Data and metrics are essential indicators of your eCommerce business’ performance. While there are dozens of different data points to consider, not all are equally important.
Identifying and analyzing the most relevant eCommerce metrics and differentiating them from more situational ones can help you grow your business and improve customer satisfaction.
The Difference Between KPIs and Metrics
When looking for information to estimate your eCommerce website’s overall performance, your analytics tab can provide you with dozens of data points and metrics.
The data points most relevant to your business are called Key Performance Indicators (KPIs). Although KPIs are essential in every industry, each sector needs to track different KPIs, depending on the individual business goals.
For example, the indicators most relevant to a manufacturing industry plant (e.g., cycle times, lead times, production schedule attainment) will differ significantly from those most pertinent to a call center (e.g., average hold time, average handle time).
The main difference between a metric and a KPI is its relevance to your business performance. A KPI is always a metric, but not all metrics are KPIs.
The Most Important eCommerce KPIs
Generally, an eCommerce KPI is short, simple to understand, easy to track and measure, and reflective of your business’ actual performance.
There are 17 essential KPIs to track, grouped into 4 categories: Sales, marketing, customer satisfaction, and user experience.
Sales KPIs measure your store’s ability to attract customers and generate revenue. The four critical sales KPIs are conversion rate, gross margin, average order value, and cost per acquisition.
1. Conversion Rate
By far, the most critical metric for any eCommerce business is the conversion rate. In marketing terms, a conversion is when a site visitor views a product page and completes the checkout process. Think of it as converting a viewer into a paying customer.
The conversion rate calculates the number of product page visitors that have completed a purchase. The higher the conversion rate, the more likely a viewer will buy a product. Therefore, improving and optimizing this KPI translates into business growth.
You can also use the conversion rate as a marketing campaign effectiveness metric. A successful marketing strategy (like a robust social media presence or a memorable ad) typically leads to more site visitors and a higher conversion rate.
2. Gross Margin Ratio
Besides conversion rate, your business’ gross margin ratio is another critical performance indicator, as it measures your business’ long-term growth and sustainability.
Gross margin equals net revenue minus the Cost of Goods Sold (COGS). The gross profit margin ratio equals the gross margin divided by net revenue and multiplied by 100.
For example, if XYZ Company’s net revenue for the last quarter is $220,000 and COGS totals $64,000, your gross margin is $156,000. Therefore, your gross margin ratio is calculated as follows:
- ( ($220,000 – $64,000) ÷ $220,000 ) ✕ 100
In this example, XYZ Company’s gross margin ratio is approximately 70.9%. Although the definition of a healthy gross profit margin varies by industry, datasets compiled by the New York University estimated that the average online retail business has a gross profit margin of 42.53%.
3.Average Order Value
The Average Order Value (AOV) is the average amount of money your customers spend on your platform. Although it is an essential metric to track, Shopify SEO agencies recommend you to compare overall AOV with sub-metrics, such as AOV by segment or product type.
The combined information helps you identify which products are the most successful, giving you indicators for growing them further and increasing profitability.
4.Cost Per Acquisition
The Cost Per Acquisition (CPA) effectively measures the amount of money your business spends to obtain a new customer. CPA aggregates all customer acquisition costs. This includes advertising campaigns, discounts, promotions, and more.
Measuring CPA requires marketing analytics tools, such as Google Analytics or the Shopify SEO Dashboard. The information provided by these tools helps you understand how your customers behave on your website, allowing you to develop and refine your marketing strategies accordingly.
On occasion, some customers may abandon the purchasing process after starting it. There are two types of abandonment:
- Cart abandonment: When a customer adds products to the shopping cart but does not proceed to checkout
- Checkout abandonment: When a customer reaches the checkout page but does not complete a transaction
Measuring your abandonment rates can help you identify potential weaknesses during the purchasing process. Some possible causes of abandonment could be a confusing checkout system or false-positive fraud detection.
6. Customer Lifetime Value
Your Customer Lifetime Value (CLV) is the average revenue earned per customer. In other words, it measures the average worth of a customer over your company’s lifetime.
A healthy CLV must be greater than your CPA, as the difference represents profit.
7. Advertising-to-Sales Ratio (A-to-S)
The Advertising-to-Sales Ratio (A-to-S), also known as the Revenue on Advertising Spent, represents the amount of money earned for each dollar spent on advertising over a specific period.
A-to-S is easy to calculate. You divide the total advertising budget by your gross sales revenue and multiply the result by 100 to get a percentage. This ratio helps measure the effectiveness of your marketing campaign. The lower the value, the better.
Marketing KPIs measure your store’s ability to attract and engage with customers.
8. Traffic Source
Visitors can find your website in many ways. They may look for you on social media platforms, organic and paid search results, referral links, or even direct traffic (typing your site’s URL directly).
Monitoring your traffic sources gives you insights into how customers find your eCommerce platform. It also helps you determine the effectiveness of your referral programs.
9. Site Traffic Volume
Measuring site traffic volume is a staple of website analytics. It tells you everything about your visitors’ habits when viewing your website. You gain insight into the average time spent on the site, page views per visit, most visited pages, new users vs. returning users, and more.
10. Social Media Metrics
Social media is one of the most powerful marketing and customer interaction tools at your disposal. Each platform provides an analytics dashboard, providing numerous insights on the effectiveness of your social media campaigns.
11. Valid Email Collection Rate
Email customer service and marketing campaigns like newsletters or promotions can only function if the email addresses entered by customers are valid.
Monitoring the valid email collection rate helps you measure interest in your products and provide better customer service.
Customer Satisfaction KPIs
These KPIs help you determine which are your most used customer support methods and whether they are effective.
12. Customer Product Reviews
Customer reviews are one of the most effective ways to track satisfaction and improve your customer retention rates. A 2020 Brightlocal survey found that 79% of online shoppers trust reviews as much (or more) than recommendations from friends and family.
13. Customer Surveys
The best way to improve your site is to get direct feedback from your customers. Running surveys frequently helps you gather customer opinions and have an idea of what to improve and how. Giving customers a voice helps them feel listened to, and implementing requested changes can contribute to customer retention.
14. Service-Level Agreement Time
The Service-Level Agreement (SLA) time is the average time spent between the opening and closing of a customer support ticket.
Reducing the SLA time is crucial because it is synonymous with solving shopper problems more quickly. The longer it takes to resolve a ticket, the less likely the customer is to return.
User Experience KPIs
User Experience (UX) KPIs measure how your customers use your website and whether it performs as expected.
15. Device Type
Knowing which devices your customers use to access your website helps you determine which UX aspects you should improve. For example, if 90% of your visitors use mobile devices, you know that optimizing your site’s mobile version is a priority.
16. Site Responsiveness
This metric measures how quickly your pages load. The faster the load times, the more pleasant the shopping experience. Use this metric to identify whether specific pages have trouble loading quickly. The top-priority pages for site responsiveness are the checkout, shopping cart, and product pages.
17. Bounce Rate
A user that leaves after visiting a single page has bounced. A 2016 CustomediaLabs study estimated that most eCommerce websites experience a bounce rate of 25% to 45%.
If your bounce rate is abnormally high (50% or more), your site may have significant UX issues, such as unresponsiveness, navigation problems, or a generally poor marketing strategy.
Get the Most Out of Your eCommerce Business With Rezolutions Design
As a digital marketing agency, Rezolutions Design can give you the edge you need to grow your eCommerce business and become more competitive. Our services include website design solutions, custom Shopify theme development, UX solutions, SEO optimization, and more.
Contact us today to help your eCommerce platform reach its full potential.