Every suc­cess­ful e‑commerce own­er or mar­keter knows that raw data dri­ves the best busi­ness deci­sions. KPIs are both savvy and time-effi­cient. But which e‑commerce KPIs should you be look­ing at for best results?

If you run an e‑commerce busi­ness, you’ll know it can be extreme­ly busy and time-con­sum­ing. At times, you’ll prob­a­bly feel like you need eight heads to han­dle the many tasks and issues that are thrown at you.

Unfor­tu­nate­ly, these numer­ous tasks can take you away from the heart of your busi­ness: its performance.

Luck­i­ly, things can be sim­pli­fied with Key Per­for­mance Indi­ca­tors (KPIs). KPIs are a bril­liant way to stay on top of your busi­ness’s per­for­mance. They give you the raw and hon­est data that dri­ves the most pru­dent busi­ness deci­sions and save you time.

Once you can recog­nise what the fig­ures mean at a glance, you’ll be ful­ly in tune with how your busi­ness is doing.

KPIs will help you iden­ti­fy where fail­ures (and suc­cess­es!) are root­ed. Plus, the speci­fici­ty that KPIs offer means that you’ll know exact­ly where to look if a change is needed.

The KPIs a busi­ness choos­es to focus on will dif­fer depend­ing on its unique posi­tion and goals.

Although we’ll be dis­cussing many impor­tant KPIs in this arti­cle, per­haps the most indica­tive of your site’s over­all per­for­mance is net profit.

Net prof­it = total rev­enue – total expenses

How­ev­er, this isn’t very spe­cif­ic. So, let’s get into the main 10:

Conversion Rate

Of course, your pri­ma­ry goal when a user vis­its your site is for them to become a buy­er. At the very least, you’ll want them to qual­i­fy into a lead. Depend­ing on your busi­ness and its goals, you’ll think of dif­fer­ent things as con­ver­sions. Here are some things you might con­sid­er as conversions:

• A user signs up for a mail­ing list
• A user makes a purchase
• A user cre­ates an account with you
• A user signs up for your loy­al­ty program

Depend­ing on what you want to mea­sure, there’ll be dif­fer­ent met­rics you could look at. For exam­ple, you might want to look at con­ver­sion rate by traf­fic source or con­ver­sion rate by device type.

Look­ing at con­ver­sions across device types can be high­ly use­ful. This met­ric might indi­cate that your mobile inter­face isn’t work­ing as it should, which is a rea­son­ably straight­for­ward issue to tackle.

Fur­ther­more, analysing your con­ver­sion rate by traf­fic source will help you know which way you suc­ceed in dri­ving traf­fic. It might be paid ads, social media, organ­ic search, or refer­rals that are more effec­tive. Once you know this, your mar­ket­ing efforts can be focused on some­thing you’re con­fi­dent is like­ly to work.

The aver­age con­ver­sion rate across the globe is 1–3% and achiev­ing this can sig­nif­i­cant­ly affect your busi­ness’s profits.

Con­ver­sion rate (%) = (num­ber of con­ver­sions / num­ber of vis­i­tors) x 100

Bounce Rate

How quick­ly are users leav­ing your web­site after vis­it­ing a sin­gle page?

If this is hap­pen­ing quick­ly (a high bounce rate), it’s clear that although your vis­i­tors are being enticed toward your site, they’re not res­onat­ing with the page they’ve land­ed on.

This issue is dif­fi­cult since there are so many rea­sons why a vis­i­tor has­n’t res­onat­ed with your land­ing page.

Your web­site’s bounce rate is high­ly instru­men­tal in its SEO per­for­mance – not just sales. So, this KPI is dou­bly important.

Some ways busi­ness­es reduce their bounce rates include:

• Improve page load­ing speed
• Ensure con­tent is rel­e­vant accord­ing to dif­fer­ent visitors
• Insert an attrac­tive CTA on the land­ing page

It might also ben­e­fit you to look at pages per ses­sion when con­sid­er­ing bounce rate. This often-over­looked met­ric can arguably offer more insights than mere­ly look­ing at bounce rate. The pages per ses­sion met­ric indi­cates how long a cus­tomer stays at your store, looks around, and explores your brand.

