5 Key Metrics Every Ecommerce Business Should Be Tracking
How often do you assess your eCommerce store’s performance? Well, small businesses often sweep this task under the rug. But selling online without keeping track of your performance is like driving with your eyes closed. In today’s fast-paced world, every marketing and promotional decision is driven by data. And with no apt data, you have virtually no chance of making improvements. So, you’ve no idea what’s working, what’s not, or even what success looks like. Successful eCommerce businesses harness metrics to make informed decisions. But, what exactly does that mean? What metrics should you be watching if you want a positive return on investment from your marketing initiatives and long-term growth for your business? We’ve put together a list of 5 KPIs you should be tracking today.
Sales Conversion Rate
Simply put, your eCommerce sales conversion rate is the percentage of visitors who visit your online store or page and buy something. You can figure out your conversion rate using the following formula:
Conversion Rate=Number of salesNumber of Users×100%
If 1,000 individuals came to your store this week but only 10 bought something, your conversion rate for the week would be 1%. And, obviously, you want the highest possible conversion rate.
Cart Abandonment Rate
It hurts to see potential customers loading up a shopping cart just to abandon it before making a purchase. And, there are a number of reasons why this could be happening. The most prevalent of which are: Surprisingly high shipping prices or unexpected additional fees, payment security concerns, longer delivery time, and a long checkout procedure that takes more than one page, overall, the user experience is inadequately structured. This is an important metric to track for eCommerce business owners because it indicates greater issues occurring on your site. Cart abandonment can be calculated using the following formula:
Cart Abandonment Rate = Number of completed cart checkouts during a given period The total number of carts loaded during that same period ×100
Customer Retention Rate (CRR)
Wondering why you are losing consumers almost as quickly as you’re gaining them? Maybe there’s something wrong with your products or customer engagement approach. Repeat customers are the lifeblood of any business as retaining an existing customer costs far less than acquiring new ones. The CRR eCommerce metric measures your ability to keep clients once you’ve acquired them. To calculate CRR, first, subtract the number of new customers gained throughout a period from the total number of customers at the end of that period. Next, divide the result by the number of clients you had at the start of the period and multiply it by 100. This metric is associated with customer satisfaction and customer loyalty, so, its importance should not be underestimated.
Customer Lifetime Value (CLV)
One of the most common marketing blunders is to see your customer base solely through the lens of a single sale. The CLV metric considers the big picture. It considers clients in terms of how much income they will generate for your business over the length of your partnership. You can calculate the CLV by multiplying the average order value by the average purchase frequency rate and the average customer lifespan. If your consumers spend an average of $100 per order, place five orders per year, and order from you for ten years, your average CLV will be 100 x 5 x 10 = $5,000. Keep in mind that you’re looking for an average, not an exact figure.
Refund and Return Rates
These are crucial eCommerce indicators, especially for smaller businesses. They represent the percentage of orders that were refunded or returned compared to the percentage of total orders. Keeping them under control allows you to view the larger picture and spot possible revenue sinkholes. In some cases, problems may arise and products need to be returned. And, unsurprisingly, fashion eCommerce has the highest return rate. While it is necessary to accept returns, a high return rate indicates issues with product quality, customer happiness, or lead quality. Returns are expensive because they take twice as long to process. Even worse are refunds which indicate that the buyer is dissatisfied. As a result, they may rave about your brand on social media in addition to limiting your revenue.
In a fast-paced sector like eCommerce, keeping track of your performance and growth is critical. Every day brings something new and challenging. And unless you want to lag behind, you must keep track of how you’re performing as well as what your business’ limitations are. Keep an eye on the data and critical metrics at all times, and you’ll be able to spot areas that need immediate attention and a strategy adjustment in order to see your eCommerce business flourish like never before.