Which eCommerce KPIs should I be prioritising? 

eCommerce KPIs

It’s never been easier to capture data.

All of the best eCommerce platforms on the market today capture a wealth of useful data in the background, but the sad truth is that not enough businesses capitalise on the data they have.

In order to grow a business at a decent rate, it’s essential to collect, monitor, and make decisions based on the data you have at your disposal, whether that’s using eCommerce tools or your own internal systems.

Speak to any data analyst, and they’ll tell you the work never really ends. There’s always more data to collect, and it’s always possible to go deeper.

But, if you try to analyse absolutely everything you have at your disposal, you’ll likely find yourself banging your head against the desk while diminishing returns firmly sets in its roots.

If you’re doing data analysis yourself, are low on time, or simply want to focus on the data that’s most important to your business growth, you’ve come to the right place.

In this article, we’re going to explore everything you need to know about eCommerce KPIs, and outline 10 eCommerce KPIs that you should prioritise in 2024. If you have the resources to do more – great. And if you don’t – don’t worry about it.

What is an eCommerce KPI?

Key Performance Indicators (KPI) are predetermined, measurable quantifiers that are used to measure progress towards a goal over time.

The vast majority of businesses use KPIs to inform progress and growth strategies. You’ll even find particularly driven individuals tracking KPIs as they work towards personal goals.

KPIs are by no means exclusive to eCommerce, but they’re widely used in this industry because a large amount of data is collected and digitised by default.

eCommerce KPI Example

All eCommerce businesses have a website, so let’s use a website as an example. Let’s imagine you want to increase the amount of users coming to your website. We have a goal in place, so what eCommerce Key Performance Indicators might we use to measure this?

  • Direct traffic: The number of users coming to your website directly through the browser’s address bar.
  • Organic traffic: The number of users that are clicking on your website from Google, Bing, or another search engine.
  • Paid traffic: The amount of users coming to your website via paid ads.
  • Email traffic: The amount of people clicking through to your website via an email campaign, such as a newsletter or a promotion.
  • Referral traffic: The amount of users coming to your website via third-party websites that have a backlink to your website.
  • Social traffic: The number of users clicking through to your website from social channels, such as LinkedIn, Facebook, and Instagram.

By regularly measuring the above KPIs, you’d be able to judge whether or not more traffic is coming to your website. Even better; by breaking down your overall goal into distinct KPIs, you can judge what you’re doing well, and what you need to improve.

Why are eCommerce KPIs important?

Ultimately, eCommerce KPIs are a way to entrench a growth mindset into your company culture and activities, which is a perfect recipe for business expansion, the career development of your employees, and the general health of your eCommerce business.

But there’s more to it than that; let’s take a look:

  • Clarity: When everyone in your business is aware of KPIs and the common goal, it’s easier for them to stay aligned.
  • Cooperation: KPIs provide context for employees to work together in aid of a goal.
  • Responsibility: KPIs can be owned by leaders, who are then accountable for success.
  • Data management: The process of tracking progress improves overall data quality and understanding across the business.
  • Decisions: KPIs can be used in the decision-making process, informing the best actions to take for company growth.

““As an operationally focused CEO, I don’t just think about the efficiency of picking and packing (although that’s very important, of course!). I also think about the processes of the entire business, across every department. Within every single one of those processes, we need to fully understand a set of metrics and KPIs to measure success.” – Emma Dempsey, CEO, James and James Fulfilment

Setting the right eCommerce KPIs for your business

Before you begin to measure eCommerce metrics and KPIs, it’s important to understand what you want to measure, and why. As we alluded to in the introduction, data analysis can be a bottomless pit, with infinite possibilities.

It’s far better to track a handful of KPIs that provide actionable insights, rather than drowning in hundreds of statistics. If you do the latter, you’ll spend all of your resources collecting and analysing the data, rather than making tangible actions.