If vis­i­tors have remained on the home­page, they’ve prob­a­bly dis­cov­ered a rea­son to leave the site. How­ev­er, if they’ve gone through sev­er­al pages, they’re prob­a­bly very inter­est­ed in what you’re offering.

Cus­tomers who have a high page per ses­sion rate are much more like­ly to make a pur­chase. To max­imise these instances, you should make sure there are more attrac­tive sug­ges­tions for the vis­i­tor to click on next. This could mean offer­ing new or relat­ed products.

Bounce rate = num­ber of sin­gle-page ses­sions / total num­ber of sessions

Cart Abandonment Rate

Any own­er of an e‑commerce busi­ness will have noticed that some cus­tomers will add prod­ucts to their cart, but they won’t com­plete the order.

This issue can be high­ly frus­trat­ing as the site vis­i­tors were so close to mak­ing a pur­chase but were put off for some unknown reason.

You can’t always know for sure what it is, but here are some rea­sons why peo­ple aban­don their carts:

• The web­site asked them to cre­ate an account
• There were hid­den costs such as ship­ping or taxes
• The check­out process was over­ly complicated
• The web­site did­n’t seem trust­wor­thy enough for a vis­i­tor to share bank details
• The web­site crashed
• The return pol­i­cy was unsatisfactory

Here are some ways you can reduce the prob­lem of aban­doned carts:

• Allow­ing vis­i­tors to check­out as a guest and gen­er­al­ly sim­pli­fy­ing the check­out process
• Elim­i­nat­ing any sur­prise fees
• Using email retargeting
• Ensur­ing there are no tech­ni­cal issues in the check­out process
• Change your return policy

Cart aban­don­ment rate = total num­ber of com­plet­ed trans­ac­tions / num­ber of ini­ti­at­ed sales

Rate of Returning Customers

This is the rate at which for­mer buy­ers return to pur­chase more or oth­er prod­ucts or ser­vices from your business.

If your RORC is above 35%, you’ll be see­ing a huge increase in rev­enue. How­ev­er, a rate of between 20-and 30% is still admirable.

Return­ing cus­tomers should be val­ued high­ly and incen­tivised to con­tin­ue buy­ing from your busi­ness. If your com­pa­ny sells prod­ucts that expire or sells a vari­ety of prod­ucts or ser­vices, you’ll want exist­ing cus­tomers to return and buy more of the same or different.

Here are some ways you can increase this rate:

• Noti­fy them of new or updat­ed products
• Cre­ate a reward scheme
• Add them to a mail­ing list that offers loy­al­ty discounts
• Check in with them after a cer­tain amount of time when they’ve poten­tial­ly used up your prod­uct and need a new one

In this regard, you’ll also want to look at the num­ber of email and noti­fi­ca­tion opt-ins. Accord­ing to some experts, 92% of first-time site vis­i­tors aren’t ready to make a pur­chase. So, there’s got to be a way to make sure they come back to your site. Get­ting vis­i­tors to sign up to a mail­ing list enables to you reach out to them once they’ve left your site.

Look­ing at your opt-in rate will let you know how many poten­tial cus­tomers you have at your fin­ger­tips. If you want to increase the num­ber of users on your mail­ing list, here are some ways to do so:

• Adding per­ma­nent ban­ners and side­bars on your site pages with opt-in CTAs
• Cre­ate a ded­i­cat­ed land­ing page
• Use slide-ins through­out the brows­ing process that offer dis­counts for opting-in

Rate of return­ing cus­tomers (%) = (num­ber of return cus­tomers / total num­ber of cus­tomers) x 100

Net Promoter Score

They say that hap­py cus­tomers will tell their friends whilst unhap­py cus­tomers will tell the world.

Unfor­tu­nate­ly (and for­tu­nate­ly!), this is the case. Cus­tomers can be a huge source of adver­tis­ing – in both neg­a­tive and pos­i­tive ways.

