You are using an outdated browser. Please upgrade your browser to improve your experience and security.

8 Essential eCommerce Metrics to Analyze and Optimize Your eCommerce Store

Jacques van der Wilt February 23, 2021

8 Essential eCommerce Metrics to Analyze and Optimize Your eCommerce Store

Ecommerce metrics are a tool commonly used by marketers, often on a daily basis. Metrics are used to measure a range of things, but can generally be used to analyze and optimize success. When it comes to selling online, using metrics, spotting trends in your analytics, and optimizing is integral to your success.

So, what are the most commonly used metrics, and how can you use them to maximize the positive impact on your business?

What are eCommerce metrics?

Metrics in eCommerce are quantifiable measurements of websites and storefronts and their performance. Metrics come in a wide range of parameters, stretching from anything as simple as clicks, to as detailed as revenue by traffic source.

How are metrics sourced?

Metrics are sourced from a huge number of places. In current times, numerous platforms track and collect data from visitors to sites, using tools like Google Analytics, Amazon Analytics, shopping carts, and even social media. All these data need to be interpreted effectively before they become a useful source of information for improving on eCommerce successes and failures.

Ecommerce KPIs

KPIs, or key performance indicators, are essentially the most important and significant metrics. They tend to be quantitative measurements that are used to measure growth, such as the number of orders per month or average profit margin.

The difference between KPIs and metrics

While there is a significant crossover between KPIs and standard metrics, there are also some noteworthy differences between the two. The most important difference is that KPIs aim to measure your goals, whereas metrics are more general and measure all processes, many of which may be unrelated to your goals.

Because KPIs are measuring goals, they always need to be relevant to what it is you are aiming to achieve. This means one business could easily have vastly different KPIs to another. One could aim for a lower cart abandonment rate, while another aims for a higher customer retention rate and doesn’t worry about those who are abandoning their carts, no matter how high the rate is.

It should also be noted that when you do decide on a KPI, you also need to set a target. Until there is a target, average profit margin (for example) remains just another metric. As soon as there is a goal for that average profit margin to reach, it becomes a KPI. Here are some common examples of KPIs:

  • Lower average acquisition cost by 2% in Q1 of 2021
  • Increase the average order value by 5% within the next 6 months
  • Decrease cart abandonment rate by 1% in the next year
  • Increase revenue sourced from social media by 5%
  • Double the customer retention rate within the next 12 months

How often should I check my metrics?

How often you check your metrics depends on your goals and the KPIs you are using. Some metrics will help you to better understand the direction of your business and its projections, and therefore should be checked weekly at the minimum. Other metrics may require more substantial sample sizes (such as cost per acquisition) to tell you anything at all, and therefore should only be checked every few weeks. It may even be the case that you have certain metrics and KPIs that you only need to check monthly, again because they require a longer time to gather a sufficient sample size.

The best way to judge how often to check your own metrics is to consider what you aim to achieve from each metric and go from there. If you want to attain more weekly site visitors, then you will need to check more often. If you want to reduce the cart abandonment rate, then a week will not be a sufficient amount of time to gain a large enough sample size.

8 Handy eCommerce Metrics and How to use them

eCommerce metrics can be very useful. However, with KPIs varying from business to business, it is often challenging to recognize which will be most effective for your online store. The following metrics will help you determine the best ways to use certain metrics like KPIs to evaluate your store.

1. Average Acquisition Cost (AAC)

AAC measures the cost of acquiring new customers. Obviously, it is best to have a low average acquisition cost, and this means you need to get as much of your traffic converting as possible. This can be done in several ways, such as using relevant keywords in advertisements, adding negative keywords to ad campaigns, and general refining advertising. You can even attempt to acquire customers through free methods, such as social media interactions, reviews, or even listing your business on Google so it appears on Maps.

You should view average acquisition cost as a means of determining how effectively you are using your budget to attract new customers. You should also remember that you can segment this metric by location, and therefore determine your most profitable zones.

8 Essential eCommerce Metrics to Analyze and Optimize Your eCommerce StoreSource: Jilt

2. Customer retention rate

Retention rate is the percentage of customers who return to shop with you again. This is a useful metric, as retaining customers is much more cost-effective than having to attract new ones. A low retention rate suggests that you may not have happy customers (unless you’re selling a one-off product, that is).

