Traffic, Revenue, Sales – these are the three vital and most common eCommerce key performance indicators KPIs that businesses track; however, there are plenty of other KPIs for eCommerce that a business should monitor diligently.
Expanding the online presence of a business is the key to its success in today’s digitally dynamic world. However, a lot of factors are involved in the smooth running of an eCommerce business, and keeping track to ensure the seamless customer experience is a mammoth task.
Couple that with different requirements for multiple departments, and the challenge is even bigger. Fortunately, we have assembled certain eCommerce metrics to help streamline the tasks and track the performance of a company.
What is an eCommerce KPI?
eCommerce KPIs are like a milepost that help determine the progress of an eCommerce business on their path to success. The eCommerce KPIs usually vary from business to business, depending upon their business and functional requirements. Once the KPIs for eCommerce businesses are decided, they are regularly tracked and monitored.
Some most important eCommerce KPIs examples are bounce rate, time on site, cost of customer acquisition, shopping cart abandonment rate, and conversion rate. These key eCommerce metrics help businesses to lay a roadmap to accomplish their defined targets.
Why are eCommerce KPIs Important?
Using time-tested strategies for your eCommerce business may seem like the way to go, but a marketing plan that may have worked for one business may not have the same effect on yours. Therefore, just enforcing an eCommerce strategy will do you no good, unless it is customized to fit your business needs. Once you have designed the roadmap, you need to keep a close check on its success rate.
“If you can’t measure it, you can’t improve it.” – Peter Drucker
Many different metrics make up the eCommerce umbrella. Oftentimes, this can overwhelm an eCommerce professional. They may focus too much on a single eCommerce metric making the success visible on paper when, in reality, the overall performance doesn’t improve much.
Instead, as an eCommerce professional, you must focus on the interdependencies between each eCommerce KPI. This will help to get an effective revenue-generating plan.
Top 10 eCommerce Metrics to Track Your Website Performance
There are various tools available to measure, analyze, benchmark, and improve the experience on your digital commerce website across multiple channels by helping you track the following eCommerce KPIs:
1. Conversion Rate
When users visit your site, you want to qualify them into leads and eventually convert to buyers. Routing them in the right direction is vital and needs to be strategically done.
The global average conversion rate is between 1-3%. For some of the best marketers, it might be even higher, but achieving even the average number can have a considerable effect on the profit.
Conversion rates optimization can be achieved by creating an intuitive call to actions, A/B testing for improvements, and simplifying the checkout process. Even though increasing the conversion rate should be your primary motive, you also want your customers to become loyal to your brand. So, define your conversion rate eCommerce KPI based on these parameters.
You need to know what your goals are and define ways to achieve them. Don’t stick to one method only. Keep experimenting with new ideas until you find the best method suited for your business.
2. Churn Rate
Customers may not always be satisfied with the service they receive from the company. Creating a strong relationship with your customers should be a top priority. Unhappy customers can stem from either underperforming products or unsatisfactory customer service.
According to Net Solutions’ Digital Commerce 2020 survey, embracing a multi-channel customer service system and delivering positive customer experiences are the biggest factors that help retailers turn visitors into satisfied customers and satisfied customers into loyal ones.
A poor experience can leave them with a bad taste, which may irritate them to the point where they write negative reviews about you online. Providing exceptional service can leave a lasting impression on your customers. They will keep coming back to do business with you.
The churn rate, one of the important eCommerce KPIs, is the number of customers that discontinue their subscription to your business after a certain time. A low churn rate means you have a happy customer base. The average churn rate for SaaS companies lands around 4.8%, with upper and lower quartiles of 8.5% and 2.9%, respectively.
3. Bounce Rate
Google Analytics’ definition of bounce rate is the percentage of single pageview visits to a website. In simple terms, this eCommerce KPI helps a business analyze the number of visitors leaving their website after viewing only a single page. The lower the bounce rate, the better it is.
What is an ideal eCommerce bounce rate benchmark for any website? Studies show that the bounce rate of a website anywhere between 30% and 55% is acceptable.
4. Return Customer Rate
If your company offers different types of products or services, you ideally want your customers to come back to purchase all of them. But this may not always be true, especially if your products are sub-par. Customers that do return should be valued and incentivized to keep purchasing from you.
According to Net Solutions’ Digital Commerce 2020 survey, More than half of the surveyed retailers find it difficult to drive sales by selling their products to the existing customers.
The return customer rate or the repeat purchase rate is the rate at which former customers come back to purchase other products from you. A return rate between 20%-40% is an admirable rate, while those with a rate above 35% can see a significant increase in their revenue.
