Introduction
So you still need convincing on why metrics and analytics matter? Read our previous blog.
After speaking about KPIs for startups, we’re now focusing on e-commerce and why it’s important to understand the key metrics that can help your online store succeed.
The process of collecting, analyzing, and applying website data from your online store is known as e-commerce analytics.
It makes you more insightful about your clients and competition, so you can decide how best to advance your company. To potentially increase sales, you can, for instance, improve your checkout experience, recognize and address problems, and improve your traffic channels.
And why does it matter?
- To understand your customers much better!
You may tailor your visitors’ experience by tracking their behavior throughout their journey with the use of e-commerce analytics.
- To improve customer experience and loyalty.
You may establish more gratifying experiences that foster trust and motivate repeat business by identifying areas for improvement.
- To increase productivity and cut costs.
Analytics show you which of your traffic sources are most productive, which helps you manage your budget and find cost-cutting opportunities.
So for a beginning, start tracking:
Key metrics to track for E-commerce
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1. Average Order Value (AOV)
What It Measures
Average Order Value (AOV) is the average amount customers spend per order on your e-commerce store.
Why It Matters in E-commerce
AOV boosts profit without needing new customers. By increasing the value of each order, you can enhance your overall revenue efficiently. This metric is key for shaping upselling strategies and maximizing ROI.
How to Calculate It
AOV is calculated by dividing your total revenue by the number of orders.
Formula: Total Revenue ÷ Total Orders
For example, if your total revenue is $4,000 from 160 orders, AOV = $25.
Pros
- Cost-effective way to increase revenue.
- Provides insights into customer spending habits.
- Helps optimize pricing, discounts, and marketing strategies.
- Contributes to understanding customer lifetime value (LTV).
Cons
- Outliers (high or low-value orders) can distort the data.
- A high AOV doesn’t always mean high profits, especially if profit margins are low.
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2. Customer Acquisition Cost (CAC)
What It Measures
CAC is the average cost to acquire a new customer, including marketing, sales, and overhead expenses.
Why It Matters in E-commerce
A low CAC means you’re acquiring customers efficiently. If CAC is too high compared to the revenue each customer generates, your business growth may be unsustainable.
How to Calculate It
CAC = Total Marketing & Sales Costs ÷ New Customers
For example, if you spend $15,000 to acquire 1,000 new customers, CAC is $15.
Pros
- Reveals the efficiency of your customer acquisition.
- Key to understanding profitability when combined with Average Order Value or Lifetime Value.
Cons
- Needs context; CAC alone isn’t enough to assess profitability.
- A high CAC can hurt business growth if not paired with high customer value.
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3. Listing Conversion Rate
What It Measures
Listing Conversion Rate calculates the percentage of buyers who view a product listing and complete a purchase.
Why It Matters in E-commerce
This metric helps determine how well your product listings are converting views into sales. A higher rate indicates that your listings are effectively attracting and converting customers, directly impacting revenue.
How to Calculate It
Listing Conversion Rate = Purchases from Listing ÷ Listing Views
For example, if 5 out of 100 people who view a listing make a purchase, your Listing Conversion Rate is 5%.
Pros
- Helps evaluate the effectiveness of your product listings.
- Provides insights into potential areas for improvement in product presentation or pricing.
Cons
- Low listing views can distort the metric, so focus on boosting traffic before focusing solely on conversion rates.
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4. Time to Purchase
What It Measures
Time to Purchase tracks how long it takes for visitors to convert into customers, either by time (days) or the number of sessions.
Why It Matters in E-commerce
Understanding Time to Purchase helps tailor marketing strategies. For high-value products, longer decision times may require detailed, informative campaigns. For low-cost products, quick impulse buys benefit from flash sales and promotions. This metric helps you understand consumer behavior and personalize shopping experiences.
How to Calculate It
Using tools like Google Analytics, track the average number of sessions or days it takes for customers to make a purchase. Segmenting data helps identify trends, seasonal changes, and the effectiveness of marketing campaigns.
For example, if 500 customers took a combined total of 6,000 days from their first visit to purchase, the average Time to Purchase would be 12 days.
Pros
- Provides insights into customer behavior and purchase timelines.
- Helps optimize marketing based on purchase patterns.
- Identifies seasonal trends and campaign effectiveness.
Cons
- Requires analytics tools to track accurately.
- Results can vary widely based on product type or season.
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5. Shopping Cart Abandonment Rate
What It Measures
Shopping Cart Abandonment Rate tracks the percentage of shoppers who add items to their cart but leave without completing the purchase.
Why It Matters in E-commerce
This metric shows how many potential buyers abandon the process before buying. A high abandonment rate could indicate issues with the checkout experience or interruptions in customer behavior, making it a key metric for optimizing sales.
How to Calculate It
Shopping Cart Abandonment Rate = [1 – (Completed Purchases ÷ Shopping Carts Created)] × 100
For example, if 200 carts are created and only 45 result in purchases, your abandonment rate would be 77.5%.
Pros
- Identifies issues in the checkout process.
- Can reveal how interruptions or poor design impact sales.
- Improving this metric often leads to immediate revenue boosts.
Cons
- Can be misleading if based on low traffic or sales volume.
- Doesn’t provide insights into why customers are abandoning carts; further investigation is needed.
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6. New Buyer Growth Rate
What It Measures
New Buyer Growth Rate tracks how quickly you’re adding new buyers to your marketplace, an essential metric for gauging demand and marketplace success.
Why It Matters in E-commerce : Reflects the effectiveness of your marketing and marketplace appeal. A growing buyer base signals demand and can attract more sellers, enhancing product variety and competition.
