Creating an e-commerce store has never been easier. With a wide array of user-friendly platforms like Shopify, WooCommerce and Magento available, nearly anyone can get a professional-looking digital shop up and running in no time.
Achieving lasting success, however, is far more complicated.
To maximize revenue and minimize returns, you need to understand how to properly utilize key e-commerce metrics.
More specifically, you need to focus on the most essential metrics that heavily impact store performance.
With that said, here are 10 of the most important e-commerce metrics to monitor.
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1. Conversion Rate
Let’s start at the top.
Nielsen Norman Group defines conversion rate as “the percentage of users who take a desired action.”
They also explain that “increased conversion is one of the strongest ROI arguments for better user experience and more user research.”
Since it has such a huge impact on your profitability, it’s the first metric I recommend tracking.
Here’s the formula for calculating your store’s conversion rate.
(Number of sales / number of users) x 100 percent = conversion rate
So what’s considered normal?
As of Q3 2018, the global average was 2.42 percent.
However, that number for smartphone users was substantially lower at just 1.84 percent.
And while there are a ton of different factors that affect conversion rate, here are a few things you can do to increase it.
Use high-quality, professional homepage design…
…Have a clear, unique selling proposition…Have a clear, unique selling proposition…
…Offer free or discounted shipping…
…Provide a smooth, streamlined checkout…
…And that’s only the beginning.
2. Shopping Cart Abandonment Rate
The average shopping cart abandonment rate is 69.57 percent, according to the Baymard Institute.
I don’t know about you, but I find that a little unsettling.
To think that nearly seven out of every 10 shoppers don’t complete their order—with a good percentage never to return—shows there’s plenty of room for improvement.
So it’s a metric you need to monitor closely.
Here’s how to calculate the shopping cart abandonment rate on your e-commerce store.
1 – (Number of completed purchases/shopping carts created) x 100 = shopping cart abandonment rate
Now the question is, what are the main reasons why shoppers abandon their carts?
The Baymard Institute cites extra costs, having to create an account and a lengthy checkout process as being the biggest deal-breakers.
So once again, it’s a good idea to offer free or discounted shipping.
Having the option of a guest check out for first-time customers is huge.
You’ll also want to keep your checkout process as simple as possible and only ask for necessary information.
3. Amount of Traffic from Traffic Sources
Knowing exactly where you’re getting your traffic from lets you know which marketing strategies are the most effective and what you should invest your time and money into.
The four main traffic sources are:
- Organic search
However, they can also include:
- Paid search
- Other advertising
If you use Google Analytics, you can easily find this data by clicking on Acquisition > Overview from your dashboard.
You can get more details by clicking on All Traffic > Channels.
This will let you know how many pages visitors are looking at per session, session duration and more.
After browsing through this data, compare it to your marketing efforts to see how well each technique is paying off.
For example, if you’ve focused heavily on social media lately, but it’s only bringing in a small percentage of your traffic, you would need to reassess that strategy.
4. Bounce Rate
“A ‘bounce’ occurs when someone visits your website and leaves without interacting further with your site,” explains digital marketing expert Neil Patel.
“Your bounce rate shows you the percentage of your visitors who bounce off of your site.”
If your bounce rate is higher than normal, it indicates that visitors aren’t heavily interacting with your site, and there are potential issues that are causing them to leave prematurely.
So it’s something you want to stay on top of.
To find your bounce rate, click on Audience > Overview on Google Analytics.
In terms of averages, RocketFuel says most bounce rates will be somewhere between 26 percent and 70 percent.
Here’s a graph that illustrates this.
If you were to break bounce rates down into a grading scale, it would look like this:
- 25 percent or lower means something is likely broken
- 26–40 percent is excellent
- 41–55 percent is average
- 56–70 percent is higher than normal
- 70 percent or higher is bad, and something is likely broken
So what are some ways to improve your bounce rate?
Invest in sleek, professional design…
…Offer simple, intuitive navigation…
…And go easy with popups.
5. Number of Returning Visitors
Recent data suggests that it’s five times more costly to acquire new customers rather than retaining existing ones.
Not only that, increasing your customer retention rate by as little as five percent can increase revenue by 25–95 percent.
So it’s certainly in your best interest to encourage repeat business.
And this starts by keeping tabs on what percentage of your traffic is returning visitors.
Just click on Audience > Overview in Google Analytics, and you’ll find this information in a pie chart here.
This will give you a glimpse of how many visitors like your e-commerce store enough to return to it.
And you can take it one step further by calculating the percentage of actual returning customers, which can be done using this formula.
(Number of returning customers / total customers) x 100 = percent of returning customers
So what are some ways you can encourage repeat business?
Offer discounts and promo codes on your site…
…Offer product recommendations based on previous purchases…
Create a loyalty program that rewards repeat purchases.
6. Top Performing Products
I like to equate selling e-commerce products to playing baseball.
Some will be base hits, some will be home runs, and some will be strikeouts.
To maximize revenue and keep your customers happy, you need to have a clear idea of which products shoppers are purchasing most frequently and which ones aren’t carrying their weight.
