KPIs for eCommerce: How to track the success of your online shop
Choosing the right KPIs is crucial for eCommerce retailers. Tracking the right metrics enables you to measure how well your online store is performing, as well as identify any areas for improvement. After all, your store’s performance has a direct influence on your sales and the growth of your business. Let’s take a look at the top KPIs that eCommerce retailers should track, and what they can tell you about your store.
What are KPIs in eCommerce?
‘KPIs’, or ‘key performance indicators’, are key metrics that help you determine the success of your business. As an eCommerce retailer, you can use KPIs to measure the performance of your online shop and answer questions like these:
How many visitors to my site convert into paying customers?
How many leave my site without making a purchase?
At which point during the order process are potential customers leaving?
What is the average order volume that my customers purchase?
Why is it important to track my store’s performance?
The eCommerce market is extremely competitive. Nearly every company now operates an online store. The rise of digitalisation and social media has caused consumers to think and act much more quickly than in the past. As a result, it’s more important than ever to make an immediate impact on prospective customers. That means not only offering excellent products and services, but also providing a flawless user experience.
If you want to take the right steps to improve your shop’s performance, you have to know exactly where things are going wrong in the first place. KPIs show you how well your online shop is performing, and which areas have potential for improvement. By focusing on the right KPIs, you can improve your online sales and grow your eCommerce business even faster.
Which eCommerce KPIs should I track?
Not all KPIs are relevant to every eCommerce business. To determine which metrics are right for your store, start by:
... setting clear goals for your KPI analysis
... defining a suitable timeframe for tracking KPIs
... identifying which factors influence your store’s performance
Below, we’ll show you the top 11 KPIs for online stores. No matter which goals you’re trying to achieve as an online retailer, there’s a strong chance that these KPIs will help you get there.
1. Website traffic
An essential KPI for eCommerce is the total number of visitors to your online shop in a certain period of time (for example, in one month). This is known as your site’s “traffic”. So, if more people visit your online store this month versus last month, it means you’ve had an increase in traffic.
Within your website traffic, there’s a difference between new users and returning users:
New users are people who are visiting your online store for the first time, or visiting it from a different device than the one they’ve used in the past. This KPI helps you determine, for example, whether your current marketing campaigns are successfully attracting new traffic to your store.
Returning users are people who have visited your store in the past. By tracking the number of returning users, you can assess whether your retargeting is working. Retargeting is all about using targeted online ads to convince past visitors to come back to your site.
In any case, the quantity of your traffic is not nearly as important as the quality. That’s why it’s important to reach out specifically to users who fit well within your target group. These are the visitors who are more likely to convert into paying customers.
Try using a tracking tool like Google Analytics to analyse your web traffic.
2. Traffic sources
This KPI gives you insights into how visitors arrive on your site. Common traffic sources include:
Social media messaging
Social media ads
Tracking tools like Google Analytics are a big help here. It’s also important to find out what percentage of your visitors are using a mobile device compared to desktop users. This lets you identify the most important sources of traffic within your target group. That way, you can make the best decisions about which aspects of your store to improve.
3. Conversion rate (CR)
The true measure of an online store’s success is not how many page views it gets. After all, your business can only grow if you’re bringing in more and more sales. Really, your conversion rate is one of the most important KPIs to track.
Your conversion rate is the percentage of your shop’s visitors who actually turn into paying customers. In eCommerce terms, so-called “leads” (potential customers) “convert” into customers.
CR (in percent) = (Transactions ÷ Leads) × 100
This means that your website must be carefully designed with all the right elements to encourage your leads to buy something. But conversion doesn’t necessarily have to result in placing an order. There may be other interactions on your website where a lead ‘converts’ by taking a specific action - such as signing up for your newsletter or downloading content. Depending on your goals, it may also be valuable for you to track these conversion rates as well.
Still, if your main focus is on tracking sales, then it’s a good idea to think of conversion primarily in terms of how many leads place an order. If you’re looking for ways to boost your conversion rate, we’ve got some advice for you that is tailored to your specific industry.
