According to experts’ forecasts, E-commerce sales are expected to grow by 9.4% in 2024, followed by 8.6% in 2025 and 2026. In 2027, global e-commerce sales growth is expected to decrease slightly to 7.6%, but overall sales will surpass $8 trillion for the first time.
With so much competition, tracking your key performance indicators (KPIs) is more important than ever so you can make informed decisions to skyrocket your business growth. It helps you identify areas where your business excels and where you need to improve.
But which important E-commerce KPI metrics to track?
We have listed some of the most essential E-commerce KPI metrics to track on your dashboard. Check it out in the 3rd section!
What are KPI Metrics for SME E-commerce Businesses?
KPIs, or Key Performance Indicators, are quantifiable numbers that allow you to gauge your E-commerce business’s performance effectively. Regarding small and medium-sized E-commerce business(SME), these metrics serve as vital signposts, directing businesses toward the goals.
From tracking customer acquisition costs to measuring customer satisfaction, these KPIs provide a comprehensive view of an E-commerce business’s performance, enabling data-driven decision-making and enhancing overall business strategies.
Why is KPI Metrics a Must to Measure?
Measuring KPIs is essential for any E-commerce business looking to thrive in online commerce.
- KPIs enable a clear evaluation of business performance across various key areas.
- KPIs facilitate informed, data-backed decision-making processes.
- KPIs related to customers provide valuable insights into their preferences and behavior.
- KPIs related to costs help in optimizing marketing and operational expenses.
- KPIs aid in identifying growth opportunities and scalability options.
Although there’s a variety of KPI metrics available, not all are designed to fit the unique requirements and capabilities of SMEs. Therefore, it’s critical to concentrate on the ones that are genuinely essential and can enable you to streamline the operations and achieve optimal growth.
So, let’s explore the essential KPI metrics that you shouldn’t ignore measuring.
19 Essential E-commerce KPI Metrics You Should Measure
Here, we’ll explore the top KPIs you should have in your web analytics tool for E-commerce. Let’s start with E-commerce KPIs related to the heart of a business – Sales.
A. Sales Metrics
Sales metrics can be categorized into Customer Acquisition, Transaction Analysis, and Prot Analysis. Let’s get to know them one by one.
Customer Acquisition
1. Customer Acquisition Cost (CAC)
CAC calculates the cost associated with acquiring a single customer. It enables you to understand the expenses incurred in gaining new customers.
Formula: CAC = (Total Sales and Marketing Costs) / (Number of Customers Acquired)
For SME E-commerce businesses, it’s generally better to optimize and get a lower Customer Acquisition Cost (CAC) because it means you’re acquiring customers more efficiently and cost-effectively, contributing to better profitability and sustainability in the long run.
However, the ideal CAC can vary depending on your specific industry, business model, and target market, so it’s essential to strike a balance between a reasonable CAC and the lifetime value of your customers (CLV discussed in point #3).
2. Customer Retention Rate (CRR)
CRR determines the percentage of customers that your business retains over a specific period. It highlights the effectiveness of strategies aimed at retaining existing customers.
Formula: CRR = [(E-N) / S] x 100
Note: Here, E represents the number of customers at the end of a specific period, N represents the number of new customers acquired during that period, and S represents the number of customers at the start of the same period.
With this E-commerce metric, you can gauge customer loyalty and the effectiveness of your strategies to keep customers coming back, which is often more cost-effective than constantly acquiring new ones and can boost long-term success.
3. Customer Lifetime Value (CLV)
CLV is a metric used to measure the total revenue from a single customer throughout its relationship with the company. It enables you to evaluate the long-term value of your customer base.
Formula: CLV = (Average Purchase Value) x (Number of Repeat Transactions) x (Average Customer Lifespan)Transaction Analysis
4. Average Order Value (AOV)
AOV provides insight into the average amount a customer spends per transaction. It helps you understand customer spending patterns and devise effective sales strategies.
