Key performance indicators, or KPIs, measure the performance of something. In the case of ecommerce websites, KPIs are multiple factors that help owners, webmasters, and marketing managers determine whether the site is successful, and how it can be improved to increase revenue. Ecommerce KPIs can be different from other business models as well, which makes them important to understand for any online retailer.
Keep reading to learn more or contact us at 888-601-5359 if you’d like some help tracking and improving ecommerce KPIs on your website!
KPIs are important because they can help improve the performance of a website.
By monitoring and measuring these indicators on a regular basis, those involved with the site can make recommendations for improvement based on real, actual data. Instead of making decisions for changes based on a gut feeling, KPIs can help lead to changes that immediately improve statistics like bounce rate, time on site, and so on.
That’s why you need to track your ecommerce website’s KPIs via a tool like Google Analytics. You should also consider them when making any decisions about search engine or conversion rate optimization. After all, website performance indicators give you unique, relevant data and insights that can fine-tune your business for better user experience and profits.
Ecommerce KPIs are numerous, and just looking at a list may be overwhelming.
However, not every online store needs to track every KPI out there. For example, an ecommerce site that sells very expensive products may not track its cost per conversion, because they know their margin is high enough to cover that expense, and that there is very high lifetime value in that new customer.
The right ecommerce KPI for you depends on your business's specific needs.
That’s why you need to consider the following factors when deciding which KPIs to track:
It’s also critical that you choose attainable and actionable KPIs, which is the focus of this page.
As we mentioned, there are many ecommerce KPIs that you can track, but these are the handful that we feel are important for most webmasters. Depending on how your store is structured, and what kind of customers you have, you may not pay close attention to some of these, or you may want to track them all very closely.
Some of the most valuable ecommerce KPIs for improving sales, revenue, and customer satisfaction include:
Website traffic is probably one of the most obvious key performance indicators that an ecommerce site owner will want to watch. Generally speaking, the more traffic your site gets, the better chance you have at turning those visitors into paying customers. More traffic doesn’t necessarily mean more purchases, but a 5 percent conversion rate at 1,000 visitors versus 1,000,000 visitors does mean two very different things!
Increasing website traffic is often a goal for ecommerce websites. Traffic leads to not only purchases but also a general awareness of your brand. The more people who visit, the more likely they are to remember your name, mention you to friends, or come back when they want to purchase something that you offer. That's why traffic is one of the more popular — and important — website KPIs to track.
Monitor your ecommerce site traffic carefully for large spikes or dips, or any other kind of unusual patterns. If you’re using Google Analytics to monitor traffic, you can check out your referrals to see if another website or social media network is sending you a lot of traffic.
Knowing who sends you the most traffic — whether it is Google or your friend’s blog — can be very valuable in deciding how to best target the majority of your visitors.
The “who” we mentioned above, in the context of website traffic, is very important. Referral traffic can help you determine which sources are sending the most visitors to your site. This information can be extremely valuable in determining where you should focus more—for example, on organic search or additional PPC ads — or which relationships you should nurture.
Depending on the context, referral traffic can be a powerful website KPI for ecommerce performance for any number of reasons. Say your ecommerce store’s referral traffic from a particular blog is very high. Upon following the link, you discover it’s because a blogger positively reviewed one of your products or services, and linked to your website in the post.
You might choose to reach out to them and nurture the relationship so that you have an opportunity to build more links in the future, or possibly to offer a special discount for the potential customers they are sending your way.
Referral traffic can also indicate potential problems.
If your referrals from other websites are low or nonexistent, this may be a sign that your current marketing or link building campaigns aren’t working well. Additionally, low referral traffic from ads might tell you that you need to reconsider the keywords you are targeting, or possibly the amount you are spending.
Conversion rate is an extremely important KPI for all ecommerce stores.
This rate is the percentage at which website visitors convert into customers. A high conversion rate indicates that you’re convincing a lot of visitors to buy your products or services, while a lower rate signifies that not as many customers are ready to buy, or that perhaps your traffic isn’t targeted enough.
Knowing the number of buyers that visited your site can help you increase ecommerce performance by showing patterns so you can more effectively target site visitors in the sales funnel.
An ecommerce store’s conversion rate can vary based on a wide number of factors.
