The Top 5 E-commerce Metrics You Need to Know
Now is the best time to start or scale your eCommerce business. In 2023 online retail sales are expected to reach $6.51 trillion, with eCommerce websites taking up 22.3% of total retail sales. This is a good argument to focus your efforts on developing a well-working eCommerce store. Unfortunately, that might be challenging as the market is shifting each day and new buyer behaviors are emerging. To be able to keep up with the changing digital environment you would need to rely strongly on data. This will allow you to make timely decisions.
Understanding data is no easy task. There are many dimensions to consider, analyze and hypothesize. We fully understand the complexity and our goal with this article is to give you just the essential KPIs that you need to take a closer look at.
If you do have, or if you want to start an eCommerce business, then check this list of top 5 e-commerce metrics:
Customer acquisition costs (CAC)
What is your cost of acquiring a new customer?
Take a piece of paper or open your Google Sheet and start calculating, include all the variable and fixed costs, and add advertising costs and marketing expenses. By doing this you will know much you are spending to acquire new customers and whether these costs are justified by the revenue that the customers generate.
Here is an easy formula:
Total marketing and sales costs/number of new customers.
Can you improve CAC?
The good news is that you can do that. You can lower your CAC by implementing strategies that involve purchase intention triggers within a limited period. These could be sale periods, flash sales, limited-time sales, abandoned cart discount codes, etc.
Cart abandonment rate
This metric is extremely important to identify any issues with your checkout process. The cart abandonment rate shows the percentage of people who add products to their shopping cart but fail to complete the purchase.
Here is an easy formula:
(Total purchases / total number of add to cart )*100
Can you improve the cart abandonment rate?
There is for sure room for improvement, but before making changes we advise understanding the reasoning behind abandoned carts. To do so it is recommended to implement UX research. In general, you can reduce cart abandonment by improving the user experience or offering things like free shipping and returns or additional payment methods.
Returning customer rate
Your marketing efforts should be focused not only on attracting new customers but also on increasing the long-term ones. In general, people who purchase more than 2 times from a single place are more likely to make a purchase again and the resources you will spend attracting them are lower than when you are trying to get a first-time client. The returning customer rate is the percentage of customers who make several purchases from an online store.
Here is an easy formula:
Customer * number of purchases
Can you improve returning customer rate?
Focus on improving your customer service and include some after-sales triggers, which will make customers purchase again. Other things you can do are offering personalized recommendations and promotions, and making the checkout process more convenient.
Conversion rate
This e-commerce metric is one of the most important for every online shop. Low conversion rates could be due to bad user experience, not well-described products, overall low trust, or not a convenient checkout process. To find out the conversion rate you would need to divide the total number of purchases by the total number of website visits for a certain period.
Here is an easy formula:
Number of purchases / Number of website visitors
Can you improve returning customer rate?
As experts in the field of conversion rate optimization we can for sure say that the answer is yes. The first step needs to be a comprehensive audit, which will provide you with the problem points. Then you can draw a step-by-step implementation plan and execute each change.
Average order value
The average order value is our final metric. The typical amount of money spent by a consumer on a single purchase is referred to as the average order value. The average order value is crucial since it shows the total revenue made by each customer and can shed light on how effective pricing is.
Here is an easy formula:
Total revenue / Number of orders
Can you improve the average order value?
There are many ways you can improve the average order value. Here are two: Use cross-selling, this will allow you to offer additional products that go along with the products already added to the cart. Free shipping when the customer purchases well that reaches a certain amount.
E-commerce metrics are crucial for companies to track and enhance their online store performance. Businesses can optimize their online store and boost sales by monitoring and analyzing these metrics as they offer valuable insights into the preferences and behaviors of their customers.