Formula: AOV = (Total Revenue) / (Number of Orders)
5. Shopping Cart Abandonment Rate (CAR)
CAR indicates the percentage of customers who add products to their cart but do not complete the purchase. It highlights potential shortcomings in the checkout process and customer experience.
Formula: CAR = 1 – (Completed Purchases / Shopping Carts Created) x 100
Profit Analysis
6. Gross Profit
Gross Profit assesses your total profit after accounting for the costs directly associated with production and distribution. It provides a clear understanding of overall financial performance.
Formula: Gross Profit = Total Sales – Cost of Goods Sold (COGS)
7. Revenue Per Visitor (RPV)
RPV measures the average revenue generated each time a user visits the website. It aids in evaluating the effectiveness of your online presence and marketing strategies.
Formula: RPV = (Total Revenue) / (Total Number of Visitors)
B. Marketing Metrics
Peter Drucker, a management educator, once said, “If you can’t measure it, you can’t manage it.”
The same principle applies to online stores. Marketing KPIs in E-commerce are a way to measure the efforts, allowing you to optimize your marketing campaigns.
Let’s know these KPIs in three categories – Online Visibility, Conversion Optimization, and Campaign Assessment.
Online Visibility
8. Total Traffic
Total Traffic indicates the number of website visitors within a specific timeframe. It is a fundamental metric for assessing the effectiveness of online visibility and reach. Every KPI dashboard for E-commerce must have this metric.
9. Traffic Sources
Traffic Sources offer insights into the origin of your online store’s visitors, helping you to evaluate the success of various marketing channels and campaigns.
Conversion Optimization
10. Average Conversion Rate
Average Conversion Rate measures the proportion of website visitors who complete a desired action, such as purchasing. It allows you to gauge the efficiency of your website in converting visitors into customers.
Formula: Conversion Rate = (Total Number of Conversions) / (Total Number of Visitors) x 100
11. Engagement Rate
Engagement Rate evaluates the level of interaction and involvement of users with your website or specific content. It provides valuable insights into the effectiveness of marketing strategies and content quality.
Calculating this metric manually is complex, so you should ensure your E-commerce KPI dashboard has this.
12. Cost Per Conversion
Cost Per Conversion determines the average cost of acquiring a single customer. It helps assess the efficiency of your marketing expenditure and optimize budget allocation for maximum returns.
Formula: Cost Per Conversion = (Total Cost of Campaigns) / (Total Number of Conversions)
Campaign Assessment
13. Email Campaign Metrics
Email Campaign Metrics analyze the effectiveness of email marketing campaigns, including open rates, click-through rates, and overall subscriber engagement.
14. Customer Acquisition Cost for Paid Traffic (CAC)
CAC for Paid Traffic calculates the cost associated with acquiring a customer through paid marketing efforts, providing you with insights into the efficiency of paid marketing strategies.
Formula: CAC = (Total Cost of Paid Traffic) / (Number of Customers Acquired)
15. Sales via Social Media
Sales via Social Media tracks the revenue generated through various social media platforms, allowing you to assess the impact of social media marketing efforts on overall sales.
Also Read: How To Setup Google Ads Conversion Tracking-A Detailed Guide (2023)
C. Other Key Metrics
Here are some more E-commerce metrics related to customer satisfaction and product analysis worth measuring.
Customer Satisfaction
16. Net Promoter Score (NPS)
NPS gauges customer loyalty and satisfaction, providing you with a clear understanding of customer perceptions and the likelihood of customer referrals.
Formula: NPS = % Promoters – % Detractors
17. Number of Repeat Customers (Customer Retention)
The Number of Repeat Customers measures the total number of customers who return to make additional purchases, reflecting customer satisfaction and loyalty.
Product Analysis
18. Top 10 Performing Products
Tracking the Top 10 Performing Products gives you insights into the most popular and profitable products, enabling effective inventory management and strategic product promotion.
19. Inventory Turnover Ratio
Inventory Turnover Ratio assesses how quickly your business sells and replaces its inventory, offering critical insights into inventory management and sales efficiency.