Some stores may be happy with a five percent conversion rate, while others may want — or expect — a rate of 20 percent or more. While increasing your conversion rate should always be a goal, it’s important to ask a few specific questions before you blindly make changes:
Ecommerce store owners interested in finding ways to improve their conversion rates should look into conversion rate optimization (CRO), which is designed to evaluate the path to purchase and make improvements along the way, all with the end goal of increasing this important metric. For online merchants, it's one of the most critical key performance indicators for a website.
Your website’s bounce rate refers to the percentage of visitors who leave your site after arriving on it from a referral source like a search engine or another website. Although this KPI basically applies to every single person who leaves your site without making a purchase, a very high bounce rate may indicate that a majority of your visitors aren’t finding what they want when they visit your site, making it an important KPI for a website in any business.
One factor that may lead to a high bounce rate is relevancy.
Let’s say your ecommerce store sells decorative feathered hats for women, and you’ve focused all of your SEO efforts on ranking for the keyword “hats.” This is a pretty broad keyword, and people who search for it might be looking for a variety of things. If you rank highly for “hats,” but most of your visitors are men looking for baseball hats, you can imagine what that’s going to do to your bounce rate.
Google actually takes your website’s bounce rate into consideration when deciding how to rank you for certain keywords, so you should watch this KPI very closely. If you’re targeting broad keywords that are increasing your bounce rate, consider adjusting your SEO strategy to focus more on long-tail keywords. In our example above, you’d probably have better luck — and see fewer bounces — if you optimized your ecommerce site for “decorative women’s hats” or “feathered hats for women.”
The next KPI important for ecommerce websites to track is time to purchase.
This metric tells you approximately how long it took for visitors to your site to change into actual customers. While some people may visit your site and immediately make a purchase, others may visit two, three, or even more than ten times before they decide to buy from you.
Depending on the kind of ecommerce store you are operating, a high time to purchase may not be a problem for you. If you sell very expensive computer or server equipment, you probably won’t see any impulse buys, considering how much research goes into purchases of that size. On the other hand, if you sell very inexpensive clothing, jewelry, or shoes, you’re likely to see many purchases falling within the one to two visits range.
Knowing your average time to purchase can help you make really smart decisions about your marketing. For example, you may want to set up a special email marketing campaign for a computer equipment store that sends detailed information to shoppers based on what they were looking at. On the other hands, general sale or new product emails will work well for stores with lots of impulse shoppers.
Repeat visits tie into the time to purchase KPI discussed above.
If your time to purchase is very high, you will have a fair amount of repeat visitors, which represents the same people coming back to your store as they try to make a decision. But repeat visitors also represent repeat customers who have purchased from you and are coming back again.
For ecommerce stores with lower value items, repeat visits may be a sign of brand loyalty.
The more repeat visits you have, the better chance you have at establishing a long-lasting relationship with a customer. But on the flip side of that, if you have very few repeat visits, you may conclude that your store doesn’t offer enough value to bring people back for a second purchase.
You can encourage repeat visitors by offering incentives to your customers.
For example, giving first-time buyers a special coupon code may cause them to think favorably of you — and can help boost your conversion rate, too. Sending them emails with special offers can also bring them back. Knowing what your repeat visit KPI looks like, and finding ways to boost it, can help you grow your ecommerce website’s revenue significantly.
If you’ve been exposed to ecommerce before, you’ve probably heard the phrase “cart abandonment” tossed around a lot. This is another important KPI to track for ecommerce stores. This KPI refers to the percentage of shoppers who add items to their cart or basket on your site, but never actually go through with a purchase.
Unlike bounce or conversion rates, cart abandon rates depend on factors far later in the shopping process and may have almost nothing to do with your website quality or SEO. Instead, shoppers tend to abandon their carts due to one of the following reasons:
By tracking this KPI very closely, you can identify issues with your checkout process before they start to cause significant problems for your business. As a result, this online KPI is especially important toward the end of the sales funnel.
For example, if you find that a majority of customers are abandoning their cart upon seeing your shipping rates, you might consider reducing them or offering free shipping above a certain purchase amount. If it appears that requiring an account to check out is scaring off customers, you could consider adding a “guest checkout” option.
Another KPI we recommend keeping track of is cost per conversion, or CPC. Commonly used to discuss Google’s AdWords, your CPC is the amount you essentially pay to turn a visitor into a buyer.
CPC seems fairly straightforward, especially if you’re looking at a Google Ads reports. Say you have a PPC ad that pays 5 cents per click, and it receives 50 clicks before there’s a conversion. What that means is that your CPC averages $2.50. As long as the purchase is more than $2.50, you’ve made a profit, right?
