Many E-commerce business owners are struggling to track how their businesses grow.
They usually look at revenues since they’re the most important. I agree, revenue is what matters, but they come as the result of other business activities.
As example, let me say that online stores usually see an abandonment rate of 70% which means that if optimizing checkout process may dramatically increase the revenues.
Today, I’ll show you 15 metrics that you need to care about - if you’d like to see how your online store grows.
Some KPIs are related to marketing activities such as CPC and the number of email subscribers, and others are related to sales such as Average Order Value and shipping costs.
Conversions are everything that matters. If there are no conversions your business will unquestionably fail.
Assuming that you have implemented E-commerce feature in Google Analytics, you have to click on Conversions - Ecommerce - Overview.
After the page loads, you’ll see the metric called Ecommerce Conversion Rate.
Having a high conversion rate is something that every business owner wants, but it depends on lots of variables. Here are some of them:
It also depends on the device that consumers use.
There aren’t many people who don’t use mobile devices these days.
In other words, you have to maximally optimize your websites because that way you’ll increase your conversions.
Also, don’t’ forget that mobile responsivity is a Google ranking factor.
Knowing average order value is important because it makes creating other plans easier.
You can check this metric directly in your app (Magento, Shopify, BigCommerce), or you can see the amount in Google Analytics.
If you somehow haven’t implemented Google Analytics yet, and you don’t use Magento (e.g.), here’s the formula that you can use.
Having a total revenue of $408,695.97 and a total 2,170 transactions tells us that your average order value is $188.34.
AVG. ORDER VALUE = $408,695.97 / 2,170 AVG. ORDER VALUE = $188.34
Also, when you know a margin profit, you’ll know how much you can spend on acquiring new customers, and so on.
Assuming that an online store has a total of 27,821 visits and $188,936 in revenues means that average revenue per visitor is $6.79.
Simply said, this KPI lets you estimate how much revenue you’ll see when your store visits 100,000 people a month.
Here’s the formula.
Currently, GA doesn’t calculate this automatically, but you can do it on your own.
Firstly, in the dashboard see how many people (users) visited your site.
After that, find how many revenues your store has.
Finally, use the formula above and you’ll get the ARPV (Average Revenue Per Visitor).
Once you know how much one visitor is valuable to your company, you can figure out how to bring as many as possible visitors.
It’s a fact the most consumers that add a product to the cart will leave your site without buying the products.
Specifically, Style & Fashion industry usually 71.9% abandonment rate.
As you could guess, GA allows you checking this rate without calculating on your own. In the menu, click on Conversions - Goals - Funnel Visualization.
You’ll see something like this.
9,247 visitors added products in the cart but only 24.51% placed the order.
In other words, there’s the abandonment rate of 75.49%. One of the ways of reducing E-commerce abandonment rate is email marketing automation.
For example, whenever someone adds a new product in the cart but doesn’t complete the order, you can send a 7% off discount code.
It’s just an idea and sending a discount isn’t a must-have, sometimes reminding may be enough.
CLV tells you how much an average customer pays you until he stops making the business with you.
CLV in E-commerce business is a bit harder than calculating in the subscribing business where you have only two variables: churn rate and average revenue per customer.
Anyway, here’s how online stores usually calculate CLV.
Simply said, if the average order value of your online store is $50 and an average customer buys three times per year while having the average lifetime of 5 years, then your CLV will be $750.
This is just one formula among many others. For example, you can also user traditional LTV equation.
“i” stands for the rate of discount, and “r” stands for the customer retention rate.
Having a CLV of $1,000 and a margin profit of $700 means that you can spend up to $700 on acquiring new customers. Otherwise, you’ll generate only loss.
CAC metrics tells you how much do you spend on acquiring new customers. Let’s say that you advertise on Google AdWords and have the following metrics:
This means that you acquire 1 new customer in every 50 clicks and since one click costs $1 it means your CAC is $50.
Here’s a Google sheet that displays calculating and comparing different channels.
Of course, if you advertise on Facebook then you should implement Facebook Pixel feature and see how much does it cost you to bring a new customer.
Email marketing is the marketing channel you need to start leveraging today. There are so many reasons why you need to invest in email marketing and here are some of them:
Simply said, the more subscribers you got, the more revenues your company will have. Getting new subscribers is the easiest with blogging. Here’s what you you need to do:
Email marketing has the greatest ROI, but maybe you should calculate your own ROI?
Here’s the formula.
Please keep in mind that B2C companies that blog generate 88% more leads per month.
So, start blogging and increase the number of newsletter subscribers!
Depending on the business and business model (B2B or B2C), you should always use social networks such as Facebook and Twitter.
Social networks are always great for brand awareness and increasing the visitors to your site. As for me online stores should focus on Facebook firstly because Facebook knows lots of its users.
For example, you can increase the number of fans by creating ads, and it means you’ll be able to precisely target your customers.
