When running an online store, it’s important to monitor your business’s performance to see how things are going. E-commerce metrics are a big part of that.
What are E-commerce Metrics and Key Performance Indicators (KPIs)?
E-commerce metrics and Key Performance Indicators (KPIs) are important data and analytics that help measure the overall success of a business. How many customers are you getting? How often do customers return? Do people leave items in their shopping carts?
You can find out all this and more by monitoring key e-commerce indicators. While every business may vary in what it considers its most important priorities among these metrics, there are 15 metrics in total that every e-commerce brand should monitor.
These metrics help brands assess popular products, how often specific products are purchased, whether there are any checkout process issues preventing new customers from buying, and much more.
1. Sales Conversion Rate
While we aren’t ranking these metrics in any specific order, we will still say that your conversion rate will be one of the most important metrics to pay attention to. Approximately 40% of e-commerce marketers surveyed by Databox indicated that conversion rate is the most important e-commerce performance indicator.
The conversion rate (CVR) is the number of people who made a purchase out of the total number of people who visited your website.
The formula looks like this:
CVR = (number of purchases / number of sessions) × 100
Multiplying by 100 at the end helps you to know the actual percentage. But to make this easier, you can see your online store’s conversion rate directly within your Shopify analytics dashboard.
Shopify also shows users the entire conversion funnel. Because people sometimes will start shopping and forget or decide not to make a purchase, the percentage of people who add a product to the shopping cart will be higher than those who actually click on checkout.
And the percentage of people reaching checkout will then be higher than those who actually proceed with the purchase.
If you have a comprehensive view of your sales funnel, it can help you identify whether the checkout process is causing issues. For example, if you have 25% of people adding products to their shopping carts, but only 1% to 2% converting, it could be due to a complicated checkout process or even a software glitch causing problems.
Your conversion rate should remain steady, or at least increase over time. If you see a significant decline, it might be time to investigate to ensure that your website is still functioning correctly.
And if you’re wondering what constitutes a good conversion rate, Unbounce’s 2021 Conversion Benchmark Report found that the overall e-commerce conversion rate is around 5.2%.
2. Average Order Value
The Average Order Value (AOV) tells you the average amount customers spend at one time in your online store.
To calculate it, follow the formula:
AOV = Total Revenue / Total Number of Orders
The average order value is a great metric to track revenue and set realistic goals for new customers.
For example, if your average order value is $45, and you are looking to achieve $10,000 in sales for that month, you would know that you need to bring in at least 222 customers during that time frame.
3.
Customer Lifetime Value
Customer Lifetime Value (CLV or CLTV) is the total revenue that your business can expect from a single customer over the course of their lifetime (or at least their relationship with your business).
This figure will vary based on the industry and product as well. The lifetime value of a SaaS product that costs $25 a month can be just $900 if the average customer stays for three years.
On the other hand, the lifetime value of a beloved candle shop can be much higher if customers keep coming back month after month and year after year to replenish their collection of candles.
To calculate CLV, use the formula:
CLV = average purchase value × number of purchases per year × average customer relationship duration (in years)
So, for example, if the average number of candles your customers buy at $20 a year is 15 and they tend to shop at your store for 10 years, you would multiply 20 × 15 × 10 to get a CLV of $3,000.
This is not a metric displayed on your Shopify dashboard as it requires some analysis from the store owner to know it. However, it provides you with very important information.
For example, knowing the customer value for your business helps you determine how much you can comfortably spend on customer acquisition and still make a profit. It can also help you identify the most valuable products for your baseline line – specifically, which high-priced products are the most popular, and how you can realign your strategy to attract more people to buy them.
4. Customer Acquisition Cost
Customer Acquisition Cost (CAC) tells you how much it costs, on average, to acquire a new customer. This is another metric you should calculate based on the marketing budget you allocate for customer generation.
The formula for Customer Acquisition Cost is:
CAC = amount spent on marketing / number of new customers
So, if you spent $1,000 on a monthly advertising campaign and brought in 100 new customers, your customer acquisition cost would be $10 per customer.
Make sure to check this metric regularly to ensure it does not exceed the customer lifetime value – or even get too close to it for your comfort.