Well, not exactly. You also need to take into consideration the time setting up the ad, the cost to ship the product, the time to develop the product or service, and so on. That’s why CPC becomes a complicated ecommerce KPI to track.
Still, knowing your CPC average is essential.
It can help you make smarter decisions about how to price your products, what to pay for advertising, and even how to market your business online. So it’s worth doing some work to figure out what your CPC.
With this metric, you can become more profitable, plus gain a competitive edge in the marketplace.
As an ecommerce store, it’s critical to know your average order value (AOV) — you may also refer to your AOV as your average order size or average market basket. Why is it so important to know your AOV?
Track your average market basket and your company can accomplish the following:
Calculate this ecommerce KPI with the following equation:
Average Order Value = Revenue / Number of Orders
As an example, if your store earns $2 million in sales via 1,000 orders, your AOV is $2,000.
If you’re looking to improve your average order size, a variety of tactics are available, including:
Launch your AOV strategies one-by-one to measure their success. Before you implement any of your tactics, think about engaging your audience and asking for their opinion on some of your potential changes, such as product bundles.
If you’re advertising your ecommerce store, whether through digital or print advertisements, it’s critical that you measure the revenue you earn from advertising — also called revenue on advertising spend (ROAS).
Track your ROAS via Google Analytics for digital advertising. You can access your ROAS data in Google Analytics via Acquisitions and then the Campaigns sub-menu. In Campaigns, select Cost Analysis to view your ROAS.
Depending on this KPI’s performance, you may want to reevaluate your advertising strategy. This process may consist of your team reassessing your strategy at a global and local level, such as by updating your target audience or revamping your ad copy.
Even if your ads perform well, look for areas to improve.
Another valuable ecommerce KPI is customer lifetime value (CLV). By calculating your average CLV, you’re predicting the lifetime spend of a shopper. Understand the lifetime value of your clients, and you can prepare for the future, plus inform your marketing and acquisition strategy.
In most instances, you want to improve your CLV. Why? It’s easier to sell a product to an existing customer than to a new customer — in fact, your chances of selling something to a new shopper are only five to 20 percent, versus 60 to 70 percent for an existing client.
Boost your CLV with some of the following strategies:
While you’re brainstorming new ways to increase your CLV, make sure you consider your audience and your products. If your product line-up consists of a few high-priced items, for example, bundling may not make sense.
Like ROAS, you can track your CLV through Google Analytics. Go to your Audience, followed by Lifetime Value. Here, you can see your acquisition channels, such as paid search and organic search. This dashboard will also display your user number and revenue per user.
With an average return of $44 for every $1 spent, email marketing is a go-to strategy for ecommerce stores. It’s essential to monitor the growth of your subscriber list, however, as well as other valuable metrics — a few include your open rate and click-through rate (CTR).
Calculate your list growth rate with the following equation:
List Growth Rate = [New Subscribers – (Unsubscribers + Email Complaints)]/Email List Total
Depending on your email marketing strategy, you may want to track your list growth rate by a monthly, quarterly, or yearly basis. As you monitor this ecommerce KPI, keep in mind that email subscriber lists have an average annual decay of 22.5 percent.
Improve your list growth rate by focusing on growing your subscriber list, as well as retaining it. You should also take the proactive approach of cleaning your email subscriber list every three to six months, as you want to connect with shoppers that matter.
A feature more ecommerce websites are adopting is the chatbot, which can provide:
If you’re integrating a chatbot into your website, it’s critical that you add it to your KPIs. By monitoring its performance, such as the number of chats started or sales earned, you can assess its value to your company.
The performance of your chatbot can also lead to process improvements, which can increase customer satisfaction. By improving your chatbot’s product recommendations, for example, you can impact your overall sales.
Plus, a chatbot provides your company with a unique selling point. If you’re an ecommerce store that operates on a subscription business model, for example, your chatbot can provide subscribers with account updates, as well as options to upgrade their subscription.
Contact your service provider to learn how to access your chatbot’s analytical data.
A critical ecommerce KPI are product reviews. They have a massive influence on a product and a company’s success, as 80 percent of consumers admit that online reviews have changed their minds about purchasing a product or service.
That’s why you need to monitor the content of reviews, as well as the number of reviews.
If you’re offering your product on multiple platforms, such as Amazon, WooCommerce, and Shopify, you’ll need to set aside time to check-in on your products. As you read through user reviews, make sure you or a team member resolves dissatisfied reviews.
