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Ecommerce Metrics You Should Consider on a Business Level

Ecommerce Metrics

The most important goal of a business is to sell its products or services. While brick and mortar companies keep an eye on their numbers with the help of a sales team, an e-commerce business must analyze sales through various metrics.

These numbers are the lifeblood of an e-commerce store. Many elements, online and offline, come together to make an e-commerce store a success. There are three basic growth levels in an e-commerce store:

  • Getting new customers
  • Getting existing customers to spend more
  • Giving existing customers an experience they will love

Google Analytics is a tried and tested way to calculate metrics for websites. Ideally, you should monitor the stats every day and keep an eye on what works and what doesn’t. This will give you a good sense of where your business stands. You will also be able to solve problems more efficiently.

To learn from the masters of online selling, let’s take a look at Amazon. The retail giant has tens of thousands of product pages. Their stock has gone up 397 percent in the last five years. Amazon tracks performance against 500 measurable goals; 80 percent of these relate to customer satisfaction.

Their algorithms analyze past spending habits of customers to create future recommendations. Amazon has started to personalize the site for every user and creates amazing user segments like “soccer moms” and “gearheads.”

According to Forbes, Jeff Bezos is even stricter about what customers don’t want. They hate delays, defects and out-of-stock products, so the metrics patrol at Amazon constantly tracks such numbers, looking to make them as rare as possible. Even the tiniest delay in loading a Web page isn’t trivial. Amazon has metrics showing that a 0.1 second delay in page rendering can translate into a 1% drop in customer activity.

This is the sole reason why Amazon continues to be one of the best businesses in the U.S. and worldwide. They want to make the site perfect for customers. Most of their metrics revolve around making the customer happy.

Here are some of the most important e-commerce metrics you should notice on your e-store:

Conversion rate

Conversion rate is the percentage of clients on your site who proceed to make a purchase.

By visitors

To determine the conversion rate of your website, just divide the number of visitors by the number of people who made a purchase. An e-commerce business must constantly measure conversion rates to find out its effectiveness.

Today, the average conversion rate across the web for e-commerce is 3 percent. Your goal should be to reach this statistic, or better yet, surpass it. In order to do that, you can try various methods on your website that can result in you achieving a higher conversion rate.

By products

You can also measure the conversion rate by products. If you are an e-commerce business with a small number of products, then this method may not be suitable. Alternatively, if you sell a large number of products, then it is a good idea to find out the conversion rates of specific products.

This will allow you to find out which products convert the most customers. Displaying those products exclusively on your landing page will result in a higher conversion rate. In the long term, you can even add these products to your marketing strategy.

 

Website Traffic

This is more important when you are just starting out as an e-store. It becomes crucial to constantly monitor website traffic. The traffic pouring in to your website tells you everything about your current situation.

You can calculate website traffic by adding up all visitors to your site, from organic, paid, referral, direct, social and email. Invest as much time as you can in non-paid traffic sources to get organic traffic on your site.

Social media is one of the best ways to do that. The promotion you do on your social media can refer an organic audience to your e-commerce pages. PR gigs also help spread the word about the site.

User segments

To collect information about your target audience and multiple buyer personas, you should create user segments. Location, budget and preferences are some major segments you can calculate. The information collected by zooming in on a user segment is a golden opportunity.

For example, you might be a B2C store, but may also have a reseller on distribution. These resellers are identified when they log in, and their choices or preferences are calculated as well. Thus, it is necessary to create a separate segment for these resellers to minimize the chance of selling a large order for a cheaper value.

Below is the screenshot of a site which sells educational items. They segment their customers based on postgraduates and undergraduates. They counted that postgraduates are 19 percent of the total visitors, but their transactions make 30 percent of revenue. If the store wasn’t segmenting, they would never know the ideal customer who buys more.

Custom Segment

Transactions

 Keep an eye on daily or weekly transactions. Combine the transactions to your Audience, Acquisition and Site Content report. You will get a fairly accurate idea of the visitors who are transacting. You can use this data to correlate other activities by visitors, such as page views and events. The concluded data will give you the complete picture of e-commerce completions on your site.

 

Gross profit margin

Divide your gross profit by your total revenue generated. In this example, you would divide $1,800 by $11,800 to get 0.15. Multiply the result from Step 2 by 100 to find the gross profit margin percentage. Finishing the example, you would multiply 0.15 by 100 to find that your gross profit margin equals 15 percent.