If your customer lifetime value is $1,000 and you’re spending hundreds of dollars to bring in even one new customer, your customer acquisition cost is truly impacting your profits. When that’s the case, you will need to reassess your customer acquisition strategy to see how you can achieve the best results at lower costs.
5. Shopping Cart Abandonment Rate
Regardless of your conversion rate or how in-demand your products are, there will be some consumers who simply do not complete the purchase process. This is known as shopping cart abandonment – when a customer adds a product to their online shopping cart but does not complete the entire purchase, thus abandoning those items.
While it’s unfortunate, it’s an expected part of e-commerce. However, it’s still important to monitor your overall shopping cart abandonment rate as it can tell you about potential issues in the checkout process.
To calculate your shopping cart abandonment rate, use this formula:
Shopping Cart Abandonment Rate = (completed purchases / number of shopping carts created) × 100
The rate
The average depends on the type of device the person used to access your online store, but it ranges between 69.75% and 85.65%.
So don’t worry if you have a high shopping cart abandonment rate. However, it’s time to start investigating potential issues if your rate is between 95% and 100%, as this means there are errors in the checkout process preventing people from completing their purchases.
6. Repeat Customer Rate
The repeat customer rate, also known as the repeat customer ratio, is the number of customers who have made more than one purchase from your store.
The average e-commerce store likely sees a repeat customer rate between 20% and 30%. Anything above that means you should invest resources in expanding your customer base, and anything lower means you may want to try some targeted ads to get those previous customers back.
Since it can cost up to five times more to acquire new customers compared to existing customers, you should work to bring customers back to the door (figuratively speaking) as much as you try to find first-time customers.
In addition to finding this in your Shopify analytics dashboard, you can also use the following formula:
Repeat Customer Rate = (Number of Returning Customers / Total Number of Customers) × 100
This is what the metric looks like in your Shopify analytics dashboard:
Getting repeat purchases means, of course, that you are doing a great job. So if you’re struggling to improve your repeat customer rate, you might want to take a look at your overall customer experience to see if there is anything you can revamp.
7. Bounce Rate
The bounce rate is a metric that anyone with any type of website should pay attention to, not just e-commerce sites. The bounce rate tells you how many people entered your website and then left again without taking any action, whether that be clicking to another page, filling out a form, or checking out a product, etc.
You can find your bounce rate under the title and view it in Google Analytics for your website. Take a look at the image below; you can find the bounce rate in the bottom row:
The average bounce rate for an e-commerce site ranges between 20% and 45%, so try to keep it around that benchmark (or even lower if you can). To reduce the bounce rate, make sure you have an easy-to-navigate website and an attractive design, and that people can immediately understand what you are selling when they land on your site.
8. Net Promoter Score
The Net Promoter Score (NPS) measures overall customer loyalty and satisfaction. This metric is calculated by surveying customers at checkout by asking a simple question: “On a scale of 1 to 10, how likely are you to recommend us to a friend or family member?”
These responses are then divided into three categories: promoters: customers who rated 9 to 10, passives: customers who rated 7 to 8, detractors: customers who rated less than 6.
Clearly, the higher the score, the better. Then, to find your net promoter score, use the following formula:
NPS
= % of Promoters – % of Detractors
So, if you have 80% of promoters, 15% of passive users, and 5% of detractors, you would calculate 80 – 5 to get a net promoter score of 75.
The net promoter score can range from -100 to 100, with a negative number occurring when there are more detractors than promoters. However, it’s unlikely that any company will achieve a score of 100. In fact, our sample score of 75 is still considered very high.
According to Inc., any score above 0 is considered “good,” scores above 50 are “excellent,” and scores above 75 are considered “world-class.”
So if you’re seeing an NPS score of around 20 or so, don’t worry. You are still performing well.
9. Click-Through Rate
Click-through rate (CTR) is the rate at which someone clicks on an email campaign, advertisement, social media post, etc., and ends up landing on your website.
To calculate the click-through rate, use the following formula:
CTR = (Number of Clicks / Number of Views / Impressions) × 100
Your email marketing platform or advertising platform should provide this in its reports or analytics dashboard, making it easy to assess the overall success of your digital marketing campaigns.
For Google ads, the e-commerce industry tends to see a CTR of 1.66% for search ads and 0.45% for display ads. However, for email campaigns, the click-through rate is around 2.01%. (Also, the email open rate for e-commerce is about 15.68%.)