With that in mind, here are some points to consider when choosing eCommerce KPIs:

  • Goals: First and foremost, what are the immediate goals for your business? Increasing sales, improving productivity, and widening reach are all common goals for eCommerce businesses.
  • What’s realistic?: What are you realistically going to be able to track with the resources you have available?
  • Plan: What activities need to be completed to ensure targets are achieved in line with your KPIs?
  • Business maturity: Are you a start-up, SME, enterprise-level business, or something else? Businesses have different goals depending on where they are in their journey.
  • Impact: What actions will you be able to take once you begin to collect data and eCommerce metrics? How will these be implemented?
  • Plan B: What alternatives are on the table should KPI improvements not happen?

10 eCommerce KPIs you should be measuring right now

Although there’s a lot to consider before you start implementing the KPIs, there’s still a number of KPIs that all trading eCommerce businesses should follow, regardless of where they are on their journey.

Here’s a list of universal eCommerce KPIs that you should be tracking in 2023 and beyond:

1. Conversion Rate

As an eCommerce business, it’s best to think of your website as a salesperson. As such, it’s important to measure how well your website is actually selling your products, just like you’d review the performance of your sales staff.

One of the best ways to do this is by measuring your conversion rate. It’s a percentage value that’s worked out by taking the number of conversions (or sales) and dividing it by the number of visitors to your website.

For example, let’s say that your website had 1000 visitors in a month, and got 100 sales in the same month. The conversion rate of your website for that month would be 10%.

Now that would be exceptionally high. The average conversion rate for an eCommerce website is somewhere between 2.5% and 3%. You should aim for a conversion rate of 3% or higher for a well performing website.

How to increase conversion rate

Conversion rate optimisation (CRO) is a profession within itself, and you could easily have an employee dedicated to improving your conversion rate. However, there’s a few best practices to implement on your website that should improve conversion rates with minimal effort:

Outside of the basics, there’s plenty to experiment with, such as page layouts, fonts, colours, messaging, wording, and much more. You can use software like Hotjar or Lucky Orange to generate heatmaps for your website, giving you a good indication of how users are interacting with your website, and what can be improved.

It’s important to remember that any significant changes to your website should be A/B tested using Google Optimise. This allows you to have two live versions of a single page on your website, and Google will collect data on conversion rates of each version so you can compare results.

2. Average Order Value

Average order value (AOV) is the average amount of money a customer spends when they make a purchase through your website. It’s an easy KPI to measure; simply add up your online store’s revenue in a given period and divide it by the number of customers who’ve made a purchase.

For example, let’s imagine your online store has made £6000 in sales over a month, and 100 customers. To get your average order value, you’d simply divide 6000 by 100 making the AOV £60.

How to increase average order value

Incentivising customers to spend more with you is an essential part of creating a thriving business. Here’s some ways to do it:

  • Free shipping: Offering free shipping to customers who spend over a threshold can encourage customers to spend more with you.
  • Loyalty schemes: Offer a loyalty program tied to the amount a customer spends with you.
  • Discounts: Provide a discount off a customer’s next order if they spend over a certain threshold.
  • Bundles: Bundles and collections – especially around holidays and festivals – can result in great value for your customer and a higher AOV for you.
  • Personalise: Creating personalised shopping experiences can help you to upsell and recommend products you think a customer might be interested in.

3. Customer Lifetime Value

Customer lifetime value (CLV) is the amount a customer will spend with your business from the first purchase until the final purchase. Customers will come and go from your website all the time, but the key to successful growth is to keep them returning for more.

To work out average CLV, you will need to multiply your average order value by average customer lifespan. Getting an accurate result will rely on a good deal of historical data, and some educated assumptions.

Thankfully, there’s lots of software out there that uses machine learning and advanced modelling to work out an accurate CLV for you, as long as you have enough data to feed it.

