September 23, 2021

11 Ecommerce Metrics You Need to Track (#6 is Crucial)

Reading time about 17 min
the most important ecommerce metrics

Ecommerce metrics literally show how your business is doing. Selling online without keeping track of your performance is like driving with eyes closed. Ecommerce marketing stops working after a while if you don’t measure and improve it. No business can survive if you don’t follow how you’re doing and compare progress over time.

We know it’s hard to decide what online business metrics to monitor, especially if you’re at the beginning of your entrepreneurial journey. That’s why we compiled this short guide to the most important ecommerce metrics to start with.

Which Ecommerce Metrics to Track?

Revenue and sales, you’d say. That’s right, of course, but those two metrics don’t say much about how your business is actually doing and what its financial health is. 

You can be selling a lot without making any profit. Or you could be getting thousands of new customers a day at an excruciating price. Or maybe those thousands of people never come back to shop for more. In all of these cases, you’d have good revenue and a high number of sales figures, but unstable business. 

That’s why every online store should measure and track the following key performance indicators (KPIs) to make sure all’s running smoothly beneath the surface:

  1. Conversion rate
  2. Customer acquisition cost
  3. Average order value
  4. Average profit margin
  5. Cart abandonment rate
  6. Customer lifetime value
  7. Retention rate and share of repeat customers
  8. Refund and return rate
  9. Best performing products and categories
  10. Email performance metrics
  11.  A note on vanity metrics: social media engagement, website traffic, and pageviews

Now let’s dive into the details.

Ecommerce Metrics to Start With

The key ecommerce metrics listed below will give you the overall picture of your business performance. Checking them every day or weekly (depending on your order volume) should be enough to catch potential problems.

1. Conversion Rate

Probably the most important among all ecommerce metrics. Conversion rate is calculated by the this formula:

CR = (Total number of customers / Total Unique Visitors) * 100

This is how many visitors convert into customers. One of the most common problems of ecommerce entrepreneurs is getting tons of traffic and no sales at all.

That explains why the average conversion rate for the ecommerce industry tends to be so low (only around 2.27%). 

Driving traffic to your site isn’t everything. Once people land there, they need a lot of persuading to place an order. The product and price, the experience, the payment security, and the return options should all feel right — as well as the brand, of course.

Conversion is basically how successfully you turn visitors into customers.

The process of improving this metric is called conversion rate optimization (CRO). Regularly check your sales funnel, visitor behavior on site, page views, and exit pages to identify where the problem is and hopefully fix it.

Just a few places to look are:

  • navigation — use heatmaps to see if visitors find their ways around your site easily;
  • buttons — do they click your calls-to-action (Shop New Collection, See deals, Read more, etc.);
  • drop-off pages — where do they decide not to buy? Is it a product page or an About Us page?

In case you’re ready to start CRO now, here are 14 ecommerce conversion strategies.

In the meantime, here are a few quick fixes that’ll help you improve your conversion rate:

  • Attract more qualified traffic with Facebook ads to lookalike audiences based on your best customers;
  • Test out every option in your checkout process yourself;
  • Optimize mobile and tablet experience;
  • Use remarketing to re-engage people who looked around your site but left without buying;
  • Do an SEO audit to see if you’re using the wrong wording on your product pages.

2. Customer Acquisition Cost (CAC)

This ecommerce performance metric measures how much it costs to acquire a new customer. The general formula goes like this:

CAC = Total costs associated with acquisition / Total new customers

If your customers spend $50 on average in your online store and the cost of acquiring each one is $45, that leaves $5. From there, you pay for the goods and all other costs to get to your profit (or more likely, loss).

That’s why keeping CAC under control is vital. Every ecommerce business has a line above which it can’t pay for acquisition. The math simply won’t work out in the end. A general rule of thumb is to keep CAC under 30% of your CLV (more on that later).

When you invest money in website traffic, not all of it converts to customers and sales growth. If you want to ever make a profit, you have to optimize your acquisition channels so you only pay for quality traffic that converts at higher rates.

Sometimes, less traffic with higher conversion rate is more profitable than huge traffic that barely converts.

Make informed spending decisions

Analyze all your acquisition channels – social media, ads, review sites, referrals, etc. – to evaluate which ones really make the difference for your business. Spending your marketing budget in the right places means you’ll be paying only as much as you can afford for acquisition.

Make sure you know what’s the maximum cost for acquisition you can afford. Otherwise, you might actually be losing money in the effort to bring in new customers.

Also, remember to segment costs by location. Prices are different for Europe, North America, and the rest of the world.

3. Average Order Value (AOV)

CAC brings us to this next ecommerce metric. Average order value is what it sounds like: the average amount a customer spends on each order from your store.