Overall, click-through rates are likely to be quite low. If you are seeing a click-through rate of 2% or higher, you are doing well.
10. Store Sessions by Traffic Source
Online store session reports show the number of visitors coming to your website and how they arrived.
The most common traffic sources are:
Search: Visitors who reached your website after clicking on search results Direct: Visitors who reached your website after typing it directly into their URL bar Social: Visitors who reached your website after clicking on a social media platform Email: Visitors who reached your website after clicking on a newsletter email
Considering these statistics can help you assess which marketing channels are the most popular for your business and which might need some special attention. For example, you may want to enhance your keyword research strategy or build your email list to increase traffic from email.
You can access this directly within your Shopify analytics dashboard.
11. Store Sessions by Device Type
Similar to the previous statistic, your Shopify analytics show your store visitors based on the device they are using to access your website. Devices typically show up as mobile, desktop, or tablet.
If you have a lot of people accessing your website via mobile, you’ll want to pay attention to how your site’s responsiveness works on mobile devices. Having an easily accessible mobile site can significantly increase your mobile sales.
12.
Store Sessions by Location
Once again, this metric is also displayed on your Shopify Analytics dashboard. It shows you the best locations of your customers, helping you adjust your marketing and product offerings based on where your highest customers are located.
13. Best Products by Units Sold
The best products by units sold is also available on your Shopify Analytics dashboard. This metric tells you your most popular products so you can plan and prepare your inventory or create more products.
14. Monthly Snapshot of Inventory at Month-End
The month-end inventory snapshot shows the quantity of each product type you have in stock at the end of each month. You can use this to get the total value of your Shopify inventory.
15. Average Inventory Sold Per Day
Another unique e-commerce metric on your Shopify Analytics dashboard, it shows the average inventory sold per day by product type.
Running everything from one office is our biggest win. Our inventory and reporting all use the same real-time sales data. Inventory and reporting are the backbone of our business, so for me, the ability to trust the numbers I see in reports is a clear reason why Shopify helps us be a more cohesive business. Jamie Paul, Founder, Mister Zimi
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We’ve talked about how measuring your metrics can help get an idea of the overall performance of your business, but let’s get more specific about the importance of e-commerce metrics.
Here are three big reasons why you should consider reviewing your business metrics at least once a month: they can help you track growth and performance, they can assist you in estimating future inventory needs, and they give you an idea of customer engagement.
Understanding Performance
First and foremost, looking at your e-commerce sales is an important part of understanding growth and overall performance. This requires more than just looking at the number of sales you made each day. You also need to look at trends and whether the numbers are increasing.
Here’s an example of a Shopify Analytics dashboard:
By looking at metrics such as sales over time, total sales, store visits, and more, you can estimate whether your business is in growth.
If so, continue doing what you’re doing. But if not, this tells you that you may need to adjust your online marketing strategy, ensure that your checkout process is user-friendly, or update your e-commerce site design to enhance user experience.
Tracking your online store’s performance is crucial for understanding if there is something in your marketing or sales strategy that simply isn’t working, allowing you to adjust and adapt for the future. Amanda Fleischer, Retail Management Consultant
Optimization
Forecasting
Additionally, you want to monitor shopping trends. By keeping an eye on your metrics and the products people are buying, you can improve overall sales forecasts at the same time.
Look at popular products, learn what you need to create/order more of, and get a good sense of buying trends. You can know which months or seasons are slower than others, allowing you more time to prepare offers and sales campaigns for your slower periods.
You can also get a better idea of the overall revenue for your business and what to expect in the coming months, so you have more confidence in ordering inventory or even hiring new staff for your business.
Collecting data is always useful for developing insights into consumer behavior and segmentation. If certain types of consumers shop on specific days of the week and at certain times of the day, prices, for example, can be adjusted to suit those categories. Akshay R. Rao, Head of Marketing Department at Carlson School of Management, University of Minnesota
Understanding Customer Engagement
E-commerce analytics can also help you understand how people typically interact with your online store. How often do customers convert? Which product pages are the most popular (and does this align with the products that are actually being purchased)? What is the total traffic to your site?
Pay attention to Shopify and Google Analytics
Source: https://www.shopify.com/blog/basic-ecommerce-metrics
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