All your accounting needs

6 E-commerce KPIs You Need to Keep an Eye On

Table of Contents

It’s exciting to think about getting products in front of anyone with internet access.

E-commerce gives you access to a wide range of opportunities and possibilities, whether you want to keep up with the times, start your first business, or do a bit of both.

Website hosting platforms and online tools let you control how your business is shown to customers and how they can interact with it. They also give your data-driven insights that help you make decisions quickly.

The data you get from your online store lets you look at buying patterns, find problems, develop sound business plans, and fix the ones that aren’t working.

But it can be not easy to know which KPI data points to pay attention to, how often they should be checked, and what each tells you. 

We’ll explain why you should spend time and money analyzing the data collected from people who visit your online store, as well as some critical data points that you should keep an eye on regularly.

what are the KPIs for E-commerce?

E-commerce KPIs, or key performance indicators, are results that can be measured and counted. They are used to seeing if a business meets its key goals or objectives. These results, which are given as numbers, are called metrics.

These numbers come from organized data sets that show what happened over a specific period. Then, this information can be used to evaluate a company’s short-term performance and plan for its long-term success.

For example, online stores usually keep a close eye on abandonment rates, which shows how often customers put items in their virtual shopping carts but don’t finish the checkout process.

Overall, e-commerce key performance indicators (KPIs) focus on customer satisfaction, business growth, price sensitivity, and the success of your digital marketing as a critical driver of online traffic.

why are KPIs important for E-commerce?

On a larger scale, certain KPIs can show how well and how things are going with a company’s finances. Even though KPIs aren’t always clear signs of success or trouble, they can help you connect results to a specific cause and figure out where to put your attention.

For example, a high cart abandonment rate doesn’t necessarily mean that your business is in trouble since the Baymard Institute found that the average across all industries is about 69.8 percent. High cart abandonment rates can signal problems with your website or checkout process, but you should look at more specific metrics, like what customers did after visiting a particular web page, to figure out where the problem is coming from.

This way, KPIs can give detailed information about how well specific projects and teams are doing.

For example, the conversion and bounce rates for specific web pages and the amount of time customers spend on them can tell you if the content on those pages is engaging, relevant, informative, and appealing. These website engagement KPIs can also help you ensure that customers can browse and check out without problems.

Multiple teams in your company are responsible for keeping your online store up and running, so it’s essential for everyone to know the KPIs that affect their work.

For example, digital marketers must monitor customer engagement, website conversion, email marketing, and certain financial KPIs to see if their work is paying off. Your sales team should monitor customer engagement, customer satisfaction, and key financial performance indicators (KPIs) to measure their performance.

Investors may even ask you about key performance indicators (KPIs) like the cost of getting a new customer, the net profit margin, and the average order value to figure out how well your business is doing.

KPIs also have the power and potential to affect the most critical decisions in your organization, especially if specific metrics are worrisome or encouraging.

For example, if your net profit margin and average order value go down from one time period to the next, you may need to look into it and talk about how to turn things around. If you wait weeks or months to act, your organization will likely make game-changing decisions based on old information.

Your organization should be checking KPIs regularly and making quick decisions based on data. It would be best if you also made a schedule for tracking and analyzing KPIs so that comparisons from one period to the next are consistent.

How often you check specific KPIs depends on the data set used to calculate a metric, how that data is collected, and whether there is enough information to make good decisions.

For example, metrics that track online traffic to your website can be checked daily, weekly, or monthly to fix problems, keep an eye on how well specific projects are doing, and get a better idea of how trends change at different times of the year.

More specifically, website analytics tools make changes to these numbers every day so you can see the number of visits, pages viewed, and leads daily. Other website metrics, like those for specific marketing campaigns and search engine rankings, can be checked once a week or once a month. This is because it takes time to get a clear picture of these things.

important KPIs you should keep an eye on

The KPIs you should track will depend on your business’s overall goals and the goals that need to be reached at certain times.

