Key metrics to track for your online store

 “Most businesses are data rich, but information poor.”

says the author of Web Analytics 2.0 who is also the chief digital marketing evangelist at Google: Avinash Kaushik. However, with digital analytics that track key metrics, businesses can obtain real-time data for their e-commerce. 

A business metric is a quantifiable and defined parameter one can use to track and likewise assess the performance of their online store. The main purpose of the assessment is to track cost management and how much progress you are making as a business towards your short- and long-term goals. A few popular e-commerce metrics include conversion rate, average order value, cart abandonment rate, traffic sources. 

Numerous successful e-commerce businesses have reported that reliance on tracking deliberate metrics can help you make important sales and any firm-related decisions. Businesses that track such data in real-time understand how to make themselves grow. There is a whole host of metrics out there that can be tracked, however, not all of them directly represent the state of your business. Quite often, businesses get wound up tracking vanity metrics that are not great indicators for assessing business performance. Such metrics would include page views, social media “likes” or unqualified leads in the sales category. Only a few of these metrics can help gauge actionable insights that will help grow. 

How to Determine the right Metrics

There is no defined way or checklist to track the performance of your business. Some indicators will for better for you than others. Your unique business would require a set of key metrcis that fit your business. This is where key performance indictors come in. Like Klipfolio’s Jonathan Taylor puts it “There are tons of metrics out there. Clicks. Percentage of new sales. Subscription revenue. But not all of them are KPIs.”

Business metrics track the performance of any business process. On the contrary, Key Performance Indicators or KPIs are specific metrics that demonstrate the effectiveness at achieving specific business objectives. For instance, a common metric digital brands track would be traffic that is generated from paid search, however, a KPI would focus on the number of qualified leads that are generated from paid search. 

Driving growth in your e-commerce business requires a few key components:

• Setting measurable goals 
• Identifying the metrics necessary to track those KPIs
• Monitoring performance and making adjustments as required

Essential KPIs to Track 

Identifying the most impactful indicators can be tricky but the following are important characteristics that KPIs should possess in order to provide actionable insights: 

• Affect the bottom line or the net income: As mentioned earlier, KPIs must directly impact the bottom line of your business and play a significant role in accomplishing your goal. 
• Can be measured accurately: The KPIs for your business wil be simple and easy to track. The accurate tracking of the data is crucial to create an indicator. It will be most favourable to obtain well-defined and quantifiable KPIs. 
• Time-bound: The most effective KPIs make use of real-time KPI results and real-time data. You can use them to implement appropriate strategies. You can use old data and combine it with real-time data to track trends.
• Actionable: The main purpose of KPIs is to help your business plan improvements you can implement.  

Onto the crux of this article, the key performance indicators that will be discussed include: 

1. Sales Conversion Rate: The sales conversion rate is the number of conversions divided by the total number of visitors. In other words, it is the percentage of visitors who make a purchase. So, if an e-commerce site receives 400 visitors in a month and has 100 sales, the conversion rate would be 100 divided by 400, or 25%. Additionally, a conversion can be any desired action that you want the buyer or the user to take. This can include anything from a click to making a purchase and becoming a customer. Ecommerce websites have various conversion goals and each one of them with have its unique conversion rate. 
2. Average Order Value: The average order value is the measurement of the typical spending of the customers on a particular order from your business. It can be calculated by dividing the total revenue in time by the total number of orders during the said period. If you sell $100,000 of products today and that revenue was created by 500 orders placed by customers, then your AOV is 100,000/500 or $200 per order. Klaviyo, an Email marketing company reported data covering several metrics (open rate, click rate, conversion rate, and Revenue per recipient) that related to traffic driven by different kinds of emails. So, the AOV for traffic from general email campaigns (when compared with emails sent based on specific triggers like sign-up) is $99.80, with a difference of $103.63 between Garden & Home Good ($142.43) and Arts & Crafts ($38.80). This data was crucial in analyzing what email marketing strategy should be used extensively. 
3. Cart Abandonment Rate: This is one of the biggest nightmares of an e-commerce business. The higher the rate, the more alarming it is since you lose sales from cart abandonment. Baymard Institute found that the overall shopping cart abandonment rate for online retailers ranges from 60% and 80%, with an average of 67.91%. Additionally, the best-optimized checkout process has an abandonment rate of 20%. 

There are several possible reasons for why this could be happening, the most common being:

• Unexpected additional fees or high shipping costs
• No guest checkout option is available
• A long checkout process that extends beyond a single page
• Payment security concerns
• Overall poorly structured user experience

The Baymard report explained that if we pay attention to the combined e-commerce sales of $738 billion in the US and EU, the potential for a 35.26% increase in conversion rate translates to $260 billion worth of lost orders which are recoverable solely through a better checkout flow & design.

4. Customer Retention: This rate measures the growth rate of the existing customers. So, the number of consumers a firm can retain over a given time. This percentage shows the number of customers who remain loyal to the brand. Thus, if a business starts a financial year with 100 customers and loses 10 of them, the brand has a retention rate of 90 per cent. But remember to account for new customers too so they don’t throw off your data. Case in point, if you start with 100 customers, lose 10, but then gain 40, that doesn’t mean you have a 130-per cent retention rate. If you think you can simply offset churn by acquiring new customers, you can wind up ignoring serious flaws in your business.

Calculate customer retention rate with this formula: [(E-N)/S] x 100 = CRR

• Start with the number of customers at the end of the period (E)
• Subtract the number of new customers gained within the period (N)
• Divide the result by the number of customers at the beginning of the time period (S)
• Multiply by 100

This data is crucial because an e-commerce business that understands the right metrics has an easier time aligning marketing and customer service with its larger retention strategy.

5. Bounce Rate: Bounce rate is the number of people that land on your website and who navigate away instantly without browsing through any of your products. Unfortunately, the average bounce rate for e-commerce is relatively high, at 45.7 per cent. So, if your business website has an unusually high bounce rate, this could mean your users are dissatisfied with the website experience. Well, in June 2017, SEMrush conducted a prominent Ranking Factors research, based on the scope of 600,000+ keywords, to analyze what impacts search results. The research ranked bounce rate as the 4th most important factor. 

Thus, to lower the bounce rate, you can: 

• Produce great content and use internal linking to get people interested in clicking through to other related pages on your website. These are also called triggers. 
• Deliver your content consistently. Be reliable, helpful, and memorable.
• Use effective CTAs.
• Provide a great user experience: minimize pop-up ads, audio, or automatic video playback.

Conclusion

As discussed earlier, there is no merit in observing a ton of indicators if it’s not deliberate and has a meaningful impact long-term for your eCommerce business. You need to identify your key performance indicators that consistently have an immense impact on your business goals. Understanding and consistently assessing the relationship between the core indicators of your business will allow you to make well-informed and objective decisions.