Never before have sales been as measurable, testable and quantifiable as in the era of ecommerce. Every detail of incoming traffic to your site can be tracked and traced, uncovering actionable insights that are crucial to profits. With the variety of data available, choosing the right ecommerce metrics to inform strategic decision making is often daunting. As business owners and marketers wrangle their way through the jungle of data generated in ecommerce, new trends appear. This article will get you on top of the most up-to-date options so you don’t miss a metrics beat.
What are ecommerce KPIs?
Key performance indicators (KPIs) are metrics that zoom in on specific user interactions with an ecommerce website, web application or digital campaign. These user behavior snapshots provide crucial insight into how a business or product is performing, allowing for strategic actions to be planned and implemented.
Why are key performance indicators important?
A well-devised ecommerce campaign may bring a high number of visitors to your site, but confusing product listings or lengthy checkout procedures may deter them from buying. Plummeting figures may suggest a broken sales strategy, but a correct diagnosis can only be achieved by pouring over quantifiable and qualifiable data. How much a customer spends per purchase, their satisfaction with the product or service received, their likelihood to buy again and the profitability of each sale are all factors that help determine how a business is doing. A solid selection of the most insightful and relevant ecommerce KPIs is essential to growth.
“If you don’t collect any metrics, you’re flying blind. If you collect and focus on too many, they may be obstructing your field of view.”
― Scott M. Graffius
What is the difference between metrics and KPIs?
Metrics are trackable datasets that reflect general business tactics, and they are far-reaching in their scope. KPIs are a specific type of metric with defined targets associated to them and an accompanying plan of action. Think of KPIs as the golden nuggets of the metrics-mining domain. Most of the actionable data to consider for the product, audience, and personas that you aim to build a long-lasting rapport with will likely be drawn from a KPI.
To know whether a metric is a KPI, ask yourself whether it strongly impacts part of your brand, or yields critical information on a vital business component. Metrics can be measured on a daily, weekly, monthly, quarterly, yearly basis and so on, whereas each KPI is fine-tuned and pertains to one piece of the strategic puzzle, usually measured over a weekly or monthly timeframe. While metrics are considered tactical, KPIs are more strategic.
|Examples of metrics||Examples of KPIs|
|SEO keyword ranking|
Return on investment (ROI)
Amount of published content
|Cost per acquisition|
Cart abandonment rate
Branded search impressions
Average order value
How to choose the best metrics for measuring the performance of your business
Define your goals
By clearly defining your ecommerce business goals, you’ll be able to build the right strategy and metrics to support it. Certain ecommerce KPIs are relevant to some business models but not others, and the relevance can vary over time depending on how objectives shift. Say a company has been laser-focused on revenue growth for months by promoting attractively-priced product bundles, but their dwindling online engagement suggests a pressing need for converting new website users. In this case, churn rate and social media-related metrics will take priority so the respective marketing actions can be planned.
Avoid vague goals and instead be as specific as possible to devise a clear path toward achieving these goals. If you’re having trouble setting short- and long-term objectives, there are lots of online resources that can help you.
Prioritize quantitative and qualitative metrics
You’ve likely come across these terms in your ecommerce endeavors. Their weight in digital business practices is due to the importance of distinguishing data that deals with numbers (quantitative) from data that defines qualities or attributes (qualitative). The latter is descriptive in scope and helps support general business objectives, unveiling qualities in your product or organization that can be improved. Examples of qualitative ecommerce metrics may be related to the demographics of your buyers, your employee happiness ratios or customer satisfaction. They help you see what parts of your products or services need looking into to avoid refunds and extend the customer lifetime value.
Quantitative metrics deal with anything that is specifically measurable in ratios, percentages and numbers. It’s advisable to set an established ratio by which you’d like to improve, such as boosting conversion rates by 3% over a 12-month period. In this case, closely monitoring quantitative KPIs that look into active user numbers will be instrumental in implementing targeted marketing activities. Combining this knowledge with qualitative data regarding customers feelings about specific products helps a business understand whether its desired conversion rate is realistic.