4. Bounce rate (BR)
The sign of a healthy bounce rate is different to most eCommerce KPIs. That’s because “less is more”. Bounce rate is a measure of how many people leave your site immediately without taking any other action. For eCommerce retailers, the goal is to keep your bounce rate as low as possible. There’s usually a close correlation between your bounce rate and your conversion rate: a high bounce rate lowers your conversion rate.
BR (in percentage) = (Visitors who leave immediately ÷ All visitors) × 100
There are various factors that cause a high bounce rate:
Too many ads or pop-up windows
Inferior content (for example, information that is out of date)
A high bounce rate not only affects your sales. It also has an impact on your Google page ranking. If lots of visitors are bouncing from your site, Google will rate it as less relevant for search results. That means your site will appear lower and lower in the rankings.
5. Click-through rate (CTR)
For an online ad or search result, the click-through rate is the number of clicks that it receives versus the total number of times it is displayed (impressions). This KPI is a great way to figure out...
... how well your online ad is performing
... how visible your site is in Google search results
... whether the links in your newsletters are working
CTR (in percentage) = (Number of clicks ÷ Total number of impressions) × 100
CTR is more valuable in some industries than others. As a store operator, it’s a good idea for you to follow the average eCommerce CTR as a benchmark. According to a study by WordStream, the average CTR for Google Ads in eCommerce in 2018 was around 2.7%.
6. Customer acquisition costs (CAC)
Efficiently acquiring new customers is one of the basic preconditions of running a successful online store. There are many different ways to lead potential customers to your website, such as:
Social media ads
There are various costs involved with any marketing strategy. And not every visitor who makes it to your shop will become a paying customer. That’s why it’s important to know which channel generates the most visitors as well as which campaigns result in the most customers.
Online retailers determine their customer acquisition costs by comparing their marketing costs with the number of new customers they generate.
CAC (in €) = Marketing costs (for one channel) ÷ Number of new customers acquired (via that channel)
By comparing various ad campaigns side by side, you can determine which channels are truly relevant for your business. This way, you can focus your marketing strategy (and budget) towards the channels with the biggest impact.
7. Customer lifetime value (CLV)
The cost of acquiring new customers shows how effectively a channel is working right now. But what if you want to know how well your marketing investment pays off in the long term? If you look at CAC alone, you might think that some marketing channels are extremely expensive. Yet, when you consider how these channels build customer loyalty over time, you can see the true return on investment.
Even if it costs a lot to acquire a new customer, it will all be worth it in the long run if they become a loyal customer who regularly returns for a cart full of high-value items. This is what the customer lifetime value (CLV) KPI is all about. It helps you identify which types of customers you should focus on, and whether you’re investing too much (or not enough) to retain existing customers.
CLV shows you how much a customer spends on your shop, either within a specific time period or until they stop shopping on your site.
CLV (in €) = Sales per customer — CAC
8. Average order value (AOV)
Average order value is another important KPI for eCommerce retailers. It shows the average amount that customers spend on an order on your site.
AOV (in €) = Sales ÷ Number of transactions
Like conversion rates, AOVs vary from one industry to the next. That’s because the AOV depends heavily on which types of products and services you’re selling, and in which price class. According to the 2020 KPI Report by Wolfgang Digital, the average AOV for all sectors of the eCommerce market combined is around €185.
9. Cart abandonment rate (CAR)
Your store’s cart abandonment rate shows how often shoppers add items to the cart but then leave the site before completing the purchase. When this happens, it means you just barely missed out on making a sale. If your CAR is high, it's a good idea to take a close look at your checkout process. What might be causing your shoppers to abandon their carts? Here are some common causes:
Are you not offering the right payment methods for your target group?
Is a specific payment method causing a technical error to occur?
Are your shipping costs too high?
Do you require your customers to create an account?