You can easily increase your total revenue by increasing the average order value, even with no new traffic. A bigger order costs you only a fraction more for goods, handling, and shipping. But it saves you acquisition and transactional costs. So in the end, higher average order value means more profit.

So why is it one of the most important ecommerce KPIs?

Because it’s an insight into how mad about your products people are. What’s the biggest order you’ve ever got? Imagine if your average order value was that much.

Some ways to increase AOV include:

  • offering bundles/ mix & match/ 3-month supply of products;
  • selling add-ons or services;
  • implementing loyalty programs;
  • giving free shipping for orders above the AOV;
  • checking which marketing channels bring you higher AOV and double-down on them.

email with bundle offer by everlane

source

4. Average Profit Margin

This is what you earn from each product after deducting what you paid for supplying it. It’s calculated as a percentage of the retail price and shows what portion of it your profit is.

Profit margin = [(Selling price – Cost of goods) / Selling price] * 100

You may be selling tons, but are you making any profit? Try to keep it higher than the average acquisition cost if you want to have a sustainable online business.

It’s completely normal to have high-performing products that earn you a sweet margin and others that barely make you anything. 

What can you do about it? As the formula suggests, the profit margin increases when the price goes up and the cost of goods sold goes down. 

  • Create product bundles of one product that attracts many people and another that has a very good margin to balance it out.
  • Highlight your most profitable products in all campaigns, visuals, etc. to sell more of them.
  • When adding new products, go for high-margin ones.
  • Do more referral campaigns and user-generated content instead of discounting so people don’t get used to reduced prices.
  • Increase the price but include add-ons, accessories, maintenance, etc. 

email with referral offer from MeUndies

A referral campaign that gets you new customers without a big budget, source

5. Cart Abandonment Rate

On average, 70% of people abandon their shopping cart online. That’s scary for any ecommerce business. Your shopping cart abandonment rate is how much sales you’re losing. 😟

The top reasons for visitors leaving are:

  • unexpected shipping costs;
  • hidden fees that can only be seen at checkout;
  • registration needed;
  • people are “just browsing” or screen shopping;
  • checkout is not safe enough or too complicated;
  • no free shipping requirements met;
  • estimated delivery not fast enough;
  • not many payment options.

All of those can be solved to reduce your cart abandonment rate. And if someone still starts checking out and leaves, here’s a collection of abandoned cart email examples to use and get them back.

See also:

6. Customer Lifetime Value

Customer lifetime value (CLTV, CLV, LTV) deserves its place on the list of the most important ecommerce metrics. It measures how much any given customer spends with your online shop throughout their customer lifecycle. There are three ways to calculate it depending on the stage of your business and the data you have so far.

1. Predictive

CLV = Average Order Value x Number of Orders

2. Averaging

CLV = Total Revenue / Total Number of Customers

3. Historical

CLV = Order 1 + Order 2 + …..

Customer lifetime value is important because it shows customer loyalty. The more people shop from you, the better, obviously. 

It also helps you turn a profit. How? 

Well, you’re paying some acquisition cost anyway to get the first order. Every order after that comes on top and makes up for that investment. 

Focusing on driving CLV instead of acquisition can save your marketing budget and make your ecommerce store more financially stable in the long run.

It’s very hard to set a benchmark because it’d vary greatly across categories, currencies, and markets. Still, a global report on ecommerce brands found an average CLTV of 168 U.S. dollars.

To increase CLV, you need to increase the average order value, increase the order frequency, or increase the customer lifecycle. Or better yet, do all three. Here are a few tactics to get there:

  • Suggest related products on product pages.
  • Create very specific product categories to help people shop by purpose (e.g. Home Office Accessories, Wedding Guest Dresses).
  • Give out freebies or samples with larger orders.
  • Offer free returns for risk-free shopping.
  • Implement back-in-stock alerts.
  • Instead of a few big campaigns to your entire email list, segment your customers into smaller subgroups and send them various, well-targeted offers.
  • Give full product details to minimize returns.
  • Provide quality customer service and learn from feedback.

email with a localized offer

An email targeting people in a specific location, source

If you want a successful online shop, driving CLV up should be on your to-do list. Identify your high-value customers and examine their customer journey. Then, try to replicate it for other potential customers. Look at how they discovered you, what incentives converted, what products make them come back again.

Pro tip: Treat especially well your highest-CLV customers. First, because you want to keep them. And second, because they can be brand ambassadors and bring you more loyal clients. 

7. Customer Retention Rate

Customer retention rate is the share of repeat customers (with more than one order) out of all your shoppers. A simple formula for calculating it is:

CRR = (Number of customers with more than 1 order / Total Customers ) * 100

Not surprisingly, it’s measured over a longer period of time.

Returning customers are far more profitable than acquiring new ones. The acquisition isn’t cheap but  returning customers will pay off their acquisition cost several times over.

How can you influence it? You’re not done after the first sale.

