They say data is the new oil of the digital economy, and that’s true! One of the most important parts of running an online store is analyzing your metrics. Metrics are essential for business growth. They shed light on the best ways to meet customer needs, identify changes in the market, and drive business strategy.
When you’re starting out with your e-commerce business, it’s important to know what metrics you need to monitor. This info can help you see what’s working and what isn't, so you can improve your business and make sure that your efforts are paying off.
This article will teach you how to track the metrics that really matter and what to do with them.
What e-commerce metrics are: Metrics vs KPIs
Metrics allow you to see how well your store is doing from different angles. They help you analyze the performance of every aspect of your e-commerce business, from conversion rates and average order value, to customer satisfaction and merchandise return rates. But what is the main difference between metrics themselves and KPIs? Why are these two terms sometimes confused?
🤔 What do e-commerce metrics help with? They provide you with an insight into how your store is doing — the process itself — and what needs to be improved. The purpose of metrics is to help you understand your e-commerce performance (sales numbers, traffic).
🤔 What do KPIs help with? They serve as an evaluation of your business and can be used to measure success across a number of different areas — specific goals.
How often do you need to track e-commerce metrics?
Tracking your metrics will help you identify time periods when you should restock inventory. It also helps you learn who your most loyal customers are so you can offer them special benefits like shipping discounts or free shipping promotions.
Monthly revenue is just one of the metrics any business should keep an eye on. It tells you how much money you’ve made from your online store in a given month. Other metrics include purchases per order and average order value. Tracking your e-commerce metrics lets you know which parts of your business are working and which ones need some tweaking.
You might be wondering if there’s a specific time when they're most useful.
It depends on the metric. You can track e-commerce metrics:
Weekly — social media engagement, traffic, impressions
Bi-weekly — average order value (AOV), cost per acquisition (CPA)
Monthly — email open rate, multichannel engagement
Quarterly — customer lifetime value (CLV), subscription rate
Types of metrics
Metrics are more than just a statistic; they serve as a way of measuring and assessing the success of a business. You may know what your company's revenue or profits are, but chances are you've overlooked some other types of metrics.
E-commerce metrics can be used to measure many things such as:
Customer loyalty rate
Effective cash flow management
Better user experience
So let's take a look at some of the most common e-commerce business metrics that can help you stay on top of the game.
1. Average order value (AOV)
This metric will help to determine how well your site is doing and understand your customers’ purchasing habits.
The average order value measures the average total of every order placed with your company over a particular period of time. The higher the AOV, the better — unless your margin is too low or you have to spend more on marketing to generate more sales.
📌 Note: There are many factors that affect your AOV; it can be influenced by many factors — discounts, promotions, to name a few.
2. Return on ad spend (ROAS)
This metric lets advertisers know if their money was well-spent or not. ROAS shows the revenue gained from each dollar spent on advertising and marketing.
In other words, it’s a way of calculating how much you’ve gained from your advertising investments. The higher your ROAS, the better.
3. Customer lifetime value (CLV)
Customer lifetime value indicates the total amount of money a business can expect from a single customer over the course of their business relationship.
With a good CLV, you're bound to see more customers and even more money coming.
4. Shopping cart abandonment rate
This metric shows the percentage of shoppers who add items to a shopping cart but then abandon it before completing the purchase. If this number is high, then the website may need to be redesigned, or provide more incentive for people to stay and buy.
The shopping cart abandonment rate is often used as a barometer of how attractive the website is to potential customers.
5. Conversion rate (CR)
Conversion rate refers to the percentage of visitors to your site who have made a purchase.
A high conversion rate can help your bottom line. It's important to measure conversion rates so that you know how successful your site is. You can also use this information to see what changes should be implemented.
6. Average profit margin (APM)
The average profit margin will give you an idea of how much money you’re making on each product sold. The profit margin must be high enough to allow the company to generate positive cash flow and pay debts without relying too much on external financing.
This measure can also be used to assess profitability for a single product or division.
7. Cost per acquisition (CPA)
Cost per acquisition is a marketing metric that reflects the total cost of acquiring customers through an advertising campaign. The total cost includes all marketing expenses including ad design, production, and any other costs related to running the campaign.
A good cost per acquisition means that the number of paying customers coming in through your ad campaign is worth it. If your cost per acquisition is too high, then you might want to rethink your strategy.
8. Gross profit margin (GPM)
This metric shows the difference between the selling price of a product and the cost of making the product. Business owners and investors generally hope to see a high gross profit margin, because it means they are earning more than they spend. When the margin is low or shrinking, you might have a problem.
This concept is important because it helps businesses understand how much money they’ll have to reinvest in their company, which in turn can lead to higher profits.
9. Cost performance index (CPI)
CPI is the ratio of earned value to actual cost and it indicates the financial effectiveness and efficiency of a project. A low number means that a company is not performing as well as it could, but a high number does not necessarily mean that the company will do well due to external factors.
As a business owner, you want to know which of your strategies are working and which aren't. By tracking these metrics, you can make sure that your sales are up and that your customers are happy.
There's one thing to keep in mind, though. Before you start tracking e-commerce metrics, you need to answer the following questions:
What am I trying to measure?
What value am I after?
How does this metric affect my customers and my company?
The data you need to answer those questions may be collected in different ways. While there are people who like using spreadsheets and Google Analytics, there is an easier way — use accounting software. With Synder, tracking these metrics is no longer a problem, as all the numbers are right in your reports. Once you put them into the formulas that were mentioned above — you're all set!
Running a successful e-commerce business requires a thorough analysis of the whole business process. And it can’t be done without tracking relevant metrics. Such small things as knowing how much money you make from each transaction and how many transactions are made from each customer can tell you if your business is healthy or not and save you lots of time, effort, and money in the long term. Let's spend these resources wisely, shall we?