7 eCommerce KPIs That Every Online Store Should Track for Growth
Key performance indicators (KPIs) provide eCommerce businesses with an easy way to monitor their progress in online retail. An eCommerce business can choose any number of key performance indicators to monitor the retail success of its online store. The KPIs help to make critical and strategic decisions about business and drive action towards business goals.
Monitoring your progress, in sales, marketing, and customer service, can help you to achieve more success, push growth, and enhance customer experience. KPIs should be chosen and monitored based on your unique business as one key performance indicator may be great for one business but not another.
In this article, we're going to be looking at what key performance indicators actually are, why KPIs are important, the different kinds of key performance indicators, and the most important. To find out more about growing your eCommerce business through the use of KPIs, keep reading now.
What is a key performance indicator (KPI)?
eCommerce key performance indicators (KPIs) are methods of monitoring progress and success in an online store or eCommerce business. It is a quantifiable measurement or data point which can be used effectively to gauge performance. When choosing the KPIs your business will monitor, it is best to narrow it down to two or three to be able to critically analyze the data you receive.
Why are KPIs important for eCommerce businesses?
An eCommerce store should consider using key performance indicators to measure their retail success to ensure they are making business decisions based on facts, rather than hypotheses. With KPIs, you are able to fully analyze the data you receive from your own site, helping you to get real-time feedback on what is working and what isn't on your online store.
Using key performance indicators on your eCommerce site means being able to understand the nuances of your website traffic and critically analyzing this information for use in business decisions. The information should be used strategically to help modify your eCommerce website according to trends.
KPIs offer actionable insights and push you to devise more strategic methods of growth while also highlighting problem areas. They can also be distributed to employees to help boost critical analysis of everything from your customer relationships and customer service quality to new customer acquisition and customer loyalty.
What are the different types of KPIs?
KPIs come in lots of different forms and can pertain to many different aspects of the business. KPIs must be measurable but can be quantitative or qualitative, and could be indicative of the future or explore the past. KPIs could relate to sales, marketing, customer service, manufacturing, and project management. Below, we have discussed a few examples of each type of KPI as it relates to business operations.
For sales, good examples of an eCommerce KPI include average order value or size, relating to the average spend per transaction. Another example could be the number of transactions per day on your online store.
Good examples of marketing KPIs are site traffic and newsletter subscribers. Both indicate the success of your marketing tools. You may also analyse conversion from social media engagement to actual sales too.
For customer service KPIs, you could look at first response times to customer service queries, which should be kept low (!), or customer service escalation rate, i.e., whether the customer requests to speak to a manager or more senior member of the customer support team. In addition, you may wish to look at the number of emails the customer support team receives as an indicator of customer satisfaction.
Customer service KPIs are incredibly important for overall happiness and customer expectations.
Manufacturing KPIs include yield and cycle time. You may also evaluate equipment and operations effectiveness as well as on-time delivery and rate of return.
KPIs for good project management include hours worked and overall budget.
How to choose KPIs to monitor for your online business goals
Choosing your KPIs is completely down to you but there are a few things that you should consider. These include:
- Business goals - What are your business goals and do your KPIs relate to them? Will increasing customer satisfaction or average order value help you to achieve your goals, or is the shopping cart abandonment rate a better KPI for you to be monitoring? Choosing these monitors of success means analyzing your business and how these indicators would help you move forward.
- Measurability - KPIs need to be measurable. There is no point in monitoring your eCommerce store for something that cannot be measured and analyzed. The best way to make strategic decisions about your eCommerce store is to ensure you know how successful it already is!
- Growth stage - Your business's growth stage is very important for choosing KPIs. If you are just starting out, you may want to focus on driving sales and so KPIs like conversion rate and site visitors may be best for you. If you are in the later stages of growth, it may be more important for you to look at customer lifetime value and customer retention rate as these figures boost growth in later stages of retail success.
- The reality of your industry - The industry you are operating within has a huge impact on the way you run your business. You may sell haircare and skincare products, or you may offer bespoke furniture, whatever you do, make sure your KPIs align with what is realistic for your industry.
