KPIs for E-commerce – Key Performance Indicators for Online Stores. What’s Worth Measuring?
To make sure that your online store achieves its goals, you should monitor its performance and parameters on a regular basis. How to do it? In order to measure the effectiveness of your actions, you need to determine KPIs, meaning key performance indicators. So what are KPIs for e-commerce?
Table of contents:
- Key Performance Indicators for an Online Store
- How to Choose the Best Ecommerce KPIs for Your Business?
- KPIs for Ecommerce – The Takeaway
Key Performance Indicators for an Online Store
The term KPI stands for a key performance indicator. Determining KPI metrics for ecommerce makes it easier to monitor the progress of your company and check whether it reaches given objectives.
How to select KPIs? Applied indicators may differ depending on the business type and each company should select them individually. These indicators may vary at different stages of operation.
In the ecommerce sector, KPIs are particularly applicable, as their monitoring and analysis is crucial to determine whether the performed activities meet the expectations of the store owner.
It is helpful to use proven industry benchmark statistics to determine how other eCommerce businesses in your product categories are performing. For example, the Feed Marketing Report created by DataFeedWatch shows a lot of useful benchmark data across 20 countries and 18 eCommerce product categories collected from over 15,000 online stores. Comparing your business to others in a given product category provides the answers on the average and extremes.
Actually, KPIs in ecommerce can concern a lot of issues related to:
- Shopping cart abandonment,
- The effectiveness of marketing channels,
- Customer complaint ratio,
- The average order value per one customer,
- Bounce rate,
- Total revenue,
- Product return rate.
Which ecommerce KPIs should you monitor at your store? Many of them are pretty flexible, it’s worth using them to see the real condition of your business, set objectives and start performing activities that will help you achieve desired results.
Below you can see popular KPI metrics for ecommerce you should take into account.
ROI stands for return on investment. With its use, you can calculate your return on investment of marketing activities.
If you invest in online ads, you should be able to easily assess their effectiveness. You can check whether a given investment has brought you the expected profits.
Let’s assume that you benefit from Google Ads. Check out the example suggested by Google:
It’s impossible to find marketing activities that guarantee perfect results every time. By trial and error, you have to decide which investments have proven to be the most beneficial for your business. For some these will be social media activities, for others SEO or email marketing. Depending on the chosen strategy, the time it takes to see a return on investment also varies.
In the case of SEO, the first satisfactory ROI can usually be observed after 9-10 months of on-page activities.
Be patient and don’t stop the SEO process. It requires continuous work, but the effects are more long-lasting than with other marketing efforts. ROI increases over time.
Read Also: How to Calculate Your SEO ROI?
Conversion rate is another important KPI metric for ecommerce that can be calculated relatively easily. Just divide the number of your online store orders by the total number of visits.
Let’s assume that the website was visited by 1000 users, 50 of whom made a purchase. This means that the conversion rate is 5%.
Your conversions are affected by numerous factors such as UX, appropriate product targeting, or product prices – all of these matter.
If you want to boost your performance, you should focus on every aspect of store management as even seemingly inconspicuous changes can help you improve your results.
Make sure people can easily navigate your website, and finalize transactions without setting up an account. Provide them with payment and shipping options tailored to their needs. Avoid clickbaits, hidden costs, and intrusive pop-ups that may deter potential buyers.
In the screenshot below you can see the results of the survey conducted by Compass. Thanks to it, you can find out the average conversion rate depending on the type of marketing activities.
However, it’s crucial to note that such an analysis isn’t universal and doesn’t necessarily apply to your online store. In order to obtain reliable data, you should perform your own analysis and check which activities are effective in your industry and market sector.
Read also: E-commerce Conversion Rate Optimization
Customer Lifetime Value
The customer lifetime value metric is about calculating the income you generate thanks to each customer. How can you determine it?
Monitor the data to find out how much one customer spends at your store a year on average.
Why should you need this information? Thanks to it, you’ll be able to estimate how much you can invest in marketing or other activities per one customer to make sure that these activities are still profitable for you.
So how to calculate CLV?
CLV = annual income earned on the customer x average number of years of the customer relationship – initial costs of acquiring the customer
When do you deal with bounce rate? If users visit your store but leave it after seeing the landing page or one page.
Bounce rate is calculated by dividing the number of web sessions during which users displayed only one page by the number of all website impressions. If the rate is high, it’s a sign that you need some changes and your website doesn’t meet users’ expectations.
Why do we think so? Just analyze it. Entering only one page is almost never enough to finalize the transaction. Although it’s possible in some cases, it’s rather an exception to the rule.
Therefore, minimizing the bounce rate should be your objective. So, what’s the ideal result? It depends on the industry, however, 20-40% is a satisfactory score. Monitor and analyze your bounce rate to identify the reason why users leave your page.
Maybe the loading time is too long? Or your page navigation is complex or unintuitive? Determining the cause of the problem is the first step to success.
Read also: How to Reduce Bounce Rate?
Cart Abandonment Rate
Do users frequently put products into their carts but don’t finalize transactions? If so, you’re dealing with cart abandonment. Your objective is to achieve the lowest possible value of this indicator. This will also translate into improvements in other parameters such as sales or conversion rate.