For example, if a shopper received a damaged version of your product, you’ll want to contact them. In almost all instances, you’ll provide them with a free replacement, which can cause them to update their review.
Use the quantitative and qualitative data from your product reviews to assess your ecommerce store’s performance. Depending on your findings, you may redesign a product, reassess a manufacturer, or revamp a customer service process.
In short, you’ll improve your company, products, and service.
Another ecommerce KPI to focus on? Your Net Promoter Score (NPS), which measures the willingness of shoppers to recommend your company to someone.
An NPS ranges from -100 to 100 — a score of 100 indicates a high willingness to recommend, while a score of -100 indicates the opposite.
While other ecommerce stores may ignore their NPS, you want to prioritize yours. Studies show that a company’s NPS influences their organic growth rate by 20 to 60 percent. That’s a massive bonus for your business, especially in the competitive ecommerce industry.
A high NPS also correlates to shoppers:
If you want to measure your Net Promoter Score, you’ll need to partner with a company that provides Net Promoter Score services. The company will poll shoppers on your behalf, asking them how likely they are to recommend your business to a friend — shoppers answer on a scale of zero to 10.
Based on their responses, shoppers go into one of the following groups:
Once they’ve polled your shoppers, your NPS partner calculates your NPS with this formula:
Net Promoter Score = Percentage of Promoters – Percentage of Detractors
For the ecommerce industry, the average NPS is 39. Overall, that’s considered an average score — an excellent NPS is between 70 to 84. It’s worth investing the time to improve your NPS, whether by revamping your customer service strategies or redesigning your ecommerce website.
Why? Companies with a leading NPS grow at twice the rate of their competitors.
One ecommerce KPI that businesses often monitor is churn rate. Your churn rate describes the annual rate at which customers stop subscribing to your services, which is why so many ecommerce companies track it.
Calculate your company's churn rate with the following formula:
Churn Rate = Number of Subscribers Lost / Number of Starting Subscribers
Depending on your subscription plans, you may base the number of starting subscribers by the month, year, or quarter. If you offer a three-month subscription, for example, you’ll measure the number of starting subscribers at the start of that three-month period and then the number lost at the end.
If you’re operating at a high churn rate, it’s often unsustainable. Remember, it’s more cost-effective to retain a customer than to earn a new one. What’s considered a high churn rate, though, and how can you lower it?
It depends on the size of your company. If you’re an established ecommerce platform, aim for a five to seven percent annual churn rate. For a small-to-midsized (SMB) business, however, expect a five percent churn rate each month.
If you’re looking to lower your churn rate, talk to your customers. Understand what’s motivating them to cancel their services, such as through cancellation surveys. Then, develop a plan for remedying those weak points.
Depending on your products or services, you’ll want to track product affinity. This ecommerce KPI provides you with valuable data on purchase behavior, discovering which products users tend to purchase together.
It’s an excellent metric for creating product bundles, but it does require some time. To calculate product affinity, you’ll need to import your item and order data into an Excel or Google Sheet document — start with product and order data from the past three months.
Next, direct your focus to your top-selling product and determine the product most often purchased with it. Then, calculate the frequency and popularity of these “bundled” orders — this provides perspective on the potential of a bundled product.
In some cases, you’ll find bundling products together is worth it. It’ll often depend on your products and services, however, as well as the intent of your shoppers. Even if a bundled product isn’t worth it now, it may become valuable in the future, so measure product affinity on a routine basis.
Even for companies outside the ecommerce industry, cost of goods sold (COGS) is a KPI that demands attention. COGS is a critical ecommerce KPI because it shows how much your business spends on selling a product or service.
This KPI measures the following costs:
Calculate your COGS with the following formula:
COGS = Beginning Inventory + Purchases – Ending Inventory
Note, your purchase value depends on the timeframe you’re measuring. If you’re calculating your COGS for the year, for example, you’d measure your total annual purchases, as well as your inventory at the beginning and end of the year.
Based on your COGS, you can build an effective pricing model for your products or services. You can also develop a pricing plan for sales, exclusive offers, and promotions to ensure your business still makes a profit on those products or purchases.
Bill Craig WebFX President
We know how difficult it can be for businesses to keep track of their ecommerce website goals and performance. If you need help with your ecommerce key performance indicators, WebFX is here for you. We can set realistic goals and optimize your store to meet them with our industry-leading SEO, marketing, and ecommerce skills. Contact us today to find out how we can make running your business easier.
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