Since e-commerce platforms like Shopify and BigCommerce and website analytics platforms like Google Analytics, Adobe Analytics, or HubSpot, can offer a lot of data to track a wide range of KPIs, it’s essential to focus on the ones that are most in line with your business goals and will have the most impact.

Let’s say that one of your long-term goals is to increase organic traffic to your website by 20 percent over the next year. With this in mind, you’ll probably want to keep an eye on KPIs that track customer engagement, your website’s ranking on search engines, and how people found you, such as rankings for specific keywords, bounce rates, and referring domains.

Even though the KPIs you track depends on things like your goals, business model, industry, and stage of growth, there are a few key metrics that every e-commerce business should be keeping an eye on:

net sales

The amount of money you have left over after returns, discounts, and allowances are taken out of your gross sales is called your “net sales.”

Your net sales calculations can also be used to show on an income statement, also called a profit and loss statement, how much money your business made over a specific period.

Gross sales can seem like an easy way to measure the health and performance of your business, but this metric doesn’t take into account any deductions or losses you may have. On the other hand, net sales are a better way to figure out how much money is made by selling products or goods online.

sales dilution rate

The difference between your gross sales and your net sales is your sales dilution. For example, the sales dilution rate would be $146,000 if your business made $975,000 in sales and had a net amount of $829,000 after returns, discounts, and allowances. If you looked at your sales dilution rate as a percentage of your total sales, it would be 17.6%.

This metric is vital to keep an eye on because it can help you find problems or inefficiencies and fix them quickly before they worsen and cost more in the future. For instance, a high number of returns from customers could mean that something is wrong with certain products, goods, or merchandise. It can also mean that customers didn’t like certain items or didn’t meet their other needs. Even though returns can happen for many reasons, figuring out your net sales can at least help you figure out where you lost money and let you know that you need to look into it further.

margin of contribution

Even though it doesn’t appear on financial statements, your contribution margin lets you know if marketing and, in some cases, selling costs are eating up too much of your gross profit.

If you have set aside enough money to market your products, goods, or services online, figuring out your contribution margin can be very helpful. Once you know your contribution margin, you can subtract all your other operational costs and your cost of goods sold (COGS) to figure out your net profit.

Even though it’s essential to focus on brand awareness and ensure that people who visit your online store have a smooth, easy, and pleasant time, these efforts can work against you if the costs go up faster than your gross profits. By keeping an eye on your contribution margin, you can ensure that these extra expenses don’t get out of hand.

basket size

As its name suggests, basket size is the average number of items customers buy when they place an online order at a specific time.

Along with knowing the average number of items in each online order, keeping an eye on your basket size can help you figure out why the average amount customers spent on each order went up or down during a specific time.

By keeping track of your average order value and basket size regularly, you can quickly see how the amount of money you make from sales relates to the size of online orders made at the same time.

Customer Lifetime Value (CLTV or CLV)

Customer lifetime value, or CLV, is the amount you think a customer will spend on your business throughout their entire relationship with you. This KPI can also help you figure out how many customers you need to start making money with your business.

Since CLTV is a measure of profit, not revenue, customer margins should be included in your calculations. If you use CLTV to make revenue projections, none of the costs to keep and support customers over time will be factored into your calculations.

To get a better idea of how much profit you’ll actually make, you need to think about how much it costs to get a customer or how much it costs to sell a product.

use your cost to keep customers to your advantage

Customer retention cost, or CRC, is the total amount of money your business spends to keep customers returning to buy its goods or use its services.

Since it’s often cheaper to keep a customer than to get a new one, your customer retention cost will tell you how much you spend to keep in touch with buyers and make them loyal to your brand.

The cost to get a new customer is a one-time cost for each person, but the cost to keep a customer will keep happening as long as someone wants to keep buying your products, goods, or services.

You can use your CRC to determine if the costs of keeping customers are more than what they spend on your products, services, or goods over time.

Want to know more about KPIs for e-commerce and other important metrics that can help you make better decisions?

Our Countick experts give you a detailed briefing on e-commerce key performance indicators (KPIs) and why they are essential for your business. Our team is here to help if you need someone to do the math or give your business-specific advice.

More To Explore