You can increase the return rate by several initiatives to engage customers, including notifying and updating your products. Creating schemes and programs to reward your return customers is a proven way of bringing back your clientele. This is a very important eCommerce KPI, which helps strengthen your bond with existing customers.
5. Net Promoter Score
“A happy customer tells a friend; an unhappy customer tells the world.”
Your customers are free advertising modes that, if treated well, can propel your business forward. If your customers are satisfied with your service, they will recommend you to a friend, and the cycle continues. But an unhappy customer may get so infuriated with the wasted time and effort on your service that they may start writing your reviews online for the world to see.
Thus, it is important to get your happy customers advertising for your products. The willingness of your customers to recommend your service to their friend is the net promoter score. It is graded from 0 to 10. This score can account for 20% to 60% of a company’s organic growth rate.
Having quality products will definitely get your customers talking, but no product is perfect. Many times your consumers will find faults in them. Effectively handling these complaints is the key to a high net promoter score – an important KPI metric.
6. Average Profit Margin
It is important for the success of any online business to differentiate the products that generate large and small profit margins. Comparing the profit margins help identify the most profitable categories and products available in your online store.
Average Profit Margin is one of the key eCommerce KPIs that represents the actual picture of profit or loss across all the products; thus, helping an eCommerce owner to lay a roadmap focussed towards resources for growth.
Although an average profit margin may vary from company to company, as per studies, the average eCommerce gross margin is approximately 40%.
7. Cart Abandonment Rate
eCommerce sites offer a virtual cart feature for their customers who want to select multiple items at once. Consumers select the products they are interested in and add them to their virtual carts. They can then order them at their leisure. You may often notice that your customers add items to their cart, but do not place the order.
The rate of potential customers who leave without buying any product is the cart abandonment rate – one of the vital eCommerce KPIs. The average abandonment rate is 68% for the top 23 eCommerce sites. Some of the ways to reduce shopping cart abandonment include email retargeting, allowing guest checkout, and eliminating surprise costs.
8. Customer Lifetime Value
Customer lifetime value is one of the vital eCommerce metrics that help shape the customer retention strategy. In an eCommerce business model, it’s quite costly to gain new prospects than to retain existing ones.
Existing customers are an important source of revenue generation for every business, thus improving customer lifetime value is one of the primary variables and goals of savvy retailers while building any growth strategy.
One of the surest ways to steer the growth of existing customers is to deliver above and beyond service, which we call customer improvement, highlighted in the Net Solutions’ GROWTH + RETENTION – (G.R.O.W.)th Model.
Customer lifetime value eCommerce KPI helps businesses to analyze the average amount of revenue that their potential customers will spend with their business over an estimated lifespan. Customer lifetime value also figures out how much your customers love your products or services and how to further improve them.
Formula: CLV (Historic) = (Transaction1+Transaction2+Transaction3…+TransactionN) X Average Gross Margin
9. Cost Per Acquisition (CPA)
Many eCommerce KPIs, for example conversion rate, are good indicators of business success. But is there any eCommerce metric that highlights the money being spent on acquiring a new customer?
Cost Per Acquisition (CPA) or customer acquisition cost is one of the financial KPIs for eCommerce businesses that helps measure the revenue impact of a company’s digital marketing campaigns. In simple words, CPA is a marketing eCommerce KPI that showcases the average cost required to acquire one paying customer on a channel level.
10. Average Order Value (AOV)
Using Cost Per Acquisition eCommerce KPI, you can estimate the cost required to grow your customer base. However, it is equally vital to understand the amount that your target customers are spending or the number of orders they are placing on your website. That’s where the Average Order Value (AOV) comes into play.
Average Order Value is among the important eCommerce KPIs that help businesses to make a data-driven decision by getting useful insights from the customer’s buying patterns, product pricing, and online advertising spending.
If the cost of gaining a new customer outweighs the amount they spend on your website, it implies you are at a loss and you need to improve your eCommerce strategy.
There are a number of ways to improve your AOV: improving checkout experience, encouraging visitors to purchase more items in a single transaction, or by rising the product price. In our Digital Commerce 2020 survey, we asked our respondents about the key factors that drive online purchases.
The above-mentioned eCommerce metrics are some of the ways to assess the ROI generated by your marketing strategies. These strategies remove any ambiguity in measuring your profits. Even though focusing on these individually will not cause significant changes to your revenue, using these eCommerce KPIs in coherence with each other can be greatly beneficial for your eCommerce store.
Once you have found the best eCommerce KPI to track business performance, analyze how well it is working for you over time. Customers’ needs evolve with time, and because of that, the way they consume products and interact with eCommerce platforms also changes. So, it is only natural that the eCommerce metrics you choose today may not work in the same way tomorrow.
A system that helps you not only monitor your performance but also effectively bring about a transition in your business should be the right choice.