Wouldn’t it be great if your eCommerce brand could print out a snapshot of how well your business was doing?
At a glance, you’d be able to see stats like your average monthly transactions, cart abandonments, and gross margin. You’d be able to quickly see what’s working and what needs improving before it snowballs into a bigger issue.
This is what’s known as tracking KPIs, or key performance indicators.
Many brands forget to monitor crucial KPIs, and it becomes a costly mistake later down the road that could have been avoided.
We totally get why this happens; when you’re busy and lost in the day-to-day grind, it can be difficult to stop what you’re doing to check your metrics.
But over time, failing to do this could cause you and your team to lose sight of what’s really going on. And when this happens, you may feel like you’re spinning your wheels and accomplishing nothing despite your hard work.
So to avoid that from happening, we’re covering everything you need to know about eCommerce KPIs, including the top ones to focus on, how to know where to start, and which ones may be most beneficial for your company.
Let’s begin on page one:
Like we mentioned earlier, KPI stands for key performance indicator. These indicators give you an idea of how well your eCommerce brand is performing in key categories.
Though brick-and-mortar stores measure KPIs like sales and return customer rates, things get a bit more complicated for eCommerce brands. You have to track all the metrics related to your business and KPIs like website traffic, bounce rates, and more.
So why should you go through all this effort? What makes tracking KPIs so important?
Because of the classic adage: “What gets measured gets improved.”
Think about it:
You can’t run a faster mile if you don’t know your current pace. You can’t measure weight loss without getting on a scale. And you can’t know which of your strategies is improving your business if you don’t have a baseline or monitor your efforts.
Without using data to measure your progress, you’ll wind up making guesstimations that may or may not pan out, which wastes both time and money.
But when you use data to establish a baseline and track your efforts through these KPIs we’re about to share, you can make more informed decisions. You’ll be able to carry out marketing tests, such as social proof experiments, to see which strategies resonate best with new and existing customers.
You’ll have all the intel you need to help your business and customer base grow, making it very much worth your time and effort.
In a perfect world, you and your team would start tracking all these KPIs today and attempt to optimize each of them ASAP. But, let’s be honest; that’s probably not realistic.
Whether your team is small, strapped for time, or both, you may not be able to jump all in right now. And that’s okay.
Instead, it’s wise to pick a handful of KPIs to focus on, spend your time optimizing those, and then eventually branch out to the rest.
So how do you know which ones to choose first?
The answer to that depends on your goals and where your business needs help right now. Ideally, you’ll want to focus on the KPIs that will have the most significant impact on your company.
So let’s say you’re spending tons of money on ads and driving traffic to your site. You should probably concentrate on optimizing your conversion rate and lowering your bounce rate, which you’ll learn about shortly.
But let’s say you have no trouble driving customers to your business and converting them. If you’re struggling to keep those customers on board, however, you might want to zero in on how to decrease your churn rate.
There’s a perfect combination of initial KPIs to measure and track for every eCommerce brand (before you start tracking them all, of course). Since we can’t know what your business is going through, let’s break down all your options to help determine where to maximize your time.
These 11 eCommerce KPIs are the most important to start tracking and monitoring. We’ll also show you a few KPIs you may not have considered measuring until now.
Once you establish your baseline, it’s essential to keep checking in on these KPIs to see whether you’re making positive strides or need to try something else.
Technically, your website traffic, conversion rate, and bounce rate are three different and important metrics. But we decided to group them together because they go hand-in-hand as one.
If you have lots of website traffic, a high bounce rate, and a low conversion rate, you’re not doing your business any favors. That’s why it’s crucial to focus on all three simultaneously:
1. Website traffic is the number of people who visit your website per month. However, this KPI goes much deeper than that. It also includes the behavior of website users, such as how many pages someone views before leaving your site, where they come from (Google, direct, social, etc.), how long they spend on your site, and whether it’s their first time or they’re a repeat visitor.
You can find all this information in Google Analytics, and each one is just as important to track.
2. Bounce rate is the figure representing how many people left your site after visiting just one page. It’s expressed as a percentage.
Unfortunately, many websites can see a bounce rate as high as 80% — which sadly means 80% of people leave after seeing just one page. Many brands strive for a bounce rate between 30% and 50%, which means the majority of visitors will check multiple pages on your site (which may signal interest in your brand).
3. Conversion rate is the number of website visitors who turned into customers. To get this figure, you’ll divide your website visitors by the number of sales you captured from your site.
If you’re new to KPIs, start with these three basics first, as optimizing them will set you on the right path no matter where your business currently stands.
Cost per acquisition (CPA) refers to how much it costs your business to acquire a new customer. This number can help you determine whether your marketing efforts are actually paying off and which channels work best for your brand.
So if you’re running paid ads, you absolutely must determine your CPA.
To find this figure, divide how much you’re spending on paid ads by the number of new customers you’ve acquired in that time frame. Do this for each individual channel your business uses, such as Google Ads, Facebook Ads, LinkedIn Ads, etc.