In the screenshot below you can see the most important reasons for shopping cart abandonment. Check out what’s the problem in your case. Don’t forget to calculate your bounce rate as well, but remember that these elements are strongly affected by the industry you operate in. For example, clothing stores usually have much lower bounce rates than shops offering electronics and household appliances.
Why? It’s simple. The more expensive the product, the more we contemplate the purchase.
Newsletter Opening Rate
The opening rate of your newsletter is one of the most important KPI metrics for ecommerce. It’ll show you whether your message has reached your recipients. If it’s low, it means that you should change your communication strategy.
Opening rate = (number of opened emails / number of all sent emails) x 100%
What are the reasons for a low opening rate? Maybe you don’t use an attractive subject line or you send too many emails? Maybe you’re not using the proper channels?
Check what’s the problem and work on it. The opening rate is a key element if you want to reach potential buyers.
Average Order Value
This KPI metric for ecommerce will show you whether customers buy more products or whether the value of their orders decreases over time.
AOV = total value of orders / number of orders
AOV is important because it’s one of the key elements that affect your business profitability.
How to increase it? By, for example, introducing a minimum order value, offering free shipping, giving out extra products for free, sending discounts for the next shopping, providing installment payments, or using an upselling strategy.
Thanks to it, you can offer customers additional products or services that complement the items they’ve already put into their carts.
Website traffic is the number of visitors that reach your website within a given period of time.
You should constantly monitor this parameter because it’ll show you whether your marketing activities are effective and whether they bring you the expected results.
Of course, it’s worth analyzing the quality of traffic as well. You can use Google Analytics, SEMrush or Ahrefs for that purpose.
Want to learn more? Check out our article: 12 Easy Ways to Increase Website Traffic.
Customer Acquisition Cost
This metric will show you how much you spend on acquiring new customers.
CAC = (total marketing costs) / (number of new customers)
You should try to keep this value as low as possible. How? By analyzing your marketing activities, researching your target audience, and making changes when necessary to adjust your strategy to recipients.
Don’t forget to compare your CAC with the customer lifetime value. This way you’ll know whether a given marketing activity is profitable for you in the long run.
How to Choose the Best Ecommerce KPIs for Your Business?
Are you wondering how to choose ecommerce KPIs that will benefit your online store and help you make more accurate business decisions?
Take into account the following factors:
Think About Your Business Goals
Before you start analyzing data, you should think about what you want to achieve. Which objectives are you pursuing? Do you want to increase your website traffic or improve your conversion rate? Or maybe you want to check if your advertisements and marketing help you reach potential customers?
Your business goals will determine the type of KPIs you should focus on.
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Think About What’s Relevant to Your Business
Not all indicators will be relevant to your online store and industry. It all depends on your business model, the products or services you offer, and the functionalities your website has.
For example, if you sell clothes, it won’t make sense for you to focus so much on the number of newsletter subscribers. Instead, you should pay attention to customer lifetime value or customer acquisition costs.
On the other hand, if you manage an online course platform or run a news blog, newsletter subscribers will be much more important to you, because this KPI will help you estimate if your content appeals to users and if they want to be up to date.
Base it on Your Business’s Growth Stage
Are you just setting up your business or has it been on the market for years?
If you’re just starting your journey, you should focus on building a customer base. In this case, the most important indicators will be newsletter subscribers, social media followers, or website traffic.
If, on the other hand, you’ve been on the market for some time, you might want to focus on ROI or compare your CAC with CLV.
The KPI metrics for ecommerce will vary depending not only on the industry but also on your growth stage. Adjusting the strategy to your capabilities is a must-have. As you know, Rome wasn’t built in a day so give yourself time.
Choose the Ones You Can Easily Measure
Some indicators are easier to measure than others. When choosing your KPIs for ecommerce, focus on those you can obtain relatively easily, without investing in specialist tools that cost an arm and a leg. Think about the data you have at your disposal.
What’s more, make sure you can count on reliable data sources. Try to avoid estimates because they’re usually inaccurate and not very helpful.
Focus on a Few Important Metrics
Don’t try to have too many irons in the fire. Measuring everything at once will probably cause havoc and make you feel lost in the data.
Instead, it’s much better to focus on a few KPIs for ecommerce that are likely to help you the most at a given time.
As your business evolves, you’ll be able to focus on other indicators. For now, concentrate on those that are most relevant to your goals. The market is constantly changing. You should also adjust your strategy to the current situation.
For this reason, KPIs that were once important may become irrelevant. Therefore, it’s crucial to monitor your results on an ongoing basis and start monitoring new metrics when necessary.
KPIs for Ecommerce – The Takeaway
KPIs play a significant role in almost every industry. Thanks to key performance indicators, you can monitor your goals and check whether your store is developing as you would wish.
Do you need help with improving the visibility of your online store in the search results and acquiring new customers? Contact us! We’ll devise an SEO strategy tailor-made to your needs.
What are the best KPIs for ecommerce in your opinion? Let us know in the comments below!
This is an update of an article published in 2021.
Nice insights, but it’s impossible to point out obligatory KPIs for e-commerce. It depends on so many factors that one really needs to crack his/her brain on the matter and choose metrics suitable for the business in question. Otherwise, it’s kind of pointless – always make sure your KPIs bring you the analytical value to what you want to evaluate!
I don’t agree – there are a couple of KPIs that are quite universal. For example, I highly doubt there’s e-commerce that doesn’t set the conversion rate of the website as a KPI metric.