This is the margin you get to keep whenever you receive an order. Moreover, the GP margin is even more important when you are a new business, because this is how you decide the threshold value for your business.

Get those margins higher, and you can create a bottom line for your business. The higher your gross margin, the easier it is to increase the bottom line. Check the pricing and margins per order regularly in order to analyze your gross profit margin.

When the business grows, you can create a monthly report of the gross profit margin. When you introduce new products, check their profit margins to see whether the margin is in line with your business or is taking the margin down. If the profit margin is creeping down, check the obvious causes like discounts and sales.

 

Cart abandonment rate

If your conversion rate is low, despite taking all measures, you need to check out the number of customers who had an inclination to buy, but didn’t buy the product in the end – and, more importantly, why they left the cart.

Shopping cart abandonment is a common issue in e-commerce. If you find out why customers are abandoning the cart, you can work on that specific area. This metric indicates the number of clients who added products to their shopping cart, but didn’t go through the checkout procedure. Your business needs to have a low cart abandonment rate at all times.

For example, if your cart abandonment rate is 80 percent, it means that 80 out of every 100 people are leaving your site without buying. The cart abandonment rate also shows how close you got to making a sale before the client moved out.

It hurts your business even more if those visitors were the result of a paid ad. Putting an item in the cart typically means that the client intended to buy. Therefore, lowering your cart abandonment rate by simplifying checkout, adding discounts and making navigation easy will improve your conversion rate.

 

Number of returning customers

This is the percentage of customers who return to your website to make another purchase. Retaining customers is the key to growing your business by trust and efficiency. Businesses thrive on their repeat customers.

This metric matters a lot also because it indicates the popularity of your business. You can calculate the number of returning customers by dividing the completely new customers in a given period of time (e.g., September 2016) by the number of customers who return to your site within this time and make an additional purchase.

You can improve the number of repeat customers by doing everything possible to improve their experience. One way would be to use email lists and newsletters to send personalized alerts to customers, which can lure them back to the site.

For example, if the customer purchased a dress, you can send them a personalized email about season end or clearance discounts on dresses. The chance of joining a loyalty program could also bring customers to the site.

 

Average order value

Average order value is the number of orders received in a given amount of time, say daily or weekly. You could definitely increase the number of orders by announcing discounts and promo codes, but it’s often not that easy; it depends on your type of business.

Calculating orders every day tells you how much in sales you are making daily. When the number of orders goes up, rejoice in that metric. However, getting fewer orders with a large amount of revenue is better than getting more orders with the same amount of revenue. If you are getting a large number of orders from new customers, there is a chance that those people will join the email list and visit again.

So the average order value is something that is tied to a lot of things at once. At the end of the day, your order value should always be increasing revenue.

 

Additional metrics to calculate:

  • Cost Per Click (CPC)

This is most commonly known as the average rate you will pay to get a new customer or sale. It includes search engine ad campaigns. CPC is also known as Pay Per Click or PPC.

 

  • Cost Per Impression (CPI)

This is most commonly known as the cost you spend on placing an online banner ad. An impression is known as the number of times the ad was seen or made people engage.

 

  • Cost Per Acquisition (CPA)

This is the rate you will pay to get a new customer or a new order. This is most commonly categorized as the cost you will pay to an affiliate for referring your business to customers.

 

  • Revenue Per Click (RPC)

This is the revenue you can generate by every click on your website.

 

  • Cost of Sale (COS)

This is the portion of your revenue which is spent on ads and other paid methods to get traffic to your site.

 

  • Customer Lifetime Value

This is the estimated value a customer is going to generate during their lifetime. Check out this infographic to get a better idea of calculating this metric for your store.

 

Last word

The above mentioned metrics mostly rely on the type of business you run. However, the key is to track these metrics regularly. Achieve your milestones by metrics, and then report them to your customers via emails and newsletters.

Look into this e-commerce private forum to learn from e-store owners with a high sales number every month and years of experience. But at the end of the day, deciding what’s best for your business is completely up to you. Learn from e-commerce stories, but also strive to create your own unique story.

Moosa Hemani

Moosa is a seasoned online marketing professional with a strong interest in SEO, E-Commerce and what makes users flow from visitor to customer. Moosa is responsible for all content on the Awesome Commerce website.

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