The great thing about selling online is that you can ask for reviews and surveys after a purchase. This means that if your retention rate isn’t up to your desired standards, you can simply ask your own customers what is going wrong. That way, you can improve that pesky retention rate, and even improve your customer lifetime value alongside it! Here is an example of how you can improve your customer retention rate in the beauty industry.

3. Conversion rate

Regarded by many as the holy grail of metrics, the conversion rate is how many visitors you manage to convert into customers. In the eCommerce industry, the conversion rate is currently around 3% on average. So by using that, plus your historic conversion rates as benchmarks, you can see whether you are effectively converting your traffic.

Should you notice a poor conversion rate, there are various things you can do to improve that, including:

  • Creating relevant landing pages
  • Optimizing your shopping feed
  • Ensuring that your site is secure
  • Use free software like Instasize to create high-quality images
  • Making sure prices match those on advertisements
  • Having plenty of payment options
  • Conduct A/B testing

4. Average profit margin

Average profit margin measures your earnings per product, subtracting your supply costs. The profit is then shown as a percentage. This metric is a great way to recognize which products are your big earners. You can make use of that information by focusing your ad campaigns on those big earners, while not advertising low-profit margin products at all.

The metric can also help to highlight your potential pricing pitfalls, and when you should be renegotiating prices with your suppliers.

5. Customer Lifetime Value

Customer lifetime value, which is calculated by customer acquisition cost from revenue earned from them, is one of the most significant eCommerce metrics. This is because it measures the total spend of a customer in your store, over all time.

This metric is ideal to track when trying to better understand the profitability of your acquisition costs. If your customer acquisition is costing more than most customers’ lifetime value, then you have an issue.

However, higher acquisition costs aren’t the end of the world. That is because customer lifetime value is something you can increase. Try incentives, such as loyalty programs. This can help to increase customer loyalty, and therefore their lifetime value. After all, good customer lifetime value is all about retention.

8 Essential eCommerce Metrics to Analyze and Optimize Your eCommerce StoreSource: SEOjournal

6. Average order value

The average order value is pretty self-explanatory. This metric measures the amount spent per order, on average. This information is useful, as it can help give you a predictable quantity of income for a specific amount of customers. If you use other metrics to determine the average number of customers, you have a good idea of your income over a period of time.

You can also use this information to recognize which customers are spending less than average per order and target them with promotions. This can be a cost-effective way to generate extra revenue.

8 Essential eCommerce Metrics to Analyze and Optimize Your eCommerce StoreSource: Referral Candy

7. Cart abandonment rate

Cart abandonment rate is a very useful metric because it tells you exactly what percentage of people started to shop with you but didn’t complete their purchases. Now, this can be down to several reasons, from something as simple as being distracted, to not liking additional costs being added at the checkout.

While the cart abandonment rate is useful for helping you realize whether you have an issue, it isn’t necessarily the best at pinpointing why people are abandoning their carts. Therefore, a high abandonment rate is a sign that you need to do some additional research and find out the main causes for the issue.

Potential causes for cart abandonment include:

  • Additional costs at checkout that weren’t clear before
  • Too many distractions, like pop-ups
  • Lack of data compliance
  • Customers are not convinced the shop is safe (no trusted badges–see below)
  • Genuine lack of security
  • Too complicated
  • No convenient payment options

8 Essential eCommerce Metrics to Analyze and Optimize Your eCommerce StoreSource: Referral Candy

8. Revenue by traffic source

Revenue by traffic source is a metric that shows what you are earning, and from where. If most of your customers come from one form of advertising, on one channel, you should focus your efforts there, rather than wasting your budget on ineffective channels.

You can even cross-check this metric with where your competitors are advertising. If everyone is focused on one channel, perhaps there is a more profitable opening for you elsewhere.

Final thoughts

It is highly likely that as an online business, you will need to use some form of eCommerce metrics and KPIs, in order to be successful. However, it is important to remember that your focus should try to remain on what is important for your business. Do not spread yourself too thin trying to analyze too many metrics that may be irrelevant to your company.

Try to keep the metrics important to your business in your line of sight, check them regularly and use that information to push your business forward.

Schedule a Call

Make a living buying and selling websites

Sign up now to get our best tips, strategies, and case studies

Leave a Reply

Your email address will not be published. Required fields are marked *

Have a Business to Sell?

Click here to get the process started today.