Key Performance Indicators or KPIs are measurable values that can confirm how effectively business milestones are progressing. A performance indicator is a quantifiable measurement to gauge performance relative to some goal, for example, increased site traffic and sales by 30% in the next quarter.
The idea behind KPIs is to narrow performance indicators to two or three points to give enterprises a clear picture rather than focusing on all indicators which might be too chaotic.
KPIs demonstrate the organization’s performance. What do they convey? These indicators show how well an individual or team is performing to accomplish business goals.
Ecommerce metrics are useful to see how business is faring at the present moment. They help companies recognize in which direction to proceed and accomplish targets. Enterprises can monitor a number of Ecommerce KPIs to analyze the progress of their strategies and tactics, from sales, marketing to customer service for their online ecommerce store.
Here are some ecommerce statistics to guide your strategy.
KPIs should be chosen and monitored on the basis of unique business goals. Certain KPIs support some goals while they are irrelevant to other enterprises. For example, a B2B ecommerce business will have different KPIs than B2C business. KPIs should differ based on the goal being measured, it is possible to consider a set of common performance indicators for ecommerce.
The basic pointers for KPIs, they MUST :
- Create an impact
- Be measured accurately
- Be in real-time
- Be Actionable to make improvements
Here Are 6 KPIs To Consider For Ecommerce
1. Shopping Cart Abandonment Rate
The shopping Cart Abandonment Rate determines how many users add products to their shopping cart but do not check out.
Enterprises craft an offer, capture consumers’ attention, nurture relationships and almost get them to hit the buy button when they opt to abandon their cart. This is actually a very common occurrence.
According to a September 2019 survey by Statistic, the first half of 2019 showed 82.24% of online retail orders were abandoned and not converted into purchases.
Jewellery had the highest cart abandonment rates of 88.6% out of other measured retail categories. What are the reasons why people abandon their carts on your B2B ecommerce store?
Reasons include unexpected shipping costs, website errors, complex check out processes, a declined card, and visitors not buying products at the last moment.
The lower the shopping cart abandonment rate, the better. If the cart abandonment rate is high, there may be too much friction in the checkout process which needs to be simplified.
2. Conversion Rate
The conversion rate refers to the rate at which users on the e-commerce site convert to buyers. To calculate this, divide the total number of visitors to a site, page, category or selection of pages by the total number of conversions.
Make sure the landing pages are effective with a strong call to action. The call to action can be anything, such as signing up for an email newsletter or making a purchase. The pages go beyond looking pretty and instead should do their job to encourage more people to buy products.
It determines how effective the webpage is to encourage visitors to take action. If the landing page receives a lot of traffic but has very low conversion rates, look at testing ways to improve the page and encourage more conversions.
Read this article on ecommerce pricing strategies
The average conversion rate for online shoppers worldwide is between 2.89% and 3.31%. This means that out of every 100 visitors, two or three will convert. Think it over and make small tweaks which can result in big gains.
This is how to calculate the conversion rate
(No. of Conversions ÷ No. of Leads) x 100 = Conversion Rate
Read this to improve your ecommerce conversion rates.
3.Cost Of Customer Acquisition
Customer Acquisition Cost (CAC) is the money it takes to retain a consumer. This is measured by looking at the marketing spend and how it breaks down per individual customer.
It is imperative to see and plan how many consumers the retail store wants to acquire in a certain period and then allocate marketing budgets appropriately.
Sales can double or triple by shelling out more money for marketing. However, if CAC increases too, profits decrease despite making more sales.
Understand how much it costs to transform a prospect into a paying customer else business may collapse without the enterprise having a clue as to why.
Calculate customer acquisition cost by
(Amount of Money Spent to Acquire Customers ÷ No. of Customers Acquired = Customer Acquisition Cost)
4.Customer Lifetime Value
Customer Lifetime Value (CLV) refers to the average amount of money spent by customers per order. An increase in AOV can be one of the easiest ways to boost revenue. Receiving more money from each customer can absorb higher customer acquisition costs and still maintain profits.
Calculate average order value in a given time frame (Total Revenue ÷ Total No. of Orders = Average Order Value)
5. Average Order Value
Average Order Value (AOV) is the average amount of net profit that each customer is predicted to contribute to a business over the entire length of the relationship. Determining how much a customer is worth to the business is essential to calculate.
This KPI helps to understand the return on investment (ROI) and how well the business retains customers. This is crucial to consider that a 5% increase in customer retention can increase company profits by 25-95%.
Gaining new consumers is between 5 to 25 times more expensive than retaining current ones. Repeat customers spend 67% more than new customers.
6. Gross Profit Margin
This KPI is a little more complex to figure out. Before using this KPI, calculate three other averages from the enterprise’s metrics. These include:
Average order value.
The number of times a customer buys per year on average.
Average customer retention time in months or years.
The Gross Profit Margin culminates into how much money is actually made by presenting the difference between your revenue and profit as a percentage.
Understanding gross profit margins will help you gauge the health of your business.
Arriving at a healthy gross profit margin for an e-commerce business is still not an easy metric to calculate.
It is calculated this way
(Revenue divided by revenue * 100 = Gross profit margin percentage)
Learning about relationships between core components of business helps make informed, objective decisions that have an incredible impact on the business.
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