This is a free method of adver­tis­ing that, if fueled by a good expe­ri­ence with your com­pa­ny, can pos­i­tive­ly impact your brand aware­ness and increase traf­fic to your site.

Your cus­tomers’ will­ing­ness to rec­om­mend you to a friend is called the net pro­mot­er score, grad­ed from 0 to 10. Some experts say that this score can account for between 20 and 60% of a busi­ness’s organ­ic growth rate.

Giv­en the pow­er of cus­tomer sat­is­fac­tion, it’s essen­tial that you’re up to date with this met­ric and work towards improv­ing it if it’s low. You can do this by respond­ing to feed­back, send­ing out sug­ges­tion forms, and active­ly chang­ing what you can if cus­tomers men­tion a problem.

Obvi­ous­ly, hav­ing excel­lent prod­ucts and ser­vices goes a long way in improv­ing this score. But no com­pa­ny is per­fect. You can com­bat this by han­dling com­plaints and feed­back in the best way possible.

Average Profit Margin

Work­ing out which prod­ucts gen­er­ate small and big prof­it mar­gins is key for every busi­ness own­er. By com­par­ing the prof­it mar­gins of prod­ucts you sell (or would like to sell), you can iden­ti­fy which are the most lucrative.

This KPI is key in e‑commerce since it rep­re­sents the black and white truth of prof­it or loss across your busi­ness’s entire prod­uct range.

Customer Acquisition Cost

How much is it going to cost to acquire one new cus­tomer? Once you know this – you’ve got your cus­tomer acqui­si­tion cost (CAC). This fig­ure will be an essen­tial fac­tor when­ev­er it comes to bud­get­ing for mar­ket­ing and advertising.

Your CAC will also be inter­twined with your aver­age order val­ue (AOV). If your AOV is $15, but it costs $20 to acquire a new cus­tomer, you’ll be los­ing mon­ey. The rela­tion­ship between these two KPIs will be fun­da­men­tal in work­ing out prices and will be par­tic­u­lar­ly impor­tant in e‑commerce busi­ness­es sell­ing low-mar­gin products.

Cus­tomer acqui­si­tion cost = cost of cus­tomer acqui­si­tion / cus­tomers acquired

Sim­i­lar to your CAC is the cost per acqui­si­tion (CPA). This KPI includes the cost of acquir­ing non-pay­ing users and leads as well as pay­ing cus­tomers. CPA is a bril­liant KPI to track if your busi­ness builds aware­ness through free sam­ples and gat­ed content.

When think­ing about cus­tomer acqui­si­tion, you’ll also want to con­sid­er traf­fic source to bet­ter under­stand which meth­ods are more suc­cess­ful. Plus, con­ver­sion by traf­fic source.

These KPIs will real­ly help you get into the nit­ty-grit­ty and push you towards get­ting the most out of your acqui­si­tion meth­ods. After all, if your AOV is low­er than your CAC, you’ll want to look at which traf­fic sources are most effective.

Cost per acqui­si­tion = costs of con­ver­sion acqui­si­tion / num­ber of conversions

Customer Lifetime Value

With­in the e‑commerce world, it’s cheap­er to retain exist­ing cus­tomers than it is to acquire new ones. In fact, some say it costs five times more to acquire a new cus­tomer than it does to keep an old one. So, you can under­stand why it’s finan­cial­ly ben­e­fi­cial to invest in cus­tomer retention.

Cus­tomer life­time val­ue is a high­ly vital KPI for e‑commerce com­pa­nies that shapes cus­tomer reten­tion strate­gies. If you can increase your cus­tomer life­time val­ue, you’ll be secur­ing a rev­enue stream that can be relied upon through­out your busi­ness’s future.

Anoth­er rel­e­vant met­ric in this regard is the per­cent­age of return­ing buy­ers. This KPI will clue you in on how many con­vert­ed cus­tomers are return­ing. Giv­en that return­ing cus­tomers are cheap­er than new ones, it would be pru­dent to try to increase your per­cent­age of return­ing buyers.

