How can you gauge if your ecommerce business is successful? The obvious answer is if you’re making money from it. But how can you be sure that you’re making as much money as you reasonably can? And that the money you’re spending on your business is giving you a good return?
The secret to optimizing these factors is to determine your key performance indicators (KPIs) and work toward them. And the most critical element for ensuring you’re on track to meet your KPIs is to track the most important ecommerce metrics.
Ecommerce metrics are data points that give you insight into the health of your ecommerce operations. These numbers tell you everything from how many site visitors you have to how valuable your average customer is and more.
Here’s a look at the most important ecommerce metrics, what they can tell you, and why tracking them is important.
Customer Acquisition Metrics
How impactful and cost-effective are your efforts to engage new shoppers? These key ecommerce metrics can help you answer that question.
Traffic Sources
Data on your site’s traffic sources tell you how people arrive at your site — whether via links from other websites, through search results, or by directly typing your URL into their browser.
Knowing where visitors are coming from can help you conclude the effectiveness of different marketing strategies. For example, if a lot of people are arriving at your site via links from Instagram, you know your social media strategy is working. If very few people are arriving from search engines, you may want to invest more in search engine optimization (SEO).
New Customer Rate
Measuring how much of your traffic consists of first-time visitors will help you determine if you’re pulling in new consumers at a steady enough rate. A high new customer rate means your marketing strategies are working. (If your new customer rate is too high, though, that may be cause for concern — see the section on repeat customer rate below.)
Customer Acquisition Cost (CAC)
If marketing to new customers costs more than those new customers spend, there was no point in acquiring them at all. Knowing how much it costs to gain a new customer can help you guarantee you’re channeling your money into cost-effective marketing efforts.
To find your customer acquisition cost (CAC), assess your total marketing costs over a set period of time and divide that by the number of new customers you get in that period. If the result is higher than you’d like, it’s time to refine your marketing approach to be both more effective and less costly.
Conversion Metrics
The crux of your business depends on whether shoppers are buying what you’re selling. These metrics can be used to make sure consumers are converting regularly.
Conversion Rate
The rate of site visitors who ultimately convert by making a purchase is one of the most basic and important ecommerce metrics.
According to data reported by Smart Insights, the average global ecommerce conversion rate is around 3%. Any rate greater than that can be considered a success.
Cart Abandonment and Checkout Abandonment Rates
It’s natural for ecommerce shoppers to frequently abandon their carts or change their minds in the middle of checkout — Smart Insights reports that the global average cart abandonment rate is 80%. But if the cart abandonment rate on your site goes above the average, it could be indicative of issues in the purchasing process, such as a confusing checkout page or high shipping costs.
Average Order Value (AOV)
Your average order value (AOV) helps you see how much each customer is spending on your site. In addition to giving you insight into how much you’re selling, the AOV helps you put a host of other metrics for ecommerce into perspective. For example, it can help you determine what a reasonable CAC is or how many new customers you need to acquire to hit your target revenue.
Retention Metrics
Selling to new customers is great, but selling to old customers who return to you, again and again, is even better. Here are some key ecommerce metrics that can help you assess how well you’re retaining shoppers.
Repeat Customer Rate
The repeat customer rate is the inverse of the new customer rate. It’s the percentage of people visiting your site who have shopped with you before.
You want to have a healthy balance of new and repeat customers for sustainable growth. If your business is too heavily weighted toward repeat customers, you may not be engaging enough new shoppers to grow. But if it’s too heavily weighted toward new customers, that may be a sign that you’re not doing enough to cultivate brand loyalty.
Churn Rate
The churn rate is the rate of shoppers who leave your business to shop elsewhere. If you have a subscription-based business, your churn rate is simply the rate of customers who cancel their subscriptions.
For all other businesses, churn is estimated by measuring how many shoppers return to your store during a set period of time. Those that don’t have churned. A high churn rate may indicate that shoppers aren’t engaged by your site or that your competition is offering them something you aren’t.
Refund and Return Rate
Frequent returns are an inescapable part of ecommerce. Still, excessive rates of returns can eat into your revenue and indicate that consumers may be disappointed.
If your return rates are higher than the industry average — just over 20% for online sales, according to the National Retail Federation (NRF) — then you may want to look into why. Consider surveying customer satisfaction or evaluating your product content to make sure consumers have an accurate understanding of what they’re ordering.
Customer Lifetime Value (CLV)
Customer lifetime value (CLV) is the amount that you can expect to earn from one customer over their lifetime. Your ecommerce business’s average CLV can be determined by first multiplying its AOV by the number of times the average customer buys from you each year. Then, multiply your result by the number of years a customer typically stays loyal to your business.
The CLV metric can help you get accurate insights into your business’s health. It illustrates how much you can expect to earn from each customer over the long term and helps you predict how much more you would make if your return rate or AOV were higher.
Customer Satisfaction Metrics
It’s not always enough to have customers who get in the habit of shopping with you. You also want customers who are excited to return to your store and who will promote your brand to their friends and family.
Net Promoter Score (NPS)
Net Promoter Score (NPS) is a metric businesses of all types use to evaluate customer approval. While most other metrics can be gathered from existing data, an NPS relies on a survey. Typically, customers are asked one simple question: “On a scale of one to 10, how likely are you to recommend us to a friend or family member?”
Promoters answer this question with a nine or 10, while detractors respond with a six or lower. (Those who give your brand a seven or eight are called “passives'' and are ignored.)
Your NPS is the percentage of all promoters subtracted by the percentage of all detractors. Any NPS over 0 is considered good because it means more people like your brand than don’t. A low NPS tells you that there is work to be done regarding your customer service or the buying experience.
Loyalty Program Participation
A great loyalty program is a win-win for retailers and consumers — consumers can save money, while retailers can encourage more repeat purchases. The percentage of shoppers who opt into your loyalty program is a metric that tells you how many people are excited about your brand and eager to buy again.
Business Performance Metrics
There are a few high-level metrics that ecommerce brands and retailers need to take into consideration.
Top Items Sold
What’s selling, what’s not, and what’s left in the inventory at the end of each quarter? Retailers need to know this information so they can make sure they’re stocking the items shoppers want.
Staying abreast of inventory needs is particularly important for ecommerce businesses since stocking issues or delays in shipping can have a significant impact on customer satisfaction.
Return on Investment (ROI)
Your business’s return on investment (ROI) measures whether the money you’re spending to keep it running is paying off. It’s calculated by dividing the profit earned by the money spent to earn it.
Often, ROI is used to assess whether specific investments are worthwhile. So, you can calculate the ROI of the software underpinning your ecommerce business, your marketing spend, your loyalty programs, and so on. Periodically measuring the ROI of each aspect of your ecommerce business can help you make sure you’re investing in the things that help your business the most.
Profit and Revenue
These basic business metrics give you the bottom line of how successful your ecommerce strategy is. Revenue is how much money your organization brings in, while profit is how much money it has after all expenses are subtracted.
If these numbers don’t match your goals, it’s time to look at some of the more granular metrics for ecommerce mentioned above to assess what the problem might be.
Using Relevant Ecommerce Metrics for Business Growth
You can’t know how to improve your business if you don’t know where your strengths and weaknesses are. Metrics for ecommerce help you pinpoint these strengths and weaknesses so you can find new opportunities to satisfy your customers.
Not only that, but smart and strategic metric analysis is an essential step toward hitting your KPIs.
