10 Essential E-commerce Metrics You Should Track

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At the early stage of building your commerce business, you may be just fumbling your way through and have no idea what you are doing right or wrong. This is why tracking metrics can guide you through your journey.

In this guide, we delve into 10 important ecommerce metrics you should track and how to improve them.

10 Important Metrics to Track For Your Ecommerce Store

1. Conversion Rate

Conversion rate is one of the most important metrics to track because it is closely related to your sales. A higher conversation rate means more purchases and hence more money is brought to your business. CRR can be calculated using this formula:

Website conversion rates = Number of purchases/ Number of visitors x 100

For instance, 50 purchases are made with 100 individual visitors to your website =
50/100 x 100 = 50%

Average ecommerce conversion rate

The average conversion rate for ecommerce is around 2.5 to 3%. For Shopify stores, the average is slightly lower, at 1.4%. If your conversion rate is lower than the average, you have got room to improve.

Here are some easy ways to increase the conversion rate:

Increase website speed: Most people can’t wait more than 2 seconds for a website to load, so make sure the load time is short.
Simplify your checkout process: Make the purchasing process as smooth and easy as possible. The fewer clicks, the better.
Use high-quality product images: High-quality images help build trust, it’s what differentiates a scammy and doggy website from a legitimate one.
Good product description: Be descriptive and provide all the information about your products to eliminate uncertainties.
Offer free shipping: Most customers are willing to pay for the value your products provide for them, but not the shipping fees. Figure out a way to remove the barrier without hurting your business.

Website conversion rate is important but obviously, it’s not the only metric you should care about. It doesn’t mean much if you have a 100% conversion rate but only 10 visitors.

2. Average Order Value (AOV)

AOV is the average amount a customer spends on one order. It’s important for measuring the effectiveness of your marketing, pricing strategies, promotions, and deals and it helps with goal-setting.

If your business has an AOV of $60, and you target a total revenue of $1000, you then know that you need around 17 customers to reach your revenue goal.

AOV = Total Revenue/ Total numbers of orders

How to increase AOV？

Product Bundling: Giving your customers an incentive to buy more, such as “Buy one, get one half off”.
Offer free shipping thresholds: Free shipping for orders above $50”. Customers are more willing to spend $30 for another product than $10 for shipping.
Upsell and cross-sell like a pro: Recommending other related products
Implement a loyalty program: The rewards can be products that can be only obtained exclusively through the loyalty program.

3. Customer Acquisition Cost (CAC)

Customer acquisition cost measures the average cost of bringing new customers into your business.

There are two ways to calculate CAC according to Amplitude:

Basic Formula:

CAC = Marketing + Sales expenses/ Number of new customers

Some of the expenses include:

Ad Spend: money spent on advertising campaigns
Sales and marketing team salaries: The cost of hiring a sales and marketing team
Content creation costs: Costs for creating content such as costs of hiring a content agency or a team, studio
Sales and Marketing Tools: The cost of the technology your team employs to acquire new customers, such as CRM software, social media management, and email marketing tools.

Fully Loaded Formula:

Expenses included in the basic formula, plus:

Overhead Costs: desks or offices for the sales and marketing team
Cost of Contrasts: Cost of legal service to create contracts for your team
Benefits provided for new customers: Special offers or discounts

If you invest $3000 dollars to acquire 150 new customers, your CAC will be $3000/150 = $20.

How to Reduce CAC?

Understand your target audience: Creating content specific to your target audience can help you avoid wasting resources on irrelevant content and bring in more customers.
Test different marketing channels: Try different social media platforms and figure out which one yields the highest return.
A/B testing: Split test everything. Try different captions, copywriting, and images.
Increase organic traffic: Optimize your website for search engines, and create blog posts, articles, etc.

4. Customer Lifetime Value (CLV)

CLV is the amount of money an average customer will spend with a brand or a company over their lifetime. The calculation for CLV can be slightly complicated and here is the formula for CLV from HubSpot:

Customer lifetime value = Customer value x Average customer lifespan
Customer value = AOV x Average purchase frequency rate

Average customer lifespan = Sum of customer lifespans/ Number of customers

Average purchase frequency rates = Number of purchases / Number of customers
(Over a certain period)

An Easier way to understand CLV:

If you have a store selling skincare products, and your customer spends about $100 (AOV) a month (average purchase frequency rate), the customer value will be $1200. On average, your customer stays with your company for about 5 years (average customer lifespan), your CLV will then be $6000.

Calculating CLV can be complex, so you should consider investing in software or tools for CLV calculations.

How to Increase CLV?

Implement a retention strategy: Email newsletters, loyalty programs, personalized offers – Make it impossible for your customers to leave.
Exceptional customer service: Make them happy and become a loyal customer of your brand
Repeat purchase: Think about subscriptions, refills, or complementary products so they have to keep coming back
Customer segmentation and tailored marketing; One size does not fill all, cater to your customer’s specific needs

CLV is an important metric to track in conjunction with CAC. Your CLV should be higher than your CAC so you are not running your store at a loss. If you spend $20 to acquire a new customer, you need them to spend more than $20 during their relationship with your brand.

5. Cart Abandonment Rate

It is frustrating when your customers are so close to completing a purchase but the transactions never happen. The car abandonment rate is the percentage of shoppers who add items to their cart but never make the purchase.

