Think of running an online store like playing a video game. To progress to the next level, you must get as many people as possible to visit your store and buy your products. But how do you know if you're winning?
This is where keeping track of ecommerce KPIs comes into the picture. These indicators help you identify how well your store is doing in terms of attracting visitors and turning them into buyers.
Since the ecommerce market is growing rapidly and is expected to total over $8.1 trillion in market share by 2026, [1] it has become more crucial than ever to be at the top of your numbers to get a piece of it in the long run.
Let's make sense of all this in a simple way so you can start improving your store and crunch more sales.
What are ecommerce KPIs?
Ecommerce KPIs are metrics that help you understand the success of your online store and its performance. More specifically, they allow you to measure your current performance versus the goals set. To constantly grow an ecommerce business, it’s incredibly important to monitor KPIs and pinpoint areas that are not meeting your goals.
Benefits of tracking ecommerce KPI metrics
There are many benefits of tracking KPI metrics, but here are just a few of them:
#1 Helps in decision-making
Utilizing your ecommerce platform's KPIs can help you make informed decisions. It gives you insights into your current performance and how to improve it. The past data can be used to make better decisions for tomorrow.
#2 Helps set goals
By tracking important KPI metrics and data, the task of creating goals for your online store becomes easier. You can define a realistic goal by analyzing the numbers and trends.
#3 Helps measure success
Since numbers do not lie, ecommerce KPI metrics are fantastic indicators of success for business owners. Using these numbers, you can evaluate how well your strategies are performing.
#4 Helps in the optimization of strategies
Any strategy, be it marketing, operational, or sales, must lead to positive results to be considered effective and efficient. To this end, take note of KPIs like ROI, conversion rates, and acquisition costs, as they enable you to analyze how you can use your resources for the best results.
Essential ecommerce KPIs to track
There are so many KPIs to keep track of that it can get overwhelming. However, there are certain main ones that must be taken into consideration.
Let’s take a closer look at these indicators, tracking which will benefit your online store massively:
Conversion rate (CVR)
Average order value (AOV)
Customer acquisition cost (CAC)
Repeat purchase rate (RPR)
Cart abandonment rate (CAR)
Customer lifetime value (CLV)
We will divide the above KPIs into two categories: ‘Sales performance and growth’ and ‘Customer engagement and retention.’
Sales performance and growth
To maximize your profits, a priority must be placed on these three pillar KPIs under sales performance and growth:
#1 Conversion rate (CVR)
Arguably, the conversion rate or CVR, is the most important and favorite metric for every business owner. It shows how many visitors to your website make a purchase and perform a desired action.
Conversion Rate = (Total Number of Visitors on the Website / Total Number of Conversions) x 100
According to Adobe, the average ecommerce CVR is 3.65%. A high rate is indicative of a website's overall excellence in design, user experience, and the effectiveness of marketing campaigns. If your website has a low CVR, you need to actively look for areas for improvement.
#2 Average order value (AOV)
Average order value (AOV) provides vital information on how much a customer is spending on your store on average. It can also estimate how much revenue a single customer is generating. The bigger this number, the better.
Average Order Value = Total Revenue / Number of orders
The fastest way to increase revenue is to boost your AOV, so if it is low, focus on strategies like upselling. Bundle deals, limited-time offers, and product recommendations are all effective examples of it.
#3 Customer acquisition cost (CAC)
Measuring the customer acquisition cost (CAC) can determine the efficiency and cost-effectiveness of your marketing initiatives. Additionally, it is directly tied to the profitability and financial sustainability of your business.
Customer Acquisition Cost = Costs Spent on Acquiring Customers / Number of Customers Acquired
If your CAC is high, you aren’t getting enough investment returns, and you might need to optimize your marketing efforts. To this end, enhance your marketing strategies, aim for higher-quality leads, and prioritize customer retention to reduce the cost of customer acquisition.
Customer engagement and retention
A crucial aspect of growth is attracting customers from multiple channels and maintaining a healthy relationship so they actively interact with your brand or make purchases. The goal for any business should be to get new customers and retain existing ones.