How to increase CLV

The trick to increasing CLV is to keep them engaged with your brand. It’s about tactically reminding customers you exist, you offer great value, and that you care. Here’s some effective ways to increase CLV:

  • Post-purchase offers: Every time a customer buys from you, follow up with an irresistible offer to keep them coming back for more.
  • Content marketing: Produce regular, relevant, and informational content to drip feed to your customers through your website, email campaigns, and socials.
  • Subscription: Create a subscription box model for your business and keep them incentivised to carry on their subscription each month.
  • Customer service: Offer the best eCommerce customer service you can, and be there to answer your client’s questions and concerns, whenever they need you.

4. Shopping Cart Abandonment Rate

According to a recent study conducted by Statista, almost 70% of users, on average, abandon their carts during a purchase. This is crazy high, especially given the fact that most users who get this far have a genuine intent to buy your product.

eCommerce businesses need to be proactive in reducing their shopping cart abandonment rate KPIs both on-site and off-site. It’s important to establish potential reasons why users are abandoning their carts, and then lowering the barriers in the way of purchase.

The most common reasons for cart abandonment include:

  • Change of heart
  • Unexpected shipping costs
  • Unavoidable account creation
  • Long delivery times
  • Technical issues
  • Security concerns
  • Payment options

How to lower shopping cart abandonment rate

Thankfully, you have the power to solve most of the problems associated with cart abandonment. Sure, you’re never going to eradicate indecisiveness from the human condition, but it’s still possible to make a significant impact:

  • Comprehensive product pages: Ensure everything your customers need to know about is on the product page, so there’s no hidden surprises.
  • Expand payment options: Customers love flexible payment options, so try to spread the net as wide as possible.
  • Web design: Ensure your website is optimised for both desktop and mobile devices so customers don’t run into responsiveness issues.
  • Security: Ensure your store is powered by a reputable, secure payment gateway, so customers can rest easy after their purchase.
  • Follow up: Most platforms have tools available to follow up with customers who have abandoned their carts via email.

5. Net Profit Margins

Out of all the KPIs we’ve mentioned today, net profit is probably the one you’re most actively trying to improve. Net profit is synonymous with business health and success, and a good margin is essential to cash flow, scaling a business, finding the best talent, and so much more.

You’ve probably already thought long and hard about a price point before taking your products to market, but the work to squeeze as much profit out of our sales as we can, while ensuring we’re providing customers with value, never really ends.

What makes a ‘good’ profit margin really depends on your business. That said, in most cases, it’s generally agreed that a 10% net profit margin is average, with 20% being high, and 5% being low.

How to improve net profit margin

Raising your prices is the simple answer, but let’s be honest, few businesses want to raise their prices without very good reason. It can result in customers seeing less value in your products, and moving away to competitors.

While it’s necessary to rise prices in line with inflation and other economic conditions, here are some safer ways to increase your net profit margin:

  • Acquire higher margin products: Sourcing products that you can make more out of can increase your offering in addition to your bottom line.
  • Target customers: Create personalised campaigns for customers that might be interested in higher margin products.
  • Increase AOV: Larger orders will accumulate less fulfilment and admin costs, giving you more profit.
  • Invest in tech: Technology and eCommerce software is cheaper than people; use technology where you can to reduce overheads.
  • Outsource: Employing a third-party for some activities such as marketing or fulfilment is more cost-effective and flexible than hiring a member of staff.

6. Customer Acquisition Cost

Customer Acquisition Cost (CAC) is a KPI that tells you how much your eCommerce business is spending to get a new customer. Ideally, you want this cost to be as low as possible. 

To work it out, you’ll divide the costs spent on gaining customers by the number of customers acquired. For example, if you spend £1000 on acquiring customers and you gained 500 customers, your CAC would be £2. 

This is a crucial eCommerce metric to keep in mind when budgeting how much you’re spending for a certain period. 

How to improve CAC

There are quite a few ways to lower your CAC, but here are the best ones:

  • Focus on the appropriate audience: Offer your ideal customers content and products they want and expect.
  • Retarget customers: Try and gather as much data on your customers, i.e. what they like and what motivates them. 
  • Boost customer retention: Target customers who have bought from you before with loyalty programs and discount codes.

