The end of the quarter is a time to check in on the health of your business and understand how things are going. These days, businesses have access to a huge amount of data from a variety of sources. So how do you know which e-commerce KPIs are the most important?
The number of key performance indicators is impressive, especially if you are new to economics or a small business owner. So I suggest choosing a few KPIs that best reflect the state of affairs and focusing on them.
When choosing the best KPIs for e-commerce, it is important to track both cost metrics, such as customer acquisition cost (CAC), and revenue and customer retention metrics, such as the percentage of returning customers. This combination recent mobile phone number data of metrics will help you assess the health of your business.
There are 12 key performance indicators that e-commerce experts advise you to track. All KPIs are presented in order of importance based on recommendations from professionals.
1. Conversion rate
Conversion rate (CR) shows the percentage of people who make a purchase after visiting your website or product page.
How to calculate conversion rate:
CR = (Количество покупок / Количество посетителей) * 100You can track conversion rates for your they are also more susceptible to damage entire store, or just see the metrics for specific pages or parts of the user journey. You can also view conversion rates for your entire campaign or for each stage of the campaign.
It’s one of five metrics that Peter Morrell, growth marketer at WizardPins, constantly monitors. “A small increase in our conversion rate can lead to a significant increase in revenue on a month-over-month or year-over-year basis,” Morrell says.
Conversion rate is an important metric for e-commerce companies of all sizes. For example, cosmetics brands Chella and Molton Brown, as well as clothing brand Tuckernuck, regularly monitor it. With Google Analytics, you can see how many of your site visitors turn into buyers.
Pro tip: Track conversion rates from each source separately to see where improvements are needed. Compare website conversion rates taiwan data with paid and unpaid social media promotion, as well as other channels. Once you know which ones have the lowest conversion rates, focus on optimizing them.
2. Average order size
Average order value (AOV) is the average amount a customer spends when shopping in a store, or simply put, the “average check.” A higher AOV means more profit per order, since you only incur operating costs (such as packaging and shipping) once.
How to calculate the average bill:
AOV = Сумма полученной выручки / Количество покупокUltimately, an increase in the average order value leads to an increase in profits and, as a result, business growth, so it is important to track this parameter and work on its growth.
AOV can also help estimate the size of a customer’s account. Morena Simatic, VP of Marketing and Growth at OptimoRoute, comments: “The value of average order size is that it shows whether we are attracting large or smaller customers. It all comes down to the 80-20 rule, which states that 20% of customers generate 80% of the revenue.”
For more advanced analytics, it is necessary to divide the average check into segments “high”, “medium”, “low”, and buyers into cohorts and work on increasing the indicator using various approaches.
Pro tip: Plot a scatter plot of orders each month to see if outliers are skewed by the average order size. Outliers can have a significant effect when order sizes are relatively small. A scatter plot can help you see that AOV is indicating a trend that doesn’t actually exist.
3. Gross margin
Gross margin, also known as gross profit margin, measures profit after subtracting operating expenses such as marketing and overhead. It shows how profitable your business is, taking into account both revenue and expenses.
How to calculate gross margin:
Gross margin = Выручка – Затраты (COGS)“At the end of the day, the only thing that matters is that you’re making more than what it takes to run the business,” Morrell says.
By tracking gross profit, you may see that your cost of goods sold (COGS) is too high or your prices are too low. If so, you will need to adjust your prices or make other changes to make your manufacturing and sales processes more efficient.
Pro tip: Look at the gross profit margins of individual products as well as the overall company profit margin.
“It’s normal for some products to be low-margin, but you need to be aware that there is little or no profit on those items,” says Meredith Ball, chief marketing officer at Automation Intellect.
4. Gross income
Gross revenue is the total amount of sales of goods and services over a given period. The term is synonymous with the colloquial terms “turnover” or “revenue.” Track this metric every month to assess the growth of sales processes and their effectiveness.
Gross Revenue is another metric in WizardPins’ top five. Morrell notes, “…our fixed costs tend to be the same across all product categories. This makes revenue a simple and easy benchmark for determining the overall health of the business.”
If your expenses vary wildly from month to month or across product categories, get a better picture of your business’s health by tracking cost-based ecommerce KPIs like gross profit margin.
Pro tip: Track gross revenue each month along with your sales numbers. Laura Moss notes, “Sales numbers were especially important when we [Adventure Cats] were working with a fulfillment company because we had to maintain a certain sales minimum.”
Even if you don’t work with a fulfillment company, tracking your sales numbers will show you whether your gross revenue growth is due to an increase in the number of customers or an increase in order size.
5. Customer Retention Rate
Customer Retention Rate (CRR) shows the percentage of customers who make a repeat purchase. This metric helps measure customer satisfaction and quantify the success of customer retention strategies.
Retaining customers is cheaper than acquiring new ones, and repeat customers tend to spend more and have a higher customer lifetime value.