Ecommerce Metrics: 8 Metrics & KPIs for Growth

All types of ecommerce companies should define clear targets, i.e., ecommerce metrics and KPIs to be measured.

For quite a few reasons, growth hacking seems to be the marketing buzzword in the ecommerce landscape at the moment. However, when you peel the word down, it’s basically aiming for better customer acquisition and engagement. These are mainly the strongest incentives of almost the whole team in an ecommerce company.

The ‘hacking’ part of things mostly relies on the data-driven and analytical approach hidden in the operations of a growth hacker. And here, while aiming for better results and analytical findings, one needs to define the metrics and KPIs to be measured effectively. In this blog post, we’ll be listing down 8 major ecommerce metrics and KPIs to find hackable growth insights.

1- Traffic

First things first! To make the very first sales dollar from a store, companies need visitors to click in and browse through the ecommerce site. Therefore, initially, the channels that drive the audience should be well understood. Then, this information can broke down into well-performing social channels or keywords. And from here, companies can reach a bigger picture, stating high-performing and also under-utilized potential traffic channels.

KPIs and metrics regarding an ecommerce site traffic can be listed as follows:

• Traffic per Sources and Channels
• Unique Visitors
• Bounce Rate
• Keyword Traffics

2- Conversion Rate

If we take an ecommerce site – yes, just the web front we see in our browsers – as a salesperson in a company, the conversion rate shows how effectively it closes a deal.

The simplistic calculation is:

Conversion Rate = (Number of Sales) / (Number of Visits)

In other words, conversion rate defines what you can get out of your traffic, as mentioned above.

Maximizing traffic surely increases the bottom line, but it does not improve the conversion rate itself. Conversion rate optimization has been a quite hot topic lately in ecommerce circles. It can yield a smarter focus on pricing, usability, or even product copy that explains what you are exactly selling to your visitors.

A very rough estimate for a worldwide average ecommerce conversion rate hangs out around %3 according to research by Nielsen Norman Group.

3- Price Index

Price Index is a key metric that shows the position of your products, a category of products, or all products in the market.

To calculate the index, you can divide a single competitor’s price by yours and then multiply by 100. Repeat this process for all competitors, sum up the results, and divide by the number of competitors. Additionally, to determine the price index for a single product among many competitors, add up all competitor price indexes and divide by the number of competitors.

Analyzing Price Index (PI) information can reveal valuable insights into competitors’ strategies. It’s important to note that having a price way below the market average can attract demand. This may not lead to a good profit margin. Therefore, finding the balance point where your business generates the most revenue is crucial for a successful business strategy.

4- Bounce Rate

Well, a bounce is a bad thing.

Bounce Rate is the percentage of visitors who immediately leave your ecommerce site for many different potential reasons.

Again, with simple math, Bounce Rate it calculated as shown below:

Bounce Rate = (Number of Visitors Who Leave Immediately) / (Total Number of Visitors)

Bounce is an event to be avoided and it kills conversion rate. A high Bounce Rate might signal many negative aspects of an ecommerce site. Like weak usability, slowness, wrong user targeting, etc. And by improving upon these aspects, the bounce rate can become lower analytically.

5- Shopping Cart Abandonment Rate

The average shopping cart abandonment rate worldwide is around %68, according to Baymard Institute.

When one thinks of the path covered by the visitor through the ecommerce site since reaching out to the shopping cart, this is a strikingly high number.

Shopping Cart Abandonment Rate = (Number of People Who Don’t Complete Checkout) / (Number of People Who Start Checkout)

There could be many reasons why a visitor actually picked one or two (or hopefully more) items from your ecommerce site and added them to their carts but then, unfortunately, stopped along the way.

A few ideas that can help to decrease these abandonments are:

• Making sure that the ecommerce site does not have too long or confusing registration forms
• Adding trust and security seals and badges
• Clearly stating the shipping costs or other similar extra costs
• Reducing the number of steps required for the checkout
• Running an abandoned cart recovery campaign

6- Average Order Value

Average Order Value is the key metric to be followed and improved on the sales side of ecommerce operations.

The higher Average Order Value achieved would yield more income for the ecommerce site.

Average Order Value = (Total Revenue)/(Number of Orders)

Strategies like free shipping over orders of X USD or bundling deals are just a few of the growth hacking strategies to implement for streaming the Average Order Value towards the north.

7- Cost per Acquisition

Cost per Acquisition is the metric that speaks of the effectiveness of paid (or all) marketing operations within an ecommerce company. When calculated for every campaign, it can show which campaigns drive value and profit, and which just only turns out to be a pile of cost.

The basic calculation goes like this:

Cost per Acquisition = (Total Cost of Marketing Activities) / (Number of Conversions)

By calculating and analyzing Cost per Acquisition, companies can financially see their return on investment for each marketing campaign they implement.

The cost here can be further decreased and optimized by killing all unprofitable campaigns. Plus, focussing on financially effective campaigns with a relatively lower cost per acquisition is another choice.

8- Customer Lifetime Value

No shopper shops only for once in their lifetime. Shopping is part of lives and we repeat it in varying frequencies in our daily lives. Ecommerce is no exception to that.

So, with a visit to an ecommerce site, a company does not only capture the chance to sell something to that visitor at that moment but instead pursues the opportunity of building a long-lasting relationship with a customer – hopefully will yield multiple purchases.

In that respect, Customer Lifetime Value aims to calculate the total spending of a customer on an ecommerce site during this relationship.

It matters because every ecommerce site should aim to make more money from a customer than it costs the site to acquire that customer. And, this aim can be better realized with the understanding of the ecommerce customer lifecycle.

The very basic equation for the calculation of Customer Lifetime Value

Customer Lifetime Value = (Average Order Value) x (Average Number of Repeat Sales) x (Average Retention Time)

As is the case for other metrics above, there is an extensive list of strategies applicable to boost Customer Lifetime Value, and some crucial ones are as follows:

• Add personalization to your marketing mix
• Offer great customer service through multichannel support and lifetime assistance
• Apply loyalty incentives and reward it through them
• Craft exclusive deals for shoppers who are engaged with you on social media
• Implement up-sells at any possible touchpoint

Well, as we stated at the top of this article, ecommerce metrics, and KPIs are vital for hacking the growth of an ecommerce site and building sustainable growth both in terms of customer base and revenues.

Here, we tried to cover 8 major of them. However, the list can grow easily by drilling these metrics down for further segmentation. Honestly, not tracking and optimizing these 8 ecommerce metrics and KPIs can be hurtful, as the 8 deadly sins of ecommerce. But luckily, it’s not really a deadly path and anyone can avoid it just now.

We wish you happy growth stories with boosting KPIs and metrics,

See you in another blog post!