E-Commerce Metrics: 7 Metrics & KPIs for Growth

E-Commerce Metrics: 7 Metrics & KPIs for Growth

February 24, 2016

As global online retail revenues surpass the 1 billion USD mark, and the annual market growth is above %20, in markets small or big, e-commerce companies better are hacking their growth path.

This does not come that easy as if it’s written down on a straight-forward playbook or something, but actually it rather needs to cracked, or as the word beautifully describes it, needs to be hacked. While doing this, instead of taking a stab in the dark, companies should define clear targets, i.e metrics and KPIs to be measured.

For a 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, which are mainly the strongest incentive of almost the whole team in an ecommerce company.

The ‘hacking’ part of things mostly rely 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 7 major e-commerce metrics and KPIs, that needs to be measured by companies closely, for finding hackable growth insights.

1- Traffic

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

KPIs and metrics regarding an ecommerce site traffic can be list down as follow:

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

2- Conversion Rate

If we take an e-commerce site – yes, just the web front we see in our browsers – as a salesperson in a company, 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 increase the bottom-line, but it does not improve the conversion rate itself. Conversion rate optimisation has been a quite hot topic lately in e-commerce circles, and it can be yielded through 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 of e-commerce conversion rate hangs out around %3 according to a research by Nielsen Norman Group.

3- Bounce Rate

Well, a bounce is a bad thing.

Bounce Rate is the percentage of visitors, who immediately leaves your e-commerce site, for many different potential reasons. – that needs to be mitigated.

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. High Bounce Rate might signal many negative aspects of an e-commerce site like weak usability, slowness, wrong user targeting, etc, and by improving upon these aspects, the bounce rate can be lowered analytically.

4- Shopping Cart Abandonment Rate

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

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

Shopping cart abandonment rate is calculated as follows:

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 e-commerce site and added them into their carts but then, unfortunately, stopped along the way.

Few ideas that can help decreasing these abandonments are:

  • Making sure that ecommerce site has not 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

5- Average Order Value

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

The higher Average Order Value achieved would yield more income for the e-commerce site.

Average Order Value is calculated as shown below:

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 growth hacking strategies to be implemented for streaming the Average Order Value towards the north.

6- Cost per Acquisition

Cost per Acquisition is the metric that speaks of the effectivity of paid (or all) marketing operations within an e-commerce 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:

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 and focussing on the financially effective campaigns with a relatively lower cost per acquisition.

7- 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 e-commerce 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. – of which hopefully, will yield multiple purchases.

In that respect, Customer Lifetime Value aims to calculate to the total spending of a customer in an e-commerce site during this relationship of her/his.

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

The very basic equation for the calculation of Customer Lifetime Value is:

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

As it’s the case for other metrics mentioned above, there is an extensive list of strategies that can be applied to boost Customer Lifetime Value, and some crucial ones can be listed down as follows:

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

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

Here, we tried to cover 7 major of them, but the list can be extended easily by drilling these metrics down for further segmentation. Honestly, not tracking and optimizing these 7 e-commerce metrics and KPIs can be regarded as 7 deadly sins of e-commerce, but luckily it’s not really a deadly path and can be avoided just now.

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

See you in another blog post!

1 Comment
  1. Amara Cyrus
    January 22, 2019

    Very informative post. I have found here lots of interesting information for my knowledge.
    Thank you and looking forward to learn more from this blog.

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