongside non branded or competitor items using our Where to Buy solution.
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 deep into the essential 12 KPIs that you should be measuring for your eCommerce strategy in our guide here.
If you want to improve online reviews or word of mouth marketing, your Net Promoter Score can become a KPI. If you’re working to improve the customer experience, look at the number of Tickets per Transaction. Or, if you’re tweaking landing pages, make sure you’re tracking your bounce rate closely.
For more information on how to analyse each of the metrics discussed or to discover how you can gain access to start optimising your eCommerce strategy, talk to a member of our team today.