Here’s how you can do it:

• Keep cus­tomers in the loop about new items, updat­ed prod­ucts, and discounts.
• Make your incen­tives time-sensitive.
• Ensure your mail­ing list, push noti­fi­ca­tions, retar­get­ing meth­ods, and social media chan­nels are optimised.

Average Order Value

This KPI is one of the most impor­tant fac­tors in help­ing e‑commerce busi­ness­es make data-dri­ven deci­sions. Through help­ful insights into cus­tomer buy­ing pat­terns, a com­pa­ny can come to a con­clu­sion about its cus­tomer acqui­si­tion costs.

If new cus­tomers are spend­ing less than what it costs you to acquire them, you’re tech­ni­cal­ly at a loss. Ide­al­ly, you want to keep the acqui­si­tion cost per cus­tomer low­er than your aver­age order val­ue.

You can improve your aver­age order val­ue by increas­ing the prices of prod­ucts (although your exist­ing cus­tomers won’t appre­ci­ate this), encour­ag­ing buy­ers to add mul­ti­ple prod­ucts to their bas­kets, and gen­er­al­ly improv­ing the check­out experience.

Aver­age order val­ue = rev­enue / total orders

Churn Rate

Unfor­tu­nate­ly, some­times cus­tomers aren’t sat­is­fied with your prod­ucts or services.

Your com­pa­ny’s churn rate indi­cates the num­ber of cus­tomers that dis­con­tin­ue their sub­scrip­tion with your busi­ness after a spe­cif­ic time peri­od. If this num­ber is low – con­grat­u­la­tions! – it means your cus­tomers are very happy.

For SaaS busi­ness­es, the aver­age churn rate falls between 2.9% and 8.5%.

It’s essen­tial that your e‑commerce busi­ness pro­vides excep­tion­al cus­tomer ser­vice and that the prod­ucts or ser­vices on offer are val­ue for mon­ey. If not, cus­tomers with poor expe­ri­ences might leave neg­a­tive feed­back on pub­lic forums and stop giv­ing you their custom.

Other KPIs

If your e‑commerce com­pa­ny sells its prod­ucts through a third par­ty (be it Ama­zon, for exam­ple), you might find it valu­able to look at prod­uct per­for­mance met­rics. Work­ing out how spe­cif­ic prod­ucts are per­form­ing means you can under­stand your brand with­in that retail­er at a deep­er level.

From this, you’ll be able to make well-informed deci­sions on stock, order­ing, prices, adver­tis­ing, and ulti­mate­ly whether that third par­ty retail­er is right for you.

Dig­i­tal mar­keters should also keep an eye on the return on ad spend (ROAS), which sounds sim­i­lar but is dif­fer­ent to the cus­tomer acqui­si­tion costs. ROAS is more spe­cif­ic than CAC since it focus­es pure­ly on the rev­enue gen­er­at­ed by adverts.

If cus­tomers come from a paid source, cal­cu­lat­ing the ROAS can pro­vide you with a mon­e­tary val­ue since it con­sid­ers pur­chase val­ue. With this, you’ll be able to use a def­i­nite fig­ure to judge whether your ad cam­paigns are worth their cost.

ROAS = total sales / total ad spend

Final Thoughts

It seems that KPIs hold the answers to all of your e‑commerce busi­ness’s questions!

It’s true; keep­ing a reg­u­lar eye on your KPIs will ensure you can stay on top of any sticky issues and keep your cus­tomers hap­py. You’ll find that once you start valu­ing KPIs for busi­ness insights, you’ll be able to make well-informed deci­sions about your mar­ket­ing, spend­ing, and site user experience.

KPIs are so help­ful that it can some­times become irre­sistible to check them dai­ly. We don’t see any­thing wrong with that, though! Skim­ming through your dai­ly KPIs can be quick and keep you in tune with your com­pa­ny’s performance.

Pur­ple­plan­et has been select­ed among the Top eCom­merce Web Design Com­pa­nies by Design­rush