  • Follow up on customer’s satisfaction (consider using Net Promoter Score to measure it).
  • Hook them for more repeat purchases with a loyalty program, maintenance, accessories, or personal expert advice.
  • Send reactivation emails to one-time shoppers and create a newsletter to keep everyone engaged with your brand. 
  • Send reminder emails when the customer is about to run out of the product (if applicable);
  • Give discounts for the next order.

A creative reactivation email, source

8. Refund and Return Rates

These are actually very important ecommerce metrics, especially for smaller brands. They’re the percentage of orders refunded or returned respectively, compared to the total number of orders. Keeping them in check helps you see the big picture and catch potential revenue sinkholes. 

Sometimes problems happen and products need to be returned. Not surprisingly, the return rate is highest in fashion ecommerce. 

While accepting returns is a must, a high return rate means problems with product quality, customer satisfaction, or lead quality. Returns are costly because they take up twice the time for processing. 

Refunds are even worse because they usually mean the customer’s unhappy. So in addition to reducing your revenue, they might rant about your brand on social media. You can forget about them referring a friend to you.

How to minimize returns

First, make sure your customers see and understand what they’re buying and what’s the quality. This includes:

  • HD photos of the product from different angles, in use, and in perspective (compared to human height, for example);
  • materials used described in the product details;
  • exact measurements of models and what size of clothing they’re wearing in the picture. 

Second, ship what you market – there’s barely anything more frustrating than receiving a product of worse quality than you paid for. We’ve all seen and laughed at the comic photos of clothes that look nothing like the picture on the site.

funny online shopping fail where the product was much smaller than expected

Source

Third, follow up on customers who return purchases and try to improve.

Finally, be careful with serial returners. As bad as it sounds, there are people who wear clothing items once and return them for a full refund.

You can even drill down into the common things among all returns and refunds to eliminate the biggest reasons. If they come from one location, maybe your shipping carrier doesn’t deliver the items in good condition. 

Or maybe your site has misleading info in the local language. If one product gets returned or refunded all the time, maybe the quality is very bad and you should just delist it.

9. Best Performing Products and Categories

While this is not one number, conversion rate, return rate, abandoned cart rate, and other ecommerce metrics vary across products and categories.

Some products sell more per view, but maybe you don’t advertise them on your homepage. This means they don’t get enough exposure and sales as a result. You’re losing potential revenue.

Try to look at all of the above-mentioned metrics at least by category, if not by product. Keep your eyes open for the following possibilities:

  • items driving repeat sales;
  • products that get ordered instead of your traffic-driving ones;
  • products that get ordered in bigger quantities;
  • products that get abandoned a lot;
  • products that get only good/ bad reviews;
  • products mostly ordered together.

This way, you can optimize your inventory, product pages, and all merchandising expenses.

an email pushing a specific product

Push the products with the best performance, source

10. Email Performance Metrics

Email is a huge part of ecommerce marketing and so it also needs to be measured. There’s no point in sending email campaigns one after another if you don’t improve them. 

The major email marketing metrics are:

  • Open rate
  • Click-through rate
  • Unsubscribe rate
  • Bounce rate

Here are current email marketing benchmarks to compare yourself to.

a map of email opens

We’d add click heat maps (which links in the email get clicked) and geolocation of the recipients who clicked. These are big insights into how people interact with your email campaigns to use for optimization. 

For example, maybe people from a particular country sign up for your newsletters and click your offers a lot, but you don’t deliver to them? Maybe it’s time you started!

Start sending smart email campaigns with Sendinblue!

Full email and automation capabilities and ultra detailed reports.

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11. The Ecommerce Metrics That Matter

You’re probably wondering why traffic, social media engagement, and pageviews are not among the important ecommerce metrics to measure. After all, the more people visit your site, the more sales you’ll make, right?

Not entirely true.

Those are called vanity metrics. They’re too top-of-funnel to really give you meaningful information. 

Anyone could be visiting your website  — a qualified lead or not. A competitor, someone looking for a job, or a marketer looking for cool websites to feature (we’re definitely guilty of this last one!). Those people won’t buy anything, unfortunately. 

Also, increasing your traffic doesn’t necessarily translate into more sales. It has to be the right traffic, meaning more people from your target audience entering the funnel. Getting anyone who’s not interested in your products to just visit your ecommerce website is a waste of time and money.

Social media engagement is misleading, too. Yes, it does help brand awareness and drives traffic, but likes are not a good measure of real interest. Click-through rate and conversions coming from this specific channel are.

Ecommerce Metrics for Success

Tracking your performance and progress is essential in a dynamic industry like ecommerce. There’s something new every day and you need to know how you’re doing, as well as what your business’ limitations are, in order to compete.

We recommend starting monitoring those ecommerce metrics and adding more detailed analyses as you grow. 

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