#1 Repeat purchase rate (RPR)
A key indicator of long-term success is a high repeat purchase rate (RPR). This metric measures the percentage of users who buy repeatedly through your ecommerce portal. More specifically, it suggests a user took the first step of purchasing from your online store, found the overall experience and product/service satisfying, and got enough value from it to make another transaction.
Repeat Purchase Rate = Purchases from Repeat Customers / Total Purchase
Repeat customers are a great sign of loyalty, something that’s essential for any business to thrive and keep growing. Importantly, since 56% of consumers would most likely become repeat customers if a store used personalization, [2] it only makes sense to leverage this fact. You can utilize strategies like product recommendations, size recommendations, store notifications, and abandoned cart reminders to customize customers’ shopping experience.
#2 Cart abandonment rate (CAR)
It pinches when a customer adds items to their cart but skips out on the last part: making the purchase. This is called cart abandonment, and this metric indicates how many users create a cart but, ultimately, choose not to go through with the purchase. A high cart abandonment rate (CAR) is never a good sign and must be fixed.
Cart Abandonment Rate = 1 – (Total Number of Completed Transactions / Total Number of Shopping Carts) x 100
Note the number of abandoned carts and see which part of the checkout process may be the culprit. Some factors to consider are unnecessary long checkouts, extra fees, item pricing, and delivery options. You can follow up with users who have signed up via email, prompting them to complete their purchase or asking what led them to abandon their cart. Reducing this metric will reduce lost opportunities, improve user experience, and generate higher revenue for your online store.
#3 Customer lifetime value (CLV)
Customer lifetime value, or CLV for short, helps identify how much total revenue a customer generates for your business throughout their time with you minus the cost of acquiring them. By understanding your average CLV, you can utilize strategies like tailor-made marketing, customized offers, subscriptions, and up-selling to maximize profits and generate long-term revenue.
Customer Lifetime Value = (Customer’s Annual Profit Contribution x Average Number of Years as Customer) – the Initial Cost of Customer Acquisition
When you prioritize client satisfaction and retention, you build a loyal customer base that is more likely to purchase from you and recommend your brand to others. Moreover, loyal customers can provide valuable feedback and insights that help improve your offerings and user experience, further strengthening your brand's market position.
Ways for improving key ecommerce KPIs
Here’s a table that’ll help you improve all of these KPIs:
KPI | How to improve |
Conversion Rate (CVR) | Offer incentives, use social proof, add live chat, optimize for mobile |
Average Order Value (AOV) | Create a loyalty program, set a free shipping threshold, offer coupons, add upsells |
Customer Acquisition Cost (CAC) | Retarget customers, set up an affiliate program, narrow down your paid ads targeting, share customer feedback |
Repeat Purchase Rate (RPR) | Utilize email marketing, send personalized product recommendations, offer rewards for each purchase |
Cart Abandonment Rate (CAR) | Offer flexible payment options, display a checkout progress indicator, offer transparent return policies, reduce the number of steps during checkout |
Customer Lifetime Value (CLV) | Listen and implement customer feedback, build a community, offer a referral program, create content to keep customers engaged |
Tools and techniques for effective KPI analysis
The right tools and techniques must be used to measure your KPIs effectively and efficiently. Since these KPIs help you find areas of improvement and make critical decisions, they should be able to handle, store, and visualize data accurately.
Let’s look at some of them below:
#1 Analytic tools
You can use Google Analytics, your ecommerce platform’s built-in tools, or your preferred B2B ecommerce software to gain valuable insights into important KPIs such as conversion rates, web traffic, user behavior, and more.
If you plan to use Google Analytics, you’ll love their new GA4 update, which makes the tool simpler to use while providing more accurate data. This update was built with ecommerce in mind, so identifying stats like most popular products, most profitable pages, and checkout percentage is a breeze.
#2 Data visualization
Displaying data in the form of infographics, charts, tables, or graphs, makes it easier to analyze. As an online store owner, the easiest way to visualize data is by using Looker Studio. It’s an amazing tool by Google that allows you to turn plain analytics into customizable, easy-to-read reports.