- Short, small, and effective goals - The best kinds of goals are the ones you can actually achieve. There isn't any point in setting long-term goals that you cannot see the end of, and so setting goals that pertain to your KPIs, say reaching a specific percentage increase in site visitors in a set amount of time, is more achievable than far off and abstract goals.
Setting KPIs to monitor will always be totally unique to you and your business and so it is important not to compare with others and how they're doing things too. Stay focused on your own KPIs and your own growth for the best success with an eCommerce store.
7 KPIs to monitor for growth
Below, we have discussed seven important KPIs you could choose to monitor for growth. You don't need to monitor all of them but could pick out a few that suit you and your business to start monitoring your progress in online retail. Check them all out below.
1. Conversion rate
The conversion rate is essentially the number of visitors who eventually buy something on your site. It is calculated by the number of customers who take action divided by the total number of customers.
A good conversion rate is indicative of successful business strategies that have gotten people to the site and encouraged them to purchase. It is important for your growth for customers to purchase something when they visit your site.
There are a few ways you can achieve conversion rate optimization, including making your eCommerce website easier to navigate, increasing the website speed, and adding in indicators of trust to your eCommerce store, like customer reviews of products.
Conversion rate could be linked to bounce rate, helping you to devise strategies for keeping customers engaged with your site. It could also be linked to new customers and your eCommerce metrics will help you to understand any of the issues here.
2. Customer retention rate
Customer retention rate is an important indicator, particularly for eCommerce websites that are in the later stages of growth. Ensuring repeat customers keep coming back to your site can help to boost sales and will help you analyze what is bringing them back time and time again.
Customer retention rate is linked to your customer satisfaction score and can be a good indicator of happy customers. Analyze which products customers are returning for to help with further customer acquisition.
You may also consider calculating your net promoter score (NPS) when looking into customer satisfaction and trying to boost customer loyalty as it is a good way to indicate where and how you can improve your customer relationships.
3. Average order value (AOV)
Your average order value is the average amount that is spent per transaction. This KPI is an efficient indicator of growth, particularly pertaining to sales. Higher AOV rates mean you have more to put towards your customer acquisition cost (CAC) budget.
Since everything from customer acquisition costs to marketing efforts to the customer support team cost you money, it is a good way to monitor growth by checking in on your average order value.
4. Net profit
Net profit is less about eCommerce metrics and more about accounting but it is another great indicator of an online retailer's success. Turning a profit is key to being able to reinvest in your brand, meet the customer acquisition cost, boost ad spend, and have overall eCommerce success.
5. Shopping cart abandonment rate
The shopping cart abandonment rate is the rate at which customers add products to their basket before abandoning them. This can be an issue with both new and existing customers. There are many things you can do to fix cart abandonment, from lowering shipping costs to fixing complicated checkout processes.
If the average number of customers abandoning their carts is high in your eCommerce store, it might be time to make some changes!
6. Return on investment (ROI)
Return on investment looks at how much revenue you generate from specific investments. A popular example is a return on social media investment, wherein brands will utilize influencers on social media to promote their products.
Social media ads, using great product photos and influencer follower counts to sell, can be really helpful, but many brands look solely at social media engagement, rather than the conversion rates to actual sales, from their investment.
eCommerce store owners sometimes make the mistake of putting all of their resources into social media advertising over other digital marketing strategies and so return on investment is a very good way of monitoring how ads are converted into website visitors and then into paying customers and online sales. Conversion rate monitoring will also help with this KPI.
7. Customer lifetime value (CLV)
Customer lifetime value (CLV) is considered one of the most important KPIs to track. Customer lifetime value can reflect an accurate picture of the health of an eCommerce business by blending together the conversion rates, return customer rate and average order value.
Good CLV is about ensuring that each of the new customers acquired by the brand has a positive experience that ensures they keep returning. CLV should increase each year, meaning new customers and repeat customers and purchase frequency should increase year on year. CLV is one of the most important eCommerce metrics to monitor for growth.
Whether using google analytics or your own eCommerce metrics, knowing how your eCommerce store is performing is integral to success. Monitoring everything from website traffic to bounce rate to customer service email count can all help different brands out in different ways. All these eCommerce KPIs can help in different ways, the trick is choosing the right eCommerce KPIs for you and your brand.