How to Calculate It
For example, if you had 1,200 new buyers last month and 1,000 new buyers the month before, your New Buyer Growth Rate would be:
((1,200 – 1,000) ÷ 1,000) × 100 = 20%.
You can also calculate total buyer growth for a specific period.
Pros
- Indicates business profitability.
- Stimulates interest from new sellers as the buyer base grows.
Cons
- Should be tracked alongside buyer engagement to ensure new users are active and contributing to revenue growth.
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7. New Sellers Growth Rate
What It Measures
New Seller Growth Rate measures how quickly you’re adding new sellers to your marketplace, crucial for meeting buyer needs and driving growth.
Why It Matters in E-commerce – Indicates marketplace expansion and the ability to meet buyer demand. A growing seller base enhances product variety, competitiveness, and overall marketplace attractiveness.
How to Calculate It
For example, if you had 300 new sellers last month and 250 new sellers the month before, your New Seller Growth Rate would be:
((300 – 250) ÷ 250) × 100 = 20%.
Pros
- Helps identify trends in seller onboarding and marketplace health.
- A growing rate may indicate a need to enhance onboarding processes for faster activation.
Cons
- Should be viewed in context with metrics like active listings per seller and the buyer-to-seller ratio for a complete picture of marketplace vitality.
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8. Revenue by Traffic Source
What It Measures
Revenue by Traffic Source breaks down total revenue by channels like social, organic search, paid search, and referral. It shows which sources bring the most value to your site or app.
Why It Matters in E-commerce
Knowing where your most profitable traffic comes from helps you allocate marketing spend efficiently and identify customer behaviors. It highlights growing or shrinking trends in traffic and consumer preferences.
How to Calculate It
Using tools like Google Analytics, track transactions from each traffic source. This breakdown helps identify which channels contribute the most to your revenue.
For example, if social media brought in $15,000 in revenue, organic search $25,000, and paid search $10,000, you can see that organic search is your most valuable traffic source.
Pros
- Shows where to invest marketing resources.
- Helps predict customer intent based on where they come from (e.g., search engines vs. social media).
- Offers insight into which channels perform best for revenue generation.
Cons
- Doesn’t capture all referral types accurately (e.g., word-of-mouth traffic can fall under ‘direct’).
- Only shows part of the customer journey, so it’s best paired with other metrics.
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9. Purchase Frequency
Purchase Frequency
What is it? The average number of times a customer buys from your store in a set period.
Why It Matters in E-commerce: Indicates customer loyalty, drives revenue growth, and informs targeted marketing strategies.
How to Calculate It
Total orders / Unique customers = Purchase Frequency
For example, if you had 2,000 orders and 500 unique customers in a given period, the Purchase Frequency would be:
2,000 ÷ 500 = 4 purchases per customer.
Pros:
- Signals customer loyalty
- Boosts revenue
- Guides marketing efforts
Cons:
- Lagging metric; reflects past behavior
- Needs context from other metrics
- Varies by industry
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10. Repeat Customer Rate
What it Measures: The proportion of customers who make at least two purchases in a specified time period, expressed as a percentage.
Why it Matters in E-Commerce: A high Repeat Customer Rate indicates customer loyalty and satisfaction, essential for sustainable revenue. Repeat customers are often more profitable and can serve as brand advocates.
How to Calculate:
For example, if you had 1,000 total customers and 300 of them made repeat purchases, your Repeat Customer Rate would be:
(300 ÷ 1,000) × 100 = 30%.
Pros:
- Cheaper to retain existing customers than acquire new ones.
- Repeat customers tend to spend more over time.
- Offers insights into customer satisfaction and engagement.
- More actionable than metrics like churn rate.
Cons:
- A declining Repeat Customer Rate might not be negative if overall customer base is growing.
- Less relevant for businesses with infrequent purchases.
- Requires contextual understanding alongside other metrics for a complete view of business health.
Making sense of e-commerce KPIs
Metrics. Everyone wants them, and everyone needs them. No arguments here!
When running an online store, it’s really important to keep an eye on your performance to see how your business is doing. E-commerce metrics are a big part of this. And we can easily dive deep into the details—after all, there’s plenty to discuss—but let’s be real, who has the time or concentration to read such long blogs, right?
So, let’s share:
8 more crucial KPIs for e-commerce
- Percentage of Active Listings: Measures the proportion of products available for sale compared to total listings, indicating inventory health.
- Percentage of Active Sellers: Reflects the ratio of sellers actively making sales to total registered sellers, highlighting marketplace engagement.
- Percentage of Engaged Buyers: Tracks the share of buyers who interact with the platform (e.g., making purchases or adding items to carts) relative to total registered buyers.
- Percentage of Satisfied Transactions: Assesses the proportion of transactions rated positively by customers, providing insight into customer satisfaction.
- Customer Lifetime Value (CLV): Estimates the total revenue a customer is expected to generate over their entire relationship with the brand, guiding marketing investments.
- Cart Abandonment Rate: Measures the percentage of customers who add items to their cart but do not complete the purchase, indicating potential issues in the checkout process.
- Return on Advertising Spend (ROAS): Evaluates the revenue generated for every dollar spent on advertising, helping to assess marketing efficiency.
- Churn Rate: Measures the percentage of customers who stop purchasing over a specific time frame, highlighting retention challenges.
Interested in more? Shoot us a message at info@solveo.co, and we can schedule a meeting where we can explain more and answer your questions.
Or check out our Launch with AI program to learn the latest technology and strategies for amazing growth.
Remember, the right data can help you make smart decisions, leading to a more profitable and efficient e-commerce operation.
So keep tracking, analyzing, and optimizing… and repeat this like a mantra for growth!
