Opening an e-commerce store is easier now more than ever due to the proliferation of e-commerce platforms. When making decisions for your e-commerce store and identifying areas for growth, it’s best to consult the data behind your shop.
There are a multitude of metrics that you can identify when diving into how lucrative your e-commerce store is. You’ll want to determine what KPIs are crucial to measuring the success of your business. You may have metrics that are important to the specific industry your business falls into, but the metrics listed below are important to identify and measure for all online stores.
Conversion rate
The conversion rate of an e-commerce store is the percentage of visitors that turn into paying customers.
You can measure the conversion of just about anything from overall customer conversion to button clicks on your homepage to sale conversion on a single product page. Conversion rate matters because it is the most important metric to focus on when measuring success and increasing sales for your store.
How to calculate it
To find your conversion rate for your e-commerce store, take the total number of conversions (or number of sales) and divide it by the number of site visitors. You can find this rate for any specific period of time. Just make sure that the period of time is the same for both conversions and site visitors.
Average order
The average order amount is simple. It’s just the average value in each purchase from your site.
Increasing average order rate is an easy way to increase sales. Consider offering discounts for bundle purchases or providing free shipping for a higher total purchase amount (i.e. your order ships free with a $75 purchase!). This will compel your buyer to spend more to earn the benefit of free shipping – a win for them, a win for you.
How to calculate it
Take the total sales revenue of your business and divide it by the number of orders.
This can be calculated for a short period of time or the lifetime of your business.
Customer lifetime value
Your store’s customer lifetime value is the total amount of revenue that you’ll bring in from a typical customer during their lifetime.
Customer lifetime value is a great metric to assist in making other decisions for your business. For example, if you have a low customer lifetime value amount, you shouldn’t spend too much on acquisition costs or retention.
How to calculate it
Calculating customer lifetime value can’t be done until you have had repeat purchases from customers.
To calculate, follow these few steps:
- Find the average purchase value by taking the sales revenue from your store in a specific time period and divide it by the number of purchases during that time.
- Calculate the average purchase frequency rate of your customers by dividing the number of purchases during the same period of time by the number of unique customers.
- Find customer value by multiplying the average purchase value and the average purchase frequency rate together.
- Calculate the average customer lifespan by averaging the number of years a client continues to purchase from your company.
- Find customer lifetime value by multiplying customer value by the average lifespan of a customer. This number is an average and represents how much you can expect to receive from a single customer.
This number can change throughout the lifespan of your business and is dependent on product and service. In order to maximize it, ensure that you are making your customers happy so they have a reason to return.
Acquisition cost
Customer acquisition cost is the amount that it costs for you to acquire a new client.
To make money off of your customers, it’s important that your customer acquisition cost is as low as possible. It must be lower than your customer lifetime value.
How to calculate it
To calculate the acquisition cost of a customer, take the total amount your business spends on marketing in a defined period of time and divide it by the number of clients acquired during the same time.
Revenue from traffic source
Revenue from traffic source is found by identifying what avenues of traffic your revenue is stemming from.
Some of your traffic streams will have higher conversions than others. Identifying which areas lead to higher conversion rates can lead to higher conversion can signal where you should be spending more of your advertising budget.
How to find it
In order to find the revenue from traffic source, you’ll need to use analytics software like Google Analytics in order to track it. Analytics from Google has real-time reporting that can allow for you to make small changes in your advertising spending to see what works and what doesn’t.
Shopping cart abandonment rate
Shopping cart abandonment rate is the percentage of visitors who add items to their shopping cart but do not follow through with making a purchase.
Shopping cart abandonment directly affects your e-commerce store’s sales. No matter what you do, it’s impossible to eliminate this from occurring to your store. However, to maximize your sales, you’ll need to decrease the abandonment rate as much as you can. Try simplifying the checkout process or use remarketing tactics, such as cart abandonment emails, to convert these potential clients.
How to calculate it
Finding your shopping cart abandonment rate is as simple as dividing the total number of purchases in a period of time by the number of shopping carts that were created. Take that number and subtract it from 1 to get your abandonment rate.
Your e-commerce platform may provide you with this statistic already.
Email opt-ins
Email opt-ins is the number of people who have signed up to receive email communication from your store.
Email communication with your customers and potential customers is an excellent way to drive traffic, increase sales, and promote specific products or promotions. Not only is email communication a way to foster brand recognition, email marketing is proven to be successful with a $44 return on investment for each dollar spent. In regard to email opt-ins, you should try to build your list up with as many engaged and interested individuals as possible.
You’ll want to ensure that your list is large and engaged. Track your email engagement through open rates and click through rate.
How to find it
To find the number of individuals signed up for your emails, you can check the analytics in your email marketing tool for the number, or simply count the number of individuals who have signed up through your form. From here, you should also pay attention to the unsubscribe rate as well – you’ll want to keep this number as low as possible.
Return rate
Return rate for your e-commerce store is the number of purchases that are returned in comparison to the number of orders placed.
Keeping your return rate as low as possible is important for customer retention. Make sure that customers are satisfied with your products and aren’t surprised by anything when they receive your product. A low return rate can signify customer satisfaction and can lead to word-of-mouth referrals.
How to calculate it
It’s simple to find the return rate on your e-commerce store. Simply take the number of returned orders and divide it by the number of total orders from your store during a specified period of time.
Customer retention rate
Customer retention rate is the percentage of customers who make a repeat purchase from your business during a specific period of time.
Retaining your existing customers is cheaper than acquiring new ones. Therefore, you’ll want to try to maximize the retention rate by convincing customers to become repeat customers.
How to find it
In order to find customer retention rate, you’ll need to decide on the period of time that you are measuring. After that, you’ll also need three other numbers: the number of total customers at the end of the period, the number of new customers acquired during the period of time, and the number of customers at the start of that period of time.
Subtract the new customers from the number of customers at the end period. Then, divide that number by the number of customers at the start of the period.
What about the others?
With over 1.66 billion digital buyers in 2017, the e-commerce industry shows no signs of slowing down anytime soon. These metrics are a great starting place in measuring the success of your e-commerce store. However, as you continue to grow and change, make sure that you’re identifying other statistics to measure that are more specific to your industry.