Formula: Inventory Turnover Ratio = (Cost of Goods Sold) / (Average Inventory for the Same Period)
20. Product Return Rates
This metric is about the proportion of items that are sent back by customers due to various issues such as defects, customer dissatisfaction, or unmet expectations.
A higher frequency of returns may suggest problems with the product, impacting both customer happiness and the costs of operations.
Formula: (No. of Products Returned by Customers) / (Total No. of Orders) X 100
21. Ratings & Reviews
Evaluating customer ratings and reviews is essential for understanding their experiences with certain products. This feedback not only influences other customers’ buying decisions but also provides you with critical insights for enhancements.
Utilizing E-commerce Metrics for Business Success
E-commerce metrics are indispensable for shaping successful business strategies and achieving sustainable growth. Here is how you can utilize these metrics for your E-commerce business.
1. Optimizing Marketing Strategies
- Targeted Marketing Campaigns: Utilize insights from conversion rates and traffic sources to identify the most effective marketing channels. Allocate resources towards the platforms that generate the highest ROI(Return on Investment).
- Content Optimization: Analyze engagement rates to understand customer preferences. Tailor content (such as product attributes, images, etc.) to match customer interests, creating engaging and relevant marketing materials.
2. Improving Customer Engagement and Retention
- Personalized Customer Experiences: Leverage customer lifetime value and retention rates to personalize interactions. Offer tailored recommendations and promotions based on customer preferences and purchase history.
- Effective Communication: To craft targeted and engaging email content, use email campaign metrics. Develop personalized communication strategies that keep customers informed about new products, promotions, and relevant updates.
3. Enhancing Product Offerings and Inventory Management
- Strategic Product Promotion: Utilize data on top-performing products to strategize product promotion and inventory management. Highlight popular items and ensure they are available to maximize sales potential.
- Inventory Optimization: Use the inventory turnover ratio to assess inventory performance. Adjust procurement and stocking strategies to prevent overstocking or stockouts, ensuring optimal inventory turnover.
4. Streamlining Sales Processes and Conversion Rates
- User-Friendly Interface: Analyze shopping cart abandonment rates to identify potential issues in the sales process. Optimize the user interface and streamline the checkout process to reduce friction and encourage conversions.
- Upselling and Cross-Selling Opportunities: Utilize average order value and cost per conversion metrics to implement effective upselling and cross-selling strategies. Recommend complementary products during the purchase process to increase order value.
Pro Tip: Conversios Can Make it Easier to Track All These Metrics
Implementing an efficient and user-friendly analytics tool like Conversios can simplify the process of monitoring and analyzing the plethora of KPI metrics crucial for your SME’s E-commerce success.
With its intuitive interface and comprehensive analytics features, Conversios streamlines data collection and analysis, providing businesses with valuable insights for informed decision-making and improved overall performance.
Conversios is available for WordPress, Shopify, as well as Magento.
FAQs
1. How do KPIs help in understanding customer behavior?
KPIs provide you with quantitative data that offer insights into various aspects of customer behavior, including purchase patterns, engagement levels, and overall satisfaction. Analyzing these KPIs gives you a comprehensive understanding of customer preferences and behaviors.
2. What strategies can be employed to reduce Shopping Cart Abandonment Rates?
You can use strategies such as simplifying the checkout process, offering transparent pricing, providing multiple payment options, and leveraging retargeting techniques to re-engage potential customers.
3. How can I effectively measure and improve Customer Retention Rates?
You can focus on building strong customer relationships, offering personalized experiences, providing excellent customer support, and implementing loyalty programs to incentivize repeat purchases. By promoting customer loyalty and satisfaction, you can improve retention rates and establish a loyal customer base for sustainable growth.
4. What are the best practices for increasing Average Order Value in E-commerce?
You can implement strategies such as offering bundled product deals, upsell and cross-sell recommendations, setting minimum purchase thresholds for free shipping, and introducing loyalty programs with tiered rewards.