Cart abandonment rate = Completed purchased/ Shopping carts created

Average Cart Abandonment Rate

According to Baymar Institute, the average cart abandonment rate across e-commerce is about 70%, which means only 3 out of 10 shoppers actually complete their purchases, that’s insane!

Some common reasons are:

High additional costs: Shipping, taxes, and fees
Complicated checkout process: Such as the need to create an account to make a purchase
Lack of trust: Scammy websites?
Just browsing: No buying intention
Price and offers: Found better deals somewhere else
Payment Options: Not enough options are available

Tips to Improve Cart Abandonment Rate

Be upfront about shipping costs: So they won’t feel like they are being tricked
Simplify your checkout process: Make it smoother and easier, and implement Google One Tap
Offer multiple payment options: The more the better
Send abandoned cart emails: It can lead to 10.5% additional sales.

6. Customer Retention Rate (CRR)

CRR is the percentage of customers who come back for more of your products or services.

Within a certain period:

Customer Retention Rate = [(E-N)/S] x 100
E – Numbers of customers at the end of that period

N – Numbers of new customers acquires within that period

S – Numbers of customers at the start of that period

Note: Customer churn rate is the percentage of your customers stop doing business with you, which equals 100 – CRR

For instance, if at the start of this month, you have 1000 customers, you bring it 100 more customers this month and you lose 200 customers at the end of this month, your CRR will be [(900-100)/1000] x 100 = 80%, your customer churn rate will be 20%.

Acquiring a new customer is expensive and requires more effort, which can cost up to five times more than retaining a customer. When you bring in new customers, you want them to continue purchasing your products or subscribe to your services for many years down the track instead of being a one-time customer.

Some strategies to increase CRR:

Excellent customer service: Make them feel important, personalizing your communications in your emails and SMS text, addressing them by their names instead of “Dear customer” and recommending products that are tailored for them
Implement a loyalty program: Give them as many reasons not to leave as possible
Keep innovating and improving your products: Create new products, improve your current products, and stay on the trends
Ask for feedback: Not just asking for feedback but also listening to them to improve your product and service

7. Return on Ad Spend (ROAS)

ROAS is the amount of revenue you generate for every dollar you spend on advertising. Tracking ROAS tells you how well your campaigns are performing, helps you identify those that are ineffective and so you can invest more in those that yield greater returns.

Return on ad spend = Campaign revenue/ Campaign cost

E.g. If you spend $1000 on a campaign and it generates $5000, ROAS will be 5:1, which means for each $1 you invest into the campaign, it generates $5 of revenue.

How do you improve your ROAS:

Understand your target audience: Make the campaigns specific and personal
A/B testing: Find the campaigns that perform the best
Better ad copy and visuals: Make it more appealing and captivating
Use Retargeting: Repeat exposure increases the likelihood of purchase

Calls to action: Tell them what they need to do, it can increase your conversion rates by 161%

8. Traffic Sources

Website Traffic Sources are the channels that bring visitors to your site. Understanding where your customers are coming from is crucial. It helps you determine the most effective channels and identify if there is any issue with other sources.

Main traffic sources to keep an eye on are:

Organic Search: Individuals who find you through search engines
Paid Search: Visitors who click on your paid ads
Social Media: Your Facebook, Instagram, and TikTok followers who click through.
Direct Traffic: People who type your URL directly
Referral Traffic: Visitors who come from other websites that recommend or mention your brand

Tips to optimize traffic sources:

Focus on SEO: On and off-page SEO, keyword targeting, creating blog posts and articles
Diversify your traffic sources: Don’t just focus on one traffic source
Create content that’s share-worthy: Viral videos, posts, etc
Build relationships with other websites: Write guest posts, and introduce your brand to other business

9. Mobile vs. Desktop Usage

What devices are your customers using to visit your store? Although 77% of shoppers are shopping on their phones, you should make sure that that’s the case with your website.

What do you do with the information?

Make your site responsive: It should look good on everything from a phone, and tablet to desktop.
Optimize your images. There is a difference in website load time when a visitor visits your website using their phones versus desktops, which is about 3.5 times longer on phones.
Optimize for mobile: For instance, put your CTAs where people can easily tap
Test on different devices: What looks great on your iPhone might be a mess on an Android tablet.

10. Net Promoter Score (NPS)

NPS is a measure of how likely your customers are to recommend your business to others. It tells you how loyal your customers are, and how satisfied they are with your products and customer service.

How is NPS calculated?

NPS is calculated based on responses to a single question:

“On a scale of 0 to 10, how likely are you to recommend our business to a friend or colleague?” Based on their rating, customers are classified as Promoters (score 9-10), Passives (score 7-8), or Detractors (score 0-6).

NPS = Total percentage of promoters – total percentage of detractors

The result can range from -100 (all customers are Detractors) to 100 (All customers are Promoters). Anything above 0 is considered “good,” above 50 is “excellent,” and above 70 is “world-class.”

How to improve NPS:

Listen to your customers: When a customer provides feedback, listen and act
Do more than you need: Go above and beyond whenever you can.
Address issues promptly: The quicker you solve their problems, the more they will be amazed
Train your team to provide exceptional customer service: Excellent customer service means happy customers

Conclusion:

There you have it, 10 important metrics every ecommerce business owner should track. By tracking these metrics, you can identify the problems your store is facing and make data-driven decisions. Tracking and improving these metrics should eventually translate into increasing profits, which is the main goal of your business. Don’t religiously try to improve the numbers without knowing why.