Another ratio-goal example based on quantitative data could be lowering bounce rate over a 6-month period. There are specific KPIs to support that goal, so the clearer your objectives, the easier it is to put together a good list of ecommerce KPIs to track. The main takeaway is to rely on KPIs that facilitate defining a plan of action and implementing timely adjustments along the way.
Block out the excess KPI noise for ecommerce
Tracking every KPI that seems to shed light on your profitability can be just as misleading as placing all your eggs in one basket by limiting yourself to just two or three metrics. In ecommerce strategy, there is no one-size-fits-all recipe for success. Depending on what stage your business is at, choosing the right ecommerce KPIs can be an exercise in trial and error, so a lean and iterative approach is recommended. Few things are more frustrating than discovering that you’ve been on the wrong trail, especially if you’ve spent budget analyzing data that generate insights of low value. Focusing on the wrong KPIs can even lead you to make decisions that will backfire financially.
Instead of overwhelming yourself or your teams with too much data, focus on a few, valuable KPIs per goal. Anywhere between one and four KPIs (to support each objective) is a healthy amount.
Compare lagging and leading types of key performance indicators
To understand this type of performance indicator, just remember the popular meme: “How it started vs. how it’s going”. The starting point, however, can be any moment in the past. Lagging indicators reveal the result of actions that were already taken. Examples are the total gross profit or number of new customers acquired over the last quarter.
Leading indicators predict future conditions and help determine the chances of meeting specific future targets. By choosing ecommerce KPIs that measure past achievements or failures and contrasting them with forward-looking realistic ranges, you can better define goals to achieve growth.
Proceed carefully with vanity metrics
Vanity metrics refer to social media impressions, time spent on site, bounce rate, application downloads and other online engagement metrics such as comments, likes and shares. While valuable to many digital marketers, these metrics have the power to mislead as they do not necessarily speak to your profitability. It’s tempting to take them as evidence that a campaign or activity is doing well, but when it comes to number crunching, vanity metrics reveal very little about your return on investment (ROI) or customer lifetime value (CLV).
Now let’s look at the essential ecommerce metrics to start with.
Best ecommerce metrics & KPIs
To achieve profitability, consider data that paints a full picture of where you are now compared to X months ago and where you want to be in the future. The most relevant KPIs to consider for an ecommerce business will depend on a host of factors. The prime factors to look into are the numbers that best reflect how the company is performing when compared to how much it’s spending. Below we include the main metrics you need to succeed in ecommerce. The first metric to take into account is:
Return on Investment (ROI)
This is one of the most fundamental ecommerce metrics to consider as a general milestone. There are several other metrics that will give additional insight into how much is being spent and the returns that are generated as a result, but ROI is a business school basic, so give it the importance it deserves.
Customer retention rate
Are your customers staying or leaving? If they’re leaving, why? Understanding retention rates will help you see if you’re building the right rapport with your customers, so you can plan actions to revive brand awareness, improve customer service, operations and so on.
Social media engagement
Community is key when operating an ecommerce business. After all, it’s people who buy your product, and online communities are growing stronger than ever before. Use the many available channels to tell a story about your products and your brand, and nourish a relationship with your customers. Keep them informed, tell them something that resonates with them, give them value. This may lead to them sharing your posts and recommending your services to friends.
Refund and return rate
Your revenue may be sky high with lots of orders coming in, but when returns pile up, their negative effect on profitability becomes very real. By closely monitoring this KPI, you can identify issues in manufacturing or discrepancies between how your products are presented online and in real life. The more you know about why an item was returned, the more power you have to delight that customer in their next purchase.
Net promoter score (NPS)
This KPI reflects how likely your customers are to recommend your products and services. It can be obtained through a simple survey that customers either receive in their email inbox or somewhere on your site. It’s a great way to gauge the overall customer experience and take further steps to improve it.
What are the KPIs of ecommerce sales?
Cost of goods sold (COGS)
The amount it costs to produce and sell a product. This includes manufacturing, shipping, labor, and overheads. Usually measured year by year, this KPI excludes the products that haven’t been sold yet, so the real costs sustained for goods sold can be accurately calculated.
Gross profit margin (GPM)
The sum of money left after accounting for the cost of goods sold (COGS) is your gross profit margin. This metric speaks volumes about the finances of an ecommerce business, and is perhaps the number one indicator for projection and goal setting, both short- and long-term.