So I recommend paying close attention to which particular products are selling the most, as well as which categories are bringing in the most revenue.
More specifically, look for your rising stars that are starting to gain traction along with the ones that are outdated and aren’t getting much attention anymore.
This will give you insight into which items you should be promoting most heavily and which ones you should potentially scrap.
One strategy that can help you get the most out of top performers is to place a “bestsellers” section in a prominent location on your homepage.
Here’s a good example from Bliss, a face and body skincare company.
7. Customer Acquisition Cost
TechTarget defines customer acquisition cost as “the fee associated with convincing a consumer to buy your product or service, including research, marketing, and advertising costs.”
This is one of the most important e-commerce metrics to know because it ensures that the time and money you’re investing in acquiring customers is worth it.
In some cases, the money brands end up spending to acquire a customer exceeds the revenue they’re bringing in.
And this isn’t a viable business strategy for obvious reasons.
To calculate your customer acquisition cost, use the following formula.
Total sales and marketing expenses/number of customers acquired = customer acquisition cost
With that said, here are some ways you can lower your customer acquisition cost.
Start a referral program where you reward existing customers by referring to others.
You could also consider using a nice mix of free and paid advertising methods.
For instance, women’s clothing company Yumi Kim can bring in a lot of shoppers through their growing Instagram presence.
Consider using content marketing to generate a steady stream of high-quality leads.
Conversely, clothing retailer Anthropologie is an example of a brand with a fantastic blog that helps pull in a ton of organic traffic.
8. Average Order Value
Increasing traffic is usually the first thing e-commerce store owners think about when attempting to boost revenue.
But one strategy that doesn’t require additional traffic is increasing the average order value.
Here your focus is to increase the amount a customer spends when shopping on your site.
To do that, you first need to know what your average order value is, which can be calculated with the following formula.
Total revenue / number of orders placed = average order value
Once you have that number, you can compare it with your average order value after taking steps to encourage bigger purchases or more purchases from your customers.
Here are some ways to go about that.
Cross-sell with product recommendations…
…Offer free shipping for customers who reach purchase thresholds…
…And create product bundles to encourage buying multiple products in one order.
9. Refund/Return Rate
One area where e-commerce stores are at a marked disadvantage is when compared to brick-and-mortar returns.
Studies have found that at least 30 percent of all products ordered online are returned, while only 8.89 percent of products purchased at a physical store is returned.
That’s more than triple.
So the refund/return rate is another critical e-commerce metric to pay attention to.
Here’s how to calculate it.
(Number of products sold that were returned / number of products sold) x 100 = refund/return rate
Given that the rate is much higher for e-commerce stores than brick-and-mortar businesses, what are some ways you can reduce it?
For starters, you need to be careful that you’re always sending the correct item.
It may sound silly, but 23 percent of returns are simply due to the wrong product being shipped.
Next, you need to use high-quality photos, ideally from different angles so shoppers will know exactly what a product looks like before ordering.
Include as much detail about the product as possible like the materials it’s made from, its dimensions, features, etc.
And if there’s any uncertainty as to its dimensions, it’s nice to place it next to another item for comparison.
Besides that, you’ll want to use great care when shipping because 20 percent of returns are due to a product being damaged.
10. Email Optin Conversion Rate
Email marketing is still pound-for-pound one of the most effective ways to generate high-quality leads.
After all, it has an amazing 3,800 percent ROI.
And considering that 97.58 percent of visitors won’t convert right off the bat, email marketing helps you get the most out of your traffic and prevents fewer leads from slipping through your fingers.
For that reason, I feel that your email opt-in conversion rate is another one of the e-commerce metrics that shouldn’t be overlooked.
Here’s the formula for calculating it.
(Number of emails opted in / number of users) x 100 = email optin conversion rate
In terms of the average rate, it typically ranges anywhere between one and five percent.
And here are some ways you can increase your email opt-in conversion rate.
First, place your opt-in box in a conspicuous location that visitors can’t miss.
Above the fold near the header tends to work well.
And so can a well-placed popup.
Just be sure visitors who aren’t interested can easily exit the popup without any hassle.
Next, only ask for essential information, and keep your form fields to a minimum.
For instance, this opt-in from Australian leisurewear company, Venroy, only requires an email address to sign up.
It’s also smart to offer perks like discounts.
This example from Birchbox is a win-win because it should increase the email opt-in conversion rate, while at the same time motivating shoppers to complete their first purchase.
Global e-commerce sales reached $2.84 trillion in 2018 and are projected to hit $4.88 trillion in 2021.
So there’s huge potential and plenty of opportunities.
But to increase your odds of success, you need to leverage some key e-commerce metrics.
Doing so allows you to improve your decision-making, optimize your store, provide a more rewarding customer experience and most importantly, increase your profitability.
Monitoring the 10 e-commerce metrics mentioned here should cover all of the bases to dramatically improve your store’s performance.
Which aspect of your e-commerce store are you most interested in optimizing?