CAR (in percentage) = (Number of orders completed ÷ Number of abandoned carts) × 100
In our article on boosting checkout conversion, we show you how to optimise your checkout process and minimise cart abandonment.
10. Return rate (RR)
Return shipping is a major challenge for eCommerce retailers. It can greatly impact the profitability of your online shop. Especially in industries with a high return rate (like fashion retail), return shipping can result in high logistical costs. In some cases, these costs can significantly cut in on your profit margin.
To ensure your shop is running as profitably as possible, it’s important to track your return rate as a KPI.
RQ (in percentage) = (Number of returns ÷ Number of orders) × 100
The goal is to keep returns to a minimum. Be sure to analyse your returns and determine what is causing them. By understanding the causes, you can take the right steps to bring your return rate under control. Ask yourself the following questions:
Is the return rate higher than average with specific products?
Are your products disappointed by the quality of a product?
Are your product descriptions clear enough?
Are products damaged when they arrive to the customer?
Are the delivery times too long?
The table below shows you examples of what you can do to address specific causes for returns:
|Reason for return||What to do|
|Delivery takes too long||Optimise your logistics processes and, if necessary, switch to a different shipping provider|
|Products are damaged on arrival||Use higher-quality packaging|
|Products do not meet the customer’s expectations||Improve your product photos and descriptions|
|Product is the wrong size||Add a (more exact) size table|
11. Time on site
This KPI shows you how much time your visitors are spending on your site. If your time on site is high, it means that your users are engaging with your brand and your products. A low time on site means that the content does not cater to your target group, or your store is not user-friendly enough. This is why time on site is also an important factor for your Google ranking. A long time on site is a sign that you are offering high-quality content. And Google will reward you with greater visibility.
ToS = Total amount a user spends on one URL ÷ Total number of URLs visited
Choosing the right KPIs: The secret is in the mix
To accurately measure your online shop’s performance, it's a good idea to track multiple KPIs. This gives you a more detailed picture, so you can also spot the areas that need to be improved.
For example, it’s not enough to simply know how many people are visiting your site. High traffic alone is not an indicator for your shop’s overall performance. If your bounce rate is also high, for example, then it means your content is not appealing enough to generate sales. In that case, it's time to start improving your content to make it more engaging and encourage customers to make a purchase. A/B testing can also help you to identify the best design choices.
Summary: KPIs for online shops
As an eCommerce retailer, you can use various KPIs to track the performance of your online store. These powerful metrics can help you spot which marketing channels work best for your target groups. For example, they show how efficient your customer acquisition is, and whether you need to make any changes in your checkout process.
The key is to keep track of multiple KPIs for your store. This is the only way to gain an accurate overview, so that you can take the right steps to improve your strategy. The table gives you a quick overview of all the most important KPIs for eCommerce, along with the questions they answer, and how they are calculated.
|Website traffic||How many people are visiting my store? How many are new visitors and how many are returning visitors?||–|
|Traffic source||Where are your site’s visitors coming from?|
|Conversion rate||What percent of my store’s visitors buy something?||CR = (Transactions ÷ Leads) × 100|
|Bounce rate||How many visitors leave my store without taking any action?||BR = (Bounced users ÷ All users) × 100|
|Click-through rate||How many customers click on links to your online store?||CTR = (Clicks ÷ Impressions) × 100|
|Customer acquisition costs||How much does it cost to acquire a new customer via a specific marketing channel?||CAC = Marketing costs ÷ New customers|
|Customer lifetime value||How much does your store earn from one single customer?||CLV = Sales per customer - CAC|
|Average order value||What’s the average amount of money your customers spend per order?||AOV = Sales ÷ Number of orders|
|Cart abandonment rate||How many shoppers leave items in the cart without completing their order?||CAR = (Sales ÷ Abandonments) × 100|
|Return rate||How many products are getting sent back to you?||RQ = (Returns ÷ Orders) × 100|
|Time on site||How much time do people spend on your site on average?||ToS = View time on URL ÷ Total URLs viewed|