The gross profit indicates the amount of money you’ve made once the cost of manufacturing the goods has been deducted.
GPM = total revenues - cost of goods sold
Net profit margin (NPM)
To understand how much benefit you’re actually generating from sales, tracking this metric is also essential. Perhaps more needs to be invested to develop a healthy and trusting relationship between your brand and your buyers. Other options include revising prices, either raising or lowering depending on the current issue, streamlining operations to reduce expenditures, offering attractive discounts, etc.
The net profit deducts all other overheads and expenses, including marketing budget, operation and admin costs, and so on. Use the following formula to calculate it:
NPM = total revenues - total expenses
Customer lifetime value (CLV, or sometimes LTV)
This KPI is fundamental for understanding how much each customer is worth to your business. It’s closely related to cost per acquisition, since the basic formula subtracts the cost incurred to acquire a new customer from the total amount of revenue that customer has generated.
CLV = Average Order Value X Repeat Sales X Average Retention Time (usually in months)
The above formula calculates the historic customer lifetime value. Ecommerce businesses also rely on the predictive customer lifetime value, which is a bit trickier to calculate and provides an approximation of how much the customer will spend. Both metrics are incredibly impactful and help identify whether marketing efforts are producing the desired results. For a closer look into at how both CLV KPIs can be determined, check out this post about Customer Lifetime Value Calculation.
This is a metric expressed as a percentage that measures the rate at which a business is losing its customers or subscribers within a specific time period. Depending on the nature of your business, customer churn can refer to a closure of an account, cancellation of a subscription, buyer decision to shop at another store, or not to renew a contract with your business.
Cart abandonment rate
Of all the KPIs in this list, measuring cart abandonment rate will have the most immediate impact on your business. After all, visitors who made it to the cart and/or checkout page were ready to hand over their money to you… but they left! On average, this KPI is about 70% for ecommerce sites. The key question is why? A hassle-free checkout procedure that makes customers feel secure and even empowered in their decision is what you should be aiming for. How does an ecommerce store achieve this? Do you perhaps need to consult with a UX (user experience) professional? The formula to calculate this KPI is:
Cart Abandonment Rate Percentage = Completed Transactions ÷ Shopping Carts Created x 100
Customer acquisition cost (CAC)
This is the total amount a company spends to acquire one customer. This is one of the most important KPIs to monitor when analyzing profitability. You may have soaring conversion numbers, but how much is it costing you? If the total budget allocated in paid campaigns and marketing budget divided by the total number of new customers means your balance sheet is in the red, then it’s time to recalibrate. Let’s apply the CAC formula to a company that has spent $100,000 on customer acquisition and has 12,000 new customers as a result:
CAC = Total marketing and sales expenses / new customers acquired
For our example, 100,000 / 12,000 = 8.3. The total cost of a new customer is $8.30.
Retail ecommerce KPIs
This is the number of visitors to your site who actually make a purchase. This is crucial in ecommerce as it gives a solid idea of how well you’re doing in persuading visitors that your products are appealing. If there’s a lot of traffic coming into your site, but it doesn’t result in sales, you may want to review pricing, the checkout procedure, how your products are presented, try out a live chat service to answer product-related queries and so on. The formula to calculate the conversion rate is:
Conversion rate = number of sales / total number of visitors
Average transaction value
This is the average amount that each customer spends per order. If visitors to your site aren’t spending enough, you may want to optimize prices, add a special promotion, or increase your product assortment. Knowing the average value of the purchases made on your site will help you set a realistic goal to increase this key metric.
Ecommerce analytics metrics & KPIs
Customer lifetime value
Again, this KPI will help you draw key insights as to how much revenue each customer brings to the table. In this section though, we introduce an important ratio to keep in mind, which is the customer lifetime value to customer acquisition cost ratio. By working out the ratio, you’ll get a full picture of how much it cost your business to gain a customer, compared to the true value your customers represent in numbers.
Subscription / unsubscribe rate
Unsubscribing from an email list is very common, but the total should be less than 0.5%, although less than 0.25% is optimal. When it’s too high it’s a good indicator that it’s time to change strategies. Perhaps your emails are going out with too much frequency, or you need to reconsider how to give your subscribers added value.
Ecommerce performance metrics & KPIs
There are many ways to measure how an ecommerce business is performing. It’s a numbers game, and the right ecommerce metrics will answer the following questions: Are your sales numbers reflecting growth? Does your brand have a following on social media? Are you offering your customers added value through relevant online content? How many people are clicking on your paid promotions? What steps are you taking to guide your customers through the purchase funnel so that they feel confident in their choice to buy? Will they recommend your services to others?
The beauty of ecommerce is that all it takes is a share from one user for others to hear about you and, if you get mentioned by specific influencers, forums or platforms, your exposure can experience exponential growth. It’s all about identifying your audience and strategizing accordingly.
Year-over-year growth (YOY)
Measuring results against a past timeframe allows you to understand where you are in terms of growth. Are you achieving growth or have profits fallen since the previous year? Can a growth slump be due to an issue with market fit or competitors? This is an essential component in the process of understanding why you aren’t achieving the profitability you want. Measuring YOY is also one of the easiest indicators to understand if you want to attract potential investors to your ecommerce business.
This tracks which products are bought together the most frequently. This KPI provides substantial information for identifying upsell opportunities and maximizing the average basket order value.
Ecommerce website metrics
Time on site
This is a great indicator of how attractive and effective your landing page is. It is easily tracked by collecting data on the average number of pages each visitor viewed and how long they browsed your site for. Time on site is also very helpful to calculate when trying to understand and reduce the next KPI – bounce rate.
This is the percentage of visitors to your site who leave before clicking anywhere. No browsing occurs, far less purchasing. This KPI speaks volumes about the quality of your leads and whether traffic to your site is coming from the right place. If generated by clicking through from an online campaign, are they genuine leads who will have an interest in your products? The average bounce rate is between 41% and 51%, but in ecommerce, it’s much lower (20-45%), so monitoring this KPI is essential to the health of your business.
Ecommerce marketing success metrics & KPIs
Email open rate
The average email open rate should be between 15% and 25%, but this varies depending on the industry. In ecommerce, it’s all about the added value you’re giving your subscribers, either through engaging and useful comments or attractive promotions.
Click-through rate (CTR)
This is used by marketing strategists to gauge the results of A/B tests. This KPI tracks the success of each email sent. There are lots of tools that can easily monitor how many click-throughs were generated from a specific action, either via email or social media promotions.
Number and quality of product reviews
One of the most overlooked but important KPIs is the amount of customer reviews your products receive and what’s being said about them. In ecommerce, potential buyers know that returns are often less straightforward than in an actual physical retail store, so they will want to read feedback before making that decision. Marketing efforts greatly influence whether a customer will write a review or not. This includes follow-up emails and branding efforts to build a positive rapport with your customers.
Our definitive top ecommerce KPIs list
Try to set yourself realistic growth percentages and factor paid promotions into your marketing budget. In this case, the most important KPIs to consider would be:
- Customer acquisition cost (CAC)
- Return on investment (ROI)
- Conversion rate
- Churn rate
- Customer lifetime value (CLV)
- Average order value (AOV)
How to track your ecommerce success metrics
Some ecommerce platforms, such as Shopify or Etsy, provide their users with built-in functionalities for monitoring success. However, you may want to go beyond and add more ecommerce metrics or KPIs to your tracking dashboard. To do this, you can use a dedicated tool, such as Google Analytics or Crazy Egg. The point of using tools is to simplify and streamline the process of tracking ecommerce businesses sales/marketing activities and objectives in the context of KPIs and metrics.
Another option is to monitor ecommerce metrics yourself in a spreadsheet, such as Google Sheets. For this, you’ll need to export the necessary data from your app or source to Google Sheets recurrently using Coupler.io. This will let you export key data from multiple sources (Airtable, HubSpot, Shopify, etc.) to Google Sheets and BigQuery on a schedule. Once you have your raw data in a spreadsheet, you can build dashboards and analyze it in different ways. For creating more advanced dashboards, you can use Google Data Studio or Tableau, for example.
Check out our blog for interesting calculation cases, such as how to calculate net promoter score or build a sales monitor. Good luck with your data!