How to figure out that your ecommerce business is going on the right track to achieve the desired business goals? With the view to making sound decisions, store owners should be aware of how their website is performing, and what aspects need to be enhanced. That’s where ecommerce metrics come in.
Selling online without keeping a record of your ecommerce performance metrics is like driving with your eyes shut. The most successful retail companies take appropriate actions based on critical business metrics. Online business metrics show how your company is doing and help to compare your progress over time.
However, the key challenge is to identify which estore tracking would give you the information you are searching for. There is an abundance of metrics you can monitor, but only some of them report the state of your ecommerce business and can be transformed into valuable insights that help you boost your business.
To point you in the right direction, we’re going to provide the information on key ecommerce metrics to keep an eye on. We’ll talk in detail about what these metrics mean and why they have a considerable impact on shaping your business strategy.
Ecommerce growth metrics are any measurable quantitative assessment of your business performance within a specified timeframe. Here’s a key business metrics list to improve the trajectory of your business.
Conversion rate is the sacred grail of ecommerce KPI metrics for store owners. The conversion rate presents you the number of people who performed the desired action, such as a purchase of a product, subscription to your website, participation in an online poll, and more. In the ecommerce industry, customer conversion metrics are usually measured by the percentage of visitors who buy a product in your store.
To calculate your conversion rate, you just need to divide the number of sales by the total number of site sessions in a given period and multiply the outcome by 100 percent. A store session represents an interaction with your website, whether it’s for ten seconds or two hours. You can also calculate your conversion rate using Google Analytics or AdWords automatically.
For instance, if 3,000 users visited your ecommerce website this month and 60 people bought a product, your conversion rate per month is 2%. According to Marketing Sherpa, an average conversion rate of online stores in the US is approximately 3%. Bear in mind that the conversion rate for a website selling cars will definitely not have the same conversion rate as a beauty shop.
Analyzing your conversion rates can help you understand if you’re turning a sufficient number of visitors into customers, or if you need to work on your CRO (conversion rate optimization), the process of improving customer conversion metrics.
Email marketing is one of the most powerful tools to drive traffic to your site. However, to understand if it is advantageous for your business to invest in email marketing, you need to evaluate the email marketing store metric such as bounce rate, click-throughs, and unsubscribes.
Opt-in email marketing is the way of encouraging store users to sign up for your email list by providing value in exchange for your customers’ email addresses. For instance, you can offer a coupon code to email subscribers on their following purchase.
You can track opt-ins and where they came from through the built-in analytics or configure Google Analytics to monitor your email opt-ins from your admin panel. The formula to calculate your email conversion rate:
Emails opted in / Number of users × 100% = Email Conversion Rate
Most of the store owners view the customer base from the perspective of one sale only. The CLV (customer lifetime value) metric takes an overall approach and refers to the total revenue you expect to earn throughout the customer lifespan.
The customer lifetime value is a crucial ecommerce metric as it demonstrates how much you can spend to acquire new customers and how far you should go to build brand loyalty. This metric helps merchants to refocus from concentrating on short-term goals to long-term revenue.
To calculate the CLV, use the given formula:
Multiply the average purchase value by the average purchase frequency rate and the average customer lifespan. For example, in case your typical customer spends $50 per order, places seven transactions annually, and proceeds to order from your ecommerce store for the next five years, then your average CLV will be 50 x 7 x 5 = $1,750. Bear in mind that you still have to subtract your acquisition costs from this number.
As you can see, it can be quite challenging to predict CLV, but once you spot really high-value customers and record all their purchases, we recommend you to analyze their shopping journey and try to reiterate their experience with other customers. It’s more cost-effective to work on customers that the company has already gained, instead of spending more money to lure new customers constantly.
As the name suggests, AOV (average order value) refers to the average sum of money your ecommerce business gets from a single purchase. Whereas the sales conversion rate shows you how many website users are buying, the average order value shows you how much income is received through each of these transactions.
Tracking and optimizing this price-performance matrix enables you to set benchmarks and get larger profit and better ROI (return on investment). To calculate your AOV, divide the total value of sales by the number of purchases placed on a website you get for a specific period.
The total value of sales / Total number of purchases = Average Order Value
For example, let’s say that in August, your online sales were $28,000 and you had a total of 700 orders. $28,000 divided by 700 = $40, so August’s monthly AOV was $40.