Furthermore, when you post on Facebook, you should always check at what time are your fans usually online.
On the other side, Twitter is great for interacting with early adopters which tell us that Twitter is great for tech companies, for example.
Twitter can be used for increasing the number of followers, but how many people will click on your tweet depends on the day of the week.
I don’t know if your online store employees work on Saturday and Sunday, but you should tweet 7 days a week.
Google AdWords and Facebook Ads could dramatically increase the conversions of your online business. In fact, the biggest online retailer - Amazon - annually spends more than $55 million on Google AdWords.
Imagine how many visitors advertising drives to Amazon.
When you decide to advertise on Google and Facebook, you’ll usually choose between paying per impressions and paying per clicks (PPC).
The most marketers pick paying per clicks. Reasonably, I’d say since PPC has the lower risk of failure.
The photo above shows you more about Google AdWords costs and advertising in different industries.
It looks like advertising in Legal and Insurance industry seems very very competitive. As for Facebook advertising, it appears that CPC variates from age to age.
For example, targeting 45 - 54 and 55 - 64 years old people seems more expensive than those who have between 18 and 24 years.
The following Marketing Charts graph tells us how people spend more time when they shop offline.
Well, that’s obvious since they need to physically be in the shopping mall, stores, etc.
But, the trick is that when consumers open your site they will spend maximally a couple of minutes.
They won’t spend 78 minutes in average as the photo tells. Places where consumers spend lots of time are search engines, checking competitors prices and so on.
However, as long as visitors spend enough time (don’t leave immediately) it means that your products are interesting to them.
If that’s not the case with you then you should check shipping costs.
When visitors leave your site without opening other pages we say that they bounced.
High bounce rate is an indicator that something might be wrong on your site because people are obviously not interested in your content.
According to the research, E-commerce stores should expect a bounce rate between 20% and 40%. Here are three typical cases that make your bounce rate higher:
Probably the best way of optimizing a bounce rate is doing A/B tests.
A/B testing feature is available in Google Analytics, but you should check out a new tool - Google Optimize.
Lots of entrepreneurs invest in different marketing channel and that’s fine.
But, they need to look at conversion rates and revenues by checking which marketing channel is the most efficient. Look at the following photo.
As you can see from the example above, the social channel has the worst conversion rates. Of course, this is just an example and it doesn’t mean that it will be with your online store.
For example, you can dig deeper by clicking on Organic Search and analyzing which landing pages have most sessions (visits) and revenues.
Once you find those pages, you can use Google Search Console and check how many impressions and CTR they got.
In simple terms, maybe focusing SEO efforts on specific pages would be a great decision. Never forget that testing is only that matters.
When visitors return to your site it means that they’re satisfied with the products you sell. Your goal is to make sure that as many as possible visitors bookmark your shop and return back.
Checking how many people are returning is possible in Google Analytics dashboard.
This ratio depends (a lot) on campaigns you do.
For example, if you spend huge amounts on Facebook advertising, it’s obvious that the Returning Visitor percentage may go down.
Now, click on Behaviour - Site Content - Landing Pages.
There, you can see which type of products brings new sessions. Simply said, you can see on what products people usually return.
Maybe your visitors are returning to products that are out of the cart?
I already told you that the number of newsletter subscribe matters, but what really matters is a click rate. According to the photo below, in the B2C retail industry, you can expect 3.57% click rate.
In other words, when you send 10,000 newsletters you should see 357 clicks to your site.
However, every company needs to find a sweet spot because if you don’t send too many emails subscribers won’t be able to click (obviously).
But, if you send too many campaigns, it may become too boring to your subscribers.
For that reason, the best advice is to test and see what brings the greatest results. For example, you can divide subscribers into three groups and send a different number of email campaigns.
Tracking click rate is possible in every email marketing app. It works simply: there’s a small transparent unique 1x1 image and whenever a subscriber opens the email, the server records it.
Successfully handling shipping costs may be the reason will you succeed or fail.
According to Business Insider, E-commerce transactions with free shipping are becoming more and more popular.
A few years ago, the shipping costs of major transactions were paid by consumers, but things have changed since Q3 2013.
The following photo shows how important shipping costs are.
It appears that unexpected shipping cost is the major reason for cart abandonment. After that, forcing users to create a new account, and so on.
I always suggest to E-commerce business owners to make shipping costs lower as much as possible.
Sometimes that’s not possible due to low product price, but I think that when you start a new online store you need to sell products with high margins.
I hope you enjoyed reading about these metrics because they are really important. It’s so hard to say which metrics are the most important. For example, CLV seems very crucial because that way you know how much you can spend on acquiring new customers.
It’s not reasonable to spend $1,000 on acquiring new customers when they’re worth only $800, for example. I’d also suggest you to never forget having low shipping costs because that’s the most common reason for the abandonment.
Finally, tracking KPIs may be boring, but if you don’t do it you won’t know what is and isn’t working. Good luck!