You can also measure your CPA for other channels like email and social media (without using ads). Just determine what you spend on these campaigns and divide that by how many new customers came in from those efforts.
To take things a step further, you may want to combine each CPA for your paid ads versus your CPA for other outlets (like email). Then you can compare whether paid ads work better or worse than your other campaigns.
These figures alone will help you see whether certain marketing channels are paying off. A low CPA means you’re doing something right; a high CPA means your efforts need more tweaking.
Gross margin represents your total sales revenue divided by your cost of goods sold (COGS).
As you can tell, eCommerce gross margin is no different than the gross margin for a brick-and-mortar store.
While you should already have this figure nailed down, it’s essential to calculate your most updated figure now, as you’ll need it for another eCommerce KPI called customer lifetime value (which we’ll discuss shortly).
Average order value refers to how much customers spend, on average, per transaction. Again, while this number is essential to know on its own, it’s also necessary for another KPI on this list, as you’ll see.
You can’t try to increase what customers spend per order if you don’t know what they average first. Once you do, you can then experiment with offers for complementary products while browsing or at checkout, for example.
Average monthly transactions shows you how many transactions your business does per month, on average. You can take a snapshot of each month or quarter to see how your brand does throughout the year.
This may help you strategize promotions for slower times during specific months/quarters or ramp up for times of increased demand. And you can also use this number to discover your customer lifetime value (another KPI on today’s list).
Average customer lifespan refers to how many months customers stay with your brand. Similar to churn rate, which is another important KPI we’ll discuss in a moment, your customer lifespan shows how long customers remain happy before they decide to stop purchasing from you.
If your customer lifespan is low, your first step is to figure out when they become disengaged. Then, you can work out a strategy for keeping them interested and engaged over this hump, so they stay loyal in the future.
Customer lifetime value (CLV) is the amount of revenue you can anticipate from a typical customer throughout your relationship together.
Because it encompasses so much, calculating this KPI requires you to determine your:
Once you have those figures down, you can then calculate your CLV, which is arguably one of the biggest, if not most important, eCommerce metrics.
Since we discussed the importance of CLV in our guide on customer lifetime value, we’ll only share the formula here:
CLV = T x AOV x ALT x AGM
Here, those abbreviations stand for:
T = Your average monthly transactions
AOV = The average order value
ALT = The average customer lifespan (in months)
AGM = Your average gross margin
See why recording all those other metrics was so necessary?
Once you have your CLV all worked out, you’ll be more prepared to optimize your marketing budget, serve existing customers better, and lower your cost per acquisition all at once.
You can learn how that’s possible by visiting this guide when you’re done here!
Your customer satisfaction score shows whether your customers are happy and how likely they are to recommend your brand to others.
It’s a well-known fact: happy customers are more likely to spend more, stick around with your brand longer, and refer others to it, making this KPI worth your time and attention.
You can use a review management tool to help you easily capture customer testimonials, if you’re not already doing so, to gauge your customer satisfaction score. Once you start focusing on this, you’ll see a quick uptick in several of your KPIs, including this next one.
Return customer rate is the number of customers who make a repeat purchase from your brand, measured as a percentage of your total sales.
You can calculate this number by seeing how many of your transactions are from repeat customers each month. So, for example, if 20 sales out of your 100 per month came from repeat customers, you have a 20% return customer rate.
Once you know this number, you can hone your efforts accordingly. For example, high return rates signal happy, loyal customers you’ll want to keep engaged. Low return rates mean you may not be delivering what you promised.
A churn rate shows how many customers stopped buying from your business altogether. While it’s most frequently used in subscription business models, it’s just as useful for other eCommerce brands to know.
Churn rate can be considered the opposite of your customer return rate because it focuses on how many customers don’t come back as opposed to those who do.
Having a low churn rate means you’re keeping customers happy, and in return, they’re staying on board longer. This boosts other KPIs like your average customer lifespan and CLV.
Your cart abandonment rate refers to how often website visitors add items to their shopping cart, but never complete the checkout stage to make a purchase.
It’s worth focusing on your cart abandonment rate because this number can clue you into bigger problems you may not even realize exist. Despite your hard work acquiring new customers, these issues may be preventing you from capturing their business, leaving you spinning your wheels and frustrated.
We discussed this topic in detail during our guide on cart abandonment, so you’ll want to check that out next to learn more about this important KPI and how to improve it!
If you haven’t been tracking these critical eCommerce KPIs, don’t overwhelm yourself by trying to tackle all of them at once.
Instead, take a smarter approach and zero in on the ones that will remedy a specific issue you’re struggling with or make the biggest impact on your business right now.
With some confidence and practice under your belt, you can then move on to tracking another handful of KPIs until you get all 11 down. Keep tracking each piece of the puzzle and monitor what’s helping/hurting your efforts.
Now it’s time to roll up your sleeves and get to work! You’ll be amazed at what you have the power to change in just a few short weeks.