7 Vital eCommerce Metrics You Should Be Measuring
Whether you’re a business in education, science, commerce, or any other field, you will always need quantifiable data, or generally ‒ metrics. Metrics are typically used to measure your performance and make reliable decisions, especially for digital marketing and eCommerce.
In comparison to physical marketing efforts, behaviours and actions in cyberspace are clearly visible and measurable. You can track thousands of metrics, but only a few of them can be turned into helpful insights that help you and your business grow.
Furthermore, venturing in eCommerce without tracking your metrics is like driving with eyes closed. And if you don’t monitor your performance and progress over time, then perhaps your business would bite the dust.
But what exactly are eCommerce metrics? How do they differ with Key Performance Indicators? These questions (and their answers below) will help you identify the eCommerce metrics you should measure and why they are important.
Metrics vs. KPIs
Before we proceed to the list, let’s talk about the difference between metrics and KPIs.
The easiest way to differentiate the two is that KPIs are metrics, but not all metrics are KPIs. This means that you don’t need to monitor thousands of metrics to get insight into your performance. All you need to look out for are the Key Performance Indicators or KPIs as they are the ones that reflect your performance that are in line to your key business goals.
Elements of a Reliable KPI
The following are the key elements you should look for when setting your business KPIs:
- Main objectives ‒ This includes brand awareness, conversion, sales, traffic, or a blend of specific targets
- Baseline ‒ This is a set of critical data used to compare the metrics you want to track
- Growth forecast ‒ This determines how much improvement you would expect over time
- Strategy ‒ Different digital marketing activities can help you boost your sales. This includes newsletters, social media promotions, and other ingenious strategies.
- Time period ‒ This determines how long it will take to achieve the above objectives
- Channels ‒ Social media, banner ads, email marketing, and customer-centred web content are examples of channels you can use to implement your strategies.
eCommerce Metrics You Should Measure
1. Conversion Rate
The percentage of the number of sales over the number of visitors is the conversion rate. In other words, it is the amount of visitors who have completed a goal on your website. Moreover, a higher conversion rate implies a more successful marketing campaign.
The average eCommerce conversion rate across industries is between 1% to 2.7%. Simply put, even with the critical elements in play, you can expect to make around 20 sales out of 1000 website visitors.
Conversion rates are vital to measuring the effectiveness of your marketing strategies. Besides, monitoring it is easier using analytics tools to automatically calculate the conversion rate.
2. Gross Profit Margin
Gross profit margin, also referred to as gross margin, is the metric used to monitor a company’s financial health. This is determined by computing the money left from sales after subtracting the operating costs.
The key to improving an eCommerce store is not just focusing on revenue, but also on profit. Adjusting your business model, such as implementing free delivery, can help you generate more money. However, subtracting increased overheads and operating costs will leave you with less profit.
Thus, it is essential to keep track of your gross margin metric to optimise your profits monthly. It is okay to implement free services and to have low margin products, but it is not good to turn a blind eye on their impacts for your store.
3. Cost of Goods Sold (COGS)
The cost of goods sold (COGS) is the total expenses needed to acquire a product or provide a service that you sell online. This metric helps determine the markup percentage of your products or services and is a key element in imposing competitive prices.
Moreover, even if your products are flying off the shelves, you still need to make a significant profit from all of them. That’s why the cost of goods sold is an important metric to track since it directly reflects how much profit your eCommerce store makes.
4. Average Order Value (AOV)
The average order value is basically the average amount spent on a single purchase in your eCommerce store. Your average order value is, quite simply, the average value of each sale. It can be found by dividing the total amount of all sales by the numbers of carts.
It is crucial to keep an eye on this metric because it can give you valuable insight to determine how much you are getting out of every dollar you spend to earn a new customer.
Among other things, the average order value is vital in pricing decisions, understanding customers’ buying habits, and finding the best marketing channels to focus your customer conversion efforts on. You need your customers to spend as much as possible, and if you know your average order value, you can find ways to raise it.
But how do you drive this metric up?
- Compliment products together to encourage customers to spend more on discounts for bundled items
- Upsell products with premium versions and additional exclusive features to your customers
- Have a recommended section within your cart page to attract customers in buying related products
- Offer free shipping for higher cart checkout values (e.g., If your AOV is $46, give free shipping at $50 total cart amount to tempt customers to spend more)
- Gear up on seasonal promos and holiday sales
5. Cart Abandonment Rate
Inevitably, some shoppers would add items to their cart, then leave your online store without buying anything. Different eCommerce studies show that about 70% of online shoppers abandon their carts. However, you can still recover some of that revenue.
Cart Abandonment Rate is an important KPI that reflects your eCommerce competency and consistency. Shoppers might abandon carts due to:
- High pricing or shipping costs
- Website errors
- Complicated checkout processes
- Declined credit cards
- Undecided visitors who are simply browsing the site
Therefore, keeping your abandonment rate monitored can help you fine-tune your eCommerce strategies to lower it as much as possible. This is made easier with the use of cart abandonment tools from online analytics services.
Additionally, these are the most helpful ways to reduce your cart abandonment rate:
- Design a simple and smooth checkout process
- Use remarketing strategies to attract would-be customers back to your store even after they cancel their cart
- Send cart abandonment emails that prompt the shopper to return and complete their purchase
6. Website Traffic
Website traffic is among the most vital metrics that will determine the success of an eCommerce site. As digital marketing strategies grew more intuitive, analysing website traffic takes a more in-depth approach.
Instead of just tracking the total number of visits to a website, you should measure valuable traffic metrics such as:
- Pageviews per visit ‒ the average number of pages that visitors open on your website
- Referring traffic source ‒ channels outside search engines that direct traffic to your eCommerce site, such as social media and banner ads
- Time on site ‒ the longer the visitors browse on your website, the better for your eCommerce business. This is an indicator of how much visitors like your web content
- Unique vs. returning visitors ‒ if your site is capable of attracting more new visitors than returning ones, the chances of conversion will be high, especially with a user-friendly web design
- Bounce rate ‒ reflects the percentage of visitors that leave your site after viewing one page. This is not necessarily bad but can affect your site’s effectiveness if conversion needs multiple pages
7. Email Opt-ins
One of the most powerful tools eCommerce sites can benefit from is email marketing. Mailing lists give you another pipeline to drive traffic so you won’t entirely rely on other platforms such as social media and search engines.
Furthermore, email marketing delivers a significant return of investment, so you’d want to get as many people on your mailing list as possible. That’s why it is crucial to track your total email opt-ins and individual opt-in rates of different forms on your website.
Tracking email opt-ins can be done in two ways:
- Use the built-in analytics in your email marketing tool
- Let digital marketing professionals like G Squared develop your customer relationship management (CRM) and email marketing
Getting familiar with vital eCommerce metrics will help you determine how well your online business is performing as well as improve the weak areas. Additionally, these helpful metrics can be used as benchmarks to fine-tune your marketing strategies and further enhance your store’s overall performance.
Running a successful eCommerce site will require your attention in many ways — from building and designing a website, establishing your brand, creating products, and providing high-quality customer service. Doing all of these at once can be challenging, but G Squared is here to lift your burden.
April 27, 2020