You can get started using a blank or pre-made template or import one from the internet. Additionally, from the dashboard, you can connect your preferred SEO tools to it and start retrieving valuable data like organic traffic, CVR, keyword rankings, CAC, etc.
#3 Benchmarking
Benchmarking basically means comparing your business’s performance KPIs with competitors or industry standards. There are several steps involved in this technique, which are:
Identify your direct competitors: Select online stores within your niche that align with your objectives and strategic direction as direct competitors.
Determine KPIs: Pick the most effective KPIs that are relevant to your strategy and goals. If CVR is your main concern, you’re going to include this metric.
Collect data: Gather comprehensive data on the selected KPIs from both your online store and those of your competitors. It can include financial reports, market research, etc.
Analyze the gap: Compare your performance against your competitors' by using the collected data to identify areas of good and poor performance.
Implement changes: Based on the identified gaps, develop new approaches to fill in and improve those areas. This can mean something as small as changing a single process or as big as revamping the whole strategy.
Benchmarking is essential in identifying where your online store stands in the competitive space and what needs to be improved.
#4 Goal-setting frameworks
Goal-setting frameworks like SMART goals can be highly beneficial when it comes to analyzing KPIs. SMART is an acronym for Specific, Measurable, Achievable, Relevant, and Time-bound.
Let’s learn about each of them below:
Specific: To ensure clear direction, your objectives must be clear and specific. Instead of “increase sales,” an ideal goal would be “increase sales of product X by 15%”.
Measurable: There should be a clear KPI to measure progress towards the goal. This ensures you’re tracking and assessing the effectiveness of your initiatives.
Achievable: Set targets that are realistic and achievable. An unattainable goal will only lower morale and misalign strategies.
Relevant: You need to ensure your goals are relevant to your ecommerce business’s mission.
Time-bound: There needs to be a deadline for achieving the targets to create urgency within the team and maintain an efficient flow of work.
The SMART framework will help your ecommerce business stay aligned with your overall mission and achieve the desired performance metrics.
Actionable strategies to improve your ecommerce KPIs
The ecommerce space is very competitive, and to grow and ensure the long-term success of your business, knowing where your strategy is falling short is a must. There’s no better indicator of it than KPIs.
Here are some strategies to improve it:
#1 Optimize your store for better conversion rates
An online store that isn’t optimized – meaning it isn’t user-friendly, hard to navigate, does not include relevant information, isn’t usable on all devices, and has a lengthy checkout process – can greatly affect KPIs, regardless of how good your product is.
Taking the German hookah brand Moze as an example, it was able to achieve higher cart value and CVR by integrating Shopware 6’s smart cross-sell and up-sell recommendations for an optimized checkout.
Similarly, if you want to improve your CVR, you need to:
Ensure your site is well-optimized
Add call to action, descriptions, and high-quality images of your products
Make the online store mobile-responsive
Offer easy checkout methods
Most importantly, you can build a reputation in your niche via quality social media content, blog posts, and paid ads.
#2 Enhance customer experience to boost retention KPIs
A user’s overall experience with your online store counts towards a customer’s perception of your brand. This is pivotal as customer retention is as important as acquisition because recurring clients drive long-term success by generating revenue over time.
To this end, launch loyalty programs, offer extra benefits to recurring customers, and use targeted marketing to promote upselling and improve customer satisfaction. You can also follow up with new clients to understand their concerns and offer a safe space to maintain a healthy community.
For instance, Sephora is a company that does the loyalty program pretty well. It offers rewards, free samples, and exclusive events to its members. Moreover, they’ve also maintained a positive community through forums and product reviews, increasing both customer engagement and retention.
#3 Leverage email marketing to increase sales
Besides helping you stay in touch with existing customers, email marketing can massively help increase sales. You can set up automated email campaigns to be sent out on specific days, promoting new releases and limited-time offers. Similarly, sending out automated emails for cart abandonment, welcoming new customers, and after-sales follow-ups can also contribute towards overall revenue.
Taking Dollar Shave Club as an example, they’ve used email marketing brilliantly to grow their business. If you’re on their email list, you’d know they send out some of the most engaging content with a humorous tone and a compelling calls-to-action. Besides, they use this opportunity to introduce new products, share grooming tips, and maintain a steady bond with subscribers, which significantly contributes to their sales growth.