Analyzing your AOV is a really powerful method to increase your margins. Some of the tips to boost average order value:
Not all users who add to their shopping cart will make a purchase. The shopping cart abandonment metric refers to the percentage of users who’ve loaded up items to their cart but failed to complete the purchase and left your website. According to Statista, around 70% of customers abandoned their shopping carts.
You can calculate this abandon cart metric applying the given formula:
Cart Abandonment Rate = 1 – (Number of Orders Placed / Number of Shopping Carts Created):
For example, if 24 people added products to their cart, and only 6 completed the purchase, the shopping cart abandonment rate would be 77.5%.
1 – (6 / 24) x 100 = 75%
In any case, if your cart abandonment rate reaches 75-80%, you’ll need to analyze the possible reasons behind such high statistics. You can track cart abandonment by configuring a funnel in Google Analytics or integrating cart abandonment tools.
The most common reasons for shopping cart abandonment:
How to reduce your cart abandonment rate:
Another ecommerce performance metric to mention is the number of users who visit your website and can become your potential customers. Why is it so crucial to measure website traffic? Knowing this metric will help you make informed decisions about website optimization and build a solid online presence.
By tracking your website traffic, you can come up with effective campaigns to maximize your chances of generating more sales. On-site website metrics can help you to monitor the effectiveness of your CTAs (call-to-action buttons) and analyze various areas about your visitors’ shopping behavior. Here are a few metrics that you can study to decide upon your marketing strategies better.
There is no average traffic for your ecommerce website, as it depends on your target niche. However, there are some useful tips to drive traffic to your ecommerce store:
The customer retention rate (CRR) is the number of customers who return to make purchases on your ecommerce store. Repeat customers are the basis of your ecommerce business success, as it costs much less to keep your customers satisfied than it is to attract new ones. The customer retention metric is directly related to customer loyalty and shouldn’t be overlooked. A strong customer retention rate will greatly boost your customer lifetime value, mitigating customer acquisition costs.
Customers are typically regarded as inactive if they haven’t bought anything from six to twelve months. To calculate your customer retention rate (CRR), merchants need additional pieces of information such as:
The formula for calculating CRR is:
To get a percentage, multiply your result by 100. For example, You start with 40.000 customers per year, lose 4000 customers, and gain 8.000 customers.
32.000/4.000 = 8;
8 x 100 = 80.
Your retention rate for that period was 80%. Is 80% a good result? It depends on your target niche and your business goals.
Some major ways to boost your CRR:
How do you make sure you’re not wasting your money on your marketing and sales campaigns? Identify your customer acquisition cost (CAC). Customer acquisition metric is the total sum of money your ecommerce business spends for marketing purposes in order to gain new customers over a certain period. By measuring CAC, you can concentrate on the channel that is bringing the most customers at a low cost in comparison to others.
To calculate customer acquisition cost, divide all the sales and marketing costs spent on bringing in more customers by the number of customers acquired in a given period.
CAC = Amount spent on customer acquisition / Customers Acquired
For example, your ecommerce business spent $30,000 on a marketing and sales campaign within a month and attracted 3,000 new shoppers. Thus, the company’s CAC is $10.
If you’re spending an average of $25 on bringing customers to your site, but your AOV is only $20, this should be a warning sign that something is wrong. That’s high time to reconsider your marketing strategies! Ensure you don’t exceed your maximum cost.
Alternatively, you might actually be losing time and money in the effort to attract new customers. Analyze all acquisition channels such as social media, Google ads, referrals, and more to assess if you’re spending your marketing budget to the relevant channels
To optimize your Customer Acquisition Cost, you should
The Net Promoter Score (NPS) metric measures how many your customers would like to recommend your products to their friends or relatives. This metric is less tangible than other metrics included in this list, but that shouldn’t downplay its significance.
NPS is usually identified by conducting a survey to your customer base and asking them how likely they would be to recommend your product or service on a scale of 1-10. Shoppers that respond with a 9 or 10 score are considered to be promoters. Shoppers that rate you a score 7 or 8 are in a neutral group and those shoppers who voted below 6 are considered to be detractors.
To find the net promoter score metric, subtract the percentage of detractors from the percentage of promoters. For example, if 70% of your customers are promoters, and 10% are detractors, your NPS would be 60%. This number you can compare to the average within your niche to figure out how your ecommerce company competes against the key player in terms of building customer loyalty.
To optimize your NPS, you should:
Now when you know the ecommerce performance metrics, track them on a regular basis, and highlight those areas in which you can introduce other strategies to boost your store’s performance. We have mentioned key ecommerce metrics, but there are other ecommerce metrics you can track to run a data-driven ecommerce business: