8 E-Commerce Metrics to Know as an E-Commerce Business Owner
With 2021 in the rearview, it’s time to focus on all the possibilities ahead. If we learned anything over the past two years, we learned:
The unexpected IS the new normal AND
The future is pretty bright for e-commerce business owners.
So, how do you capitalize on the momentum in this new year? Metrics, metrics, metrics!
When you know where your business stands within each of the top metrics for e-commerce businesses, you’ll be able to make the most informed decisions for your business – no matter what life throws at you!
I know the terms KPI, CAC, AOV, SEO, and all the other abbreviations flying around can be a little overwhelming, especially if tracking e-commerce metrics is new to you. However, it’s crucial to track and monitor your metrics as the insights can help you:
Identify key trends
Alert you to areas of opportunity
Build your 2022 promo calendar
Analyze your profitability
Create strategic marketing initiatives
And more!
So, what exactly are the key metrics for e-commerce and how do you calculate them? Here’s everything you need to know.
What Are Metrics?
An e-commerce metric is any quantifiable and consistent measurement used to track, monitor, and assess various business processes.
Now, you may have heard the words “metric” and “KPI” (key performance indicator) used interchangeably in e-commerce. But are they really the same thing?
Not quite! While a metric is ANY quantified measurement, e-commerce KPIs are your most important metrics because they’re the numbers you track for growth.
KPIs differ from business to business. It’s important to choose the most relevant KPIs to your current and long-term objectives. For example, if one of your business goals is to increase sales by 20% YOY your KPIs might be customer acquisition costs and average order value.
Important Metrics for E-commerce
As an e-commerce entrepreneur, you know that numbers are vital to running a successful and profitable business. However, learning about and understanding all the e-commerce metrics can be intimidating at first. Don’t worry, I’m here to help! Let’s break down some of the key metrics you need to know.
1. Average Order Value (AOV)
The AOV is a KPI in e-commerce that indicates the average price customers spend on one order from your company. This metric tells you if you’re spending too much time and money acquiring new customers. The AOV also measures your marketing campaigns and their effectiveness. Some things that can contribute to a higher AOV include offering discounts, adding free shipping, upselling, and product bundling.
To calculate the AOV, simply divide the total sales by total orders.
2. Sales Conversion Rate (SCR)
In e-commerce metrics, the SCR refers to the percentage of users who visit your online store and make a purchase. The higher the conversion rate, the better!
If you notice a dramatic dip in your SCR, it may indicate a problem that’s not product-related. Here are some things you should try:
Test your website’s functionality. Did something change? Keep a close eye on the plugins and apps you use. If one expires or becomes unsupported, it can impact your conversion rate.
Review existing payment gateways regularly. Are there enough payment options? Do you offer an installment plan like Klarna, Sezzle or AfterPay? Ensuring your customers have a multitude of payment methods is mutually beneficial.
Check your website speed, especially if you have recently added new elements, such as updated product images or videos. Your visitors will likely leave if it takes too long to load or make a purchase.
Review your digital advertising and marketing campaigns. Are you promoting your products effectively?
To measure the SCR, divide the number of sales by the number of users, and multiply that number by 100%.
3. Customer Acquisition Cost (CAC)
CAC measures the average cost you spend to gain one customer. It incorporates everything from staff costs to marketing and sales.
In e-commerce metrics, the customer acquisition cost is measured by dividing all your sales, marketing, and other expenses by the number of new customers acquired during a specific time period. It can also be broken down by sources, such as traffic channels or social media to measure how much it costs you to acquire a specific customer from that channel.
If this metric increases over time, it might be a warning sign that something is wrong, typically with your product or user experience.
4. Customer Lifetime Value (CLV)
This metric gives you a big-picture view. The lifetime value shows you how much revenue a customer produces for your company during your relationship with them.
Building loyalty is a huge factor in increasing your CLV. Make sure you have strong loyalty programs, support pages, and customer service response times so customers purchase from you again and again.
Calculate CLV by multiplying the average order value by the average purchase frequency rate and the average customer lifespan.
5. Website Metrics
There are several different ways to measure website metrics. Google analytics, website conversion rate, time on site, visitors, and pages per visit are just a few. However, two critical e-commerce metrics I like to focus on are cart abandonment rate and bounce rate.
6. Cart Abandonment Rate
This metric shows you how many potential sales you’re losing. Nothing hurts quite like seeing buyers adding items to their cart, only to leave them behind! Don’t take it personally though: On average, 70% of potential customers abandon their shopping cart right before clicking the “purchase” button.
The top reasons?
The shipping costs were high or unexpected.
Their order didn’t meet the requirements for free shipping.
The customer needed to register to finish checking out.
There were hidden fees that could only be seen when checking out.
Your estimated delivery time was not fast enough.
There weren’t enough payment options.
The customer was screen shopping or “just browsing.”
To quantify this metric, take a specific time period and divide the number of completed cart checkouts by the total number of carts loaded within the same given time. Multiply the result by 100.
7. Bounce Rate
Your bounce rate is another KPI in e-commerce that you can’t overlook. A bounce rate measures the percentage of individuals who visit your website and then do nothing on the page they’ve entered. That means a customer lands on your page and then bounces without clicking on a menu item, a “read more” link, or anything else on that page.
Having a high bounce rate is usually because of these three things:
Your audience doesn’t match your website’s purpose.
The quality of the page is not enticing, interesting, or engaging.
Visitors found the information they were looking for immediately.
You can calculate your business’s bounce rate by calculating the total number of singular-page visits divided by the total number of entries to your website.
8. Email Marketing Metrics – Open Rate and Click Through Rate
As the name states, an open rate is the percentage of people who opened your email message, while the click-through rate is the average number of clicks those opened emails received.
These are both typically given to you by your email service providers (ESPs). The ESPs embed an invisible GIF image into each email. It counts as “open” when that GIF gets downloaded from the server. Basically, the number of people who open that email out of the total number of emails you sent is the open rate. While the number of people who clicked on your emails divided by the total delivered emails gives you your click-through metric.
According to Mailchimp, the average open rate for e-commerce email marketing is just under 16%, and the average click-through rate is around 2%.
This measure is a great way to gain insight into how your contacts are engaging with your emails. If you are within or above the range, your email marketing is going well. (You go girl!) And if not, you can always test and improve your messaging!
Let’s Start the Year Off Right!
Looking at this list, you probably noticed there are a lot of e-commerce metrics to keep track of! Complicating matters is the fact that they all have different reports that need to be pulled at different times (daily, weekly, bi-weekly, monthly, or quarterly). Knowing the core KPI metrics for e-commerce and how they’re tracking for your business helps you make critical decisions on:
Inventory levels
Pricing and promotional strategies
Marketing and positioning within your market
Missed opportunities
All these numbers got you feelin’ stressed? With my Virtual Sidekic Done-in-a-Day service, I can help take the pressure off by teaching you how to find and calculate them. We will get you in a leadership mindset and utilize your platforms to automate these reports.
When I do what I do best, it leaves room for you to do what you do best. As women in business, we have to have each other's backs, and I've got yours! Click here to learn more and book a discovery call today!