Lessons from leading ecommerce brands
Studying the top ecommerce brands informs us about the industry’s dos and don’ts. You can use the following insights to improve your brand’s performance:
#1 Customer experience should be number one
No brand can function in a bubble. If your online store aims for long-term success, ensuring the customers are satisfied and have a positive experience is essential. A customer-centric approach builds strong relationships.
A prime example is the online retail giant Amazon. In early 2020, the company reduced the delivery time from 3.4 days to only 2.2 days, [3] which skyrocketed its profit and overall growth. In other words, by delivering products faster, Amazon made customers’ shopping experience more convenient.
#2 Don’t ignore social media
Social Media is a fantastic tool for driving sales, building awareness about your brand, and increasing credibility. You can collaborate with influencers to promote your products, share reviews, and post high-quality content for your niche to build credibility.
Hiroshi Mikitani, the CEO of Rakuten, Japan’s largest ecommerce marketplace, sets a great example of using different social media platforms correctly. For example, Hiroshi likes to keep it casual on Instagram, sharing more intimate and personal moments of his life.
On the other hand, Hiroshi shares insights on his LinkedIn profile related to business and everything surrounding Rakuten.
This practice of being active on social media and posting content relevant to each platform is a fantastic opportunity for your brand to humanize itself and stand out in the age of AI.
#3 Keep evolving
In a constantly changing environment, adaptability is the key to long-term success. Take the example of eBay. It started as an auction website, but as of today, it has also become a proper marketplace to stay relevant in the ecommerce field. Seeing how the platform has stood the test of time and is still going strong is an example of how necessary it is to keep evolving.
One of the many ways you can start evolving is by using ecommerce automation tools in your strategy. It can help in eliminating repetitive tasks and getting more done in considerably less time. Besides, it’s a great asset for targeting customers, segmenting markets, avoiding human errors, and combating online fraud.
Moreover, Bikebox, one of Germany’s leading bike retailers, was able to automate its business processes and reduce its bounce rate with the help of Shopware’s no-code automation solutions. As a result, they improved their overall performance by 30%.
How Shopware can help your ecommerce business
Being a versatile open-source commerce platform, Shopware can help you build your online store from ground zero and customize and automate repetitive tasks and processes without any coding skills. We take the pain out of managing an online store, irrespective of whether your ecommerce business is B2C or B2B.
Our platform gives you the flexibility to tailor your store just as you’ve imagined it to be. In fact, our headless architecture and API-first approach adapt to your business needs while keeping room for various customization possibilities, including integration with over 3,000 extensions.
You can request a demo, explore all the features, and discover how Shopware can help your online store prosper, just as we’ve done with numerous other ecommerce businesses over the years.
Final thoughts
Taking note of your ecommerce KPIs can help improve and make your business thrive. A thorough analysis of these metrics can find areas for improvement in your overall sales and marketing strategies, helping you drive more traffic to your online store, convert visitors to customers, and retain them for years.
FAQs
What are KPIs in ecommerce?
KPIs stand for ‘Key Performance Indicators,’ and they help an ecommerce brand identify its success, the effectiveness of its strategies, and areas for improvement.
What are the 4 key performance indicators?
The four key performance indicators are conversion rate (CVR), average order value (AOV), customer acquisition cost (CAC), and customer lifetime value (CLV).
What is Amazon KPI?
Amazon KPIs typically include metrics such as stock levels, sales performance, operational efficiency, and more. Some major Amazon KPIs to track to improve your business are return rate, stock inventory, order defect rate, keyword ranking, reviews, and feedback.
What is Shopify KPI?
Ecommerce websites built on Shopify can use Shopify KPIs to measure their stores' performance. These include inventory level, shipping costs, store traffic, and average order value.
How often should I review my ecommerce KPI metrics?
There is no standard time regarding how often you should review your ecommerce KPIs metrics, but a monthly review is recommended as a rule of thumb. However, this can vary depending on your business’s goals and industry pace.