7. Customer Retention Rate

Another important KPI to keep in mind is Customer Retention Rate (CRR), as it’s a crucial eCommerce metric to assist in figuring out whether clients are returning or not. To calculate CRR, you’ll need to subtract the number of customers at the end of a period from the total number of new customers during the same period. 

Next, you’ll divide this amount by the final number of clients at the start of that period. Finally, you’ll multiply the figure by 100. So, let’s say you gained 150 customers by the end of the period and you started with 50, your CRR will be 150%. 

How to improve CRR

There are various methods to boost your customer retention rate, such as: 

  • Collect customer feedback: This is a useful way to improve customer loyalty, as people want to feel appreciated. Moreover, the customer’s feedback could be extremely useful in working out where your product strategy needs to be changed or not.
  • Solve customer queries swiftly: Customer satisfaction is likely to go down the longer they are waiting. By resolving the issues quickly, you’re more likely to keep a paying customer.
  • Quick delivery and free returns: One of the best customer retention strategies is to offer a smooth and issue-free delivery and return system. This not only improves customer retention but it also might spread brand awareness by word of mouth.

8.  Customer Satisfaction Score 

A crucial KPI, to measure the customer service quality you are providing, is the Customer Satisfaction Score (CSAT). To get data for this, you can send customers marketing emails after their purchase. You can ask them to complete a short survey by asking “how satisfied are you with your experience? They can then provide a metric with a score from 1 to 5/10. 

To work out CSAT, you’ll divide the total score by the number of respondents who have completed the survey. For example, if you get a total score of 80 and have 20 respondents, you’ll have a CSAT of 4/5. 

How to improve CSAT

A CSAT can be improved by taking customer feedback seriously, as it can result in a better conversion rate, AOV, and CLV.

9. Net Promoter Score

If you’re looking for an eCommerce KPI that works out how likely your customers are to recommend your brand, you can use the Net Promoter Score (NPS). You can use a similar survey to determine CSAT, the previous KPI and it will help you to categorise three types of people: 

  • Promoters = respondents who give a score of 4/5 or 9/10
  • Passives = respondents who give a score of 3 or 7/8
  • Detractors = respondents who give a score of 1/2 or 0/6

Then you’ll get your NPS by subtracting the percentage of detractors from the percentage of promoters. So let’s say you have 78% promoters and 26% detractors, your NPS will be 52%. 

How to improve NPS

If you have a low NPS, you can always connect with detractors and get useful feedback and keep your promoters engaged and happy with your offerings.

10. Repeat Purchase Rate 

The Repeat Purchase Rate (RPR) is one of the most important eCommerce KPIs to track for customer loyalty, as it can show you how many clients return to your site. What’s more, return customers are fantastic for your business, as it requires you to spend less on marketing campaigns. This is because acquiring a new customer can sometimes cost up to seven times more than retaining an old customer, as seen in this Harvard Business Review study.

To work out the RPR, you’ll divide the purchases from repeat customers in a period by the total purchases made in the same period. Let’s say you had 60 repeat customers and 100 customers in four months, your RPR would be 60%. 

How to improve RPR

To boost your RPR, these are a few usual tips to follow:

  • Upsell your products: For repeat customers, you can upsell items that they might like, based on previous purchases. 
  • Increase user engagement: Utilise your brand’s social media more often and interact with your customers comments and suggestions.

Improve eCommerce KPIs by outsourcing fulfilment

Here at James and James, we’re pretty hot on our KPIs for eCommerce. After all, you don’t build one of the most efficient product fulfilment services on the market without a mindset of continuous improvement.

Our operation specialists are laser-focussed on squeezing every percentage point of efficiency out of our international fulfilment centres, which means we’re able to offer 99.999% accuracy, with 97% of orders being dispatched on the day they are made.

With our expertise, architecture, and technology, you’ll never need to worry about operational KPIs ever again. To learn more about how we can help your business grow, give us a call on +44 (0)1604 801 915 or get in touch via our online contact form.

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