10 Most Important E-commerce Metrics

Whether you're a marketer working for an e-commerce brand or an e-commerce business owner yourself, you're most likely aware of the importance of tracking e-commerce metrics.

But with the sheer number of e-commerce KPIs you could potentially measure, things can get overwhelming pretty soon. The good news is – not all metrics are created equal.

In this all-inclusive post, you'll be introduced to the 10 most crucial metrics for e-commerce brands, how to measure them, and the strategies to improve them.

Here's the first one:

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1. Sales Conversion Rate

One of the most fundamental e-commerce metrics that all store owners need to track is the sales conversion rate. What is it?

Consider this: You've built a beautiful e-commerce website that sells pet supplies. After months of hard work, your online store is finally gaining traction from pet owners. Last month, you successfully amassed 1000 monthly visitors. That's great!

Yet, there's another statistic that needs your dire attention: the number of people who actually bought your pet supplies. Let's say that number happens to be 20.

The e-commerce conversion rate, in this case, will be:

(Number of sales ÷ number of users) × 100%

Therefore, your last month's conversion rate was 2%. Of course, the better your conversion rate, the higher your chances of success. The easiest way to achieve your revenue goals is to give importance to CRO. 7 of the top converting companies spend more than 5% of their budgets on optimization.

To improve your e-commerce conversion rate:

• Enhance the speed of your product pages
• Optimize your product descriptions by incorporating relevant keywords
• Use high-quality product images to entice visitors
• Incorporate customer testimonials in your copy to convert more visitors

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2. Average Order Value (AOV)

Ever ordered pizza from the Domino's app (or really any food delivery app, for that matter)?

Say you've added a Cheese Burst Margherita to your food delivery cart. The page where you review the bill before placing your order is where they gently nudge you to buy their Chocolate Lava Crunch Cake or perhaps their Italian Pasta?

Their suggestions are mostly based on your previous orders and popular items on the menu. And that's exactly how brands increase the average order value (AOV) – which is the amount a customer is willing to spend on a single order.

AOV in e-commerce is a crucial metric that allows D2C brands to increase their revenue by cross-selling or upselling to their existing customers.

Average order value = revenue ÷ total orders

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3. Add-to-Cart Rate

While measuring the e-commerce conversion rate is indispensable to gauge your store's overall success, identifying the add-to-cart rate is equally important. Why, you ask?

First, let's understand how it's calculated:

Add-to-cart rate = Total number of add-to-cart sessions ÷ total number of sessions

Clearly, conversion can only happen if visitors add your product to their cart. It's essentially a key micro-conversion step that allows you to determine the efficiency of the overall sales process.

It gives you information like:

• How appealing the specific products and product pages are
• Your potential customer's intent to purchase

The average add-to-cart rate in July 2020 was 3-4%, as per a survey by Databox. Obviously, calculating the add-to-cart rate for your own e-commerce store requires no manual calculation. Tools such as Google Analytics help you with that information.

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4. Customer Lifetime Value (CLV)

When it comes to e-commerce KPIs (key performance indicators), one can never exclude the customer lifetime value (CLV, for short). Let's circle back to the first example to understand this key metric.

Let's say you've gained a loyal customer who loves what you offer in the "dog supplies" category – they're in awe of the grooming supplies, to be specific. Over the last three months, they've placed four orders, each one worth $35.

In this case, the CLV would be $140 (4 × $35). As you may have observed, the customer lifetime value is the total amount a customer spends on your business over their association with you.

But to get a true estimate, you must minus the acquisition cost for this customer (more on that later).

To increase the CLV:

• Work to improve your AOV
• Foster brand loyalty to convert existing customers into repeat buyers

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5. Customer Acquisition Cost (CAC)

How much do you typically spend on bringing in a new customer? That's your customer acquisition cost (CAC). While expanding your customer base is good news, it's not the only criterion for success.

For example, if your CAC is $40, but your AOV is only $35, you're essentially operating at a loss. (Notice that e-commerce KPIs, however important individually, are dependent on each other). Studies show drop in conversion rates, with companies spending only $1 to convert customers after spending $92 acquiring them.

An e-commerce business owner typically spends on these activities to acquire a customer:

• Marketing and sales
• Staff salaries
• Site hosting

Needless to say, your CAC must be as low as possible; it has killed many startups over the years. Blue Apron's CAC, for example, is reportedly over $400, a reason for impending doom, as quoted by the Business Insider.

To decrease your CAC:

• Focus on organic marketing activities such as social media marketing and SEO
• Introduce referral programs

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6. Card Abandonment Rate

There are several reasons as to why someone may abandon their shopping cart, including:

• Concerns with payment security
• Poor checkout experience
• Unexpected additional fees, such as high shipping costs and taxes
• Hesitation due to total cost of items, with an intent to purchase later

Unfortunately, cart abandonment is a common phenomenon, with a study putting the average cart abandonment rate at 69.80%.

Think about the business you'll gain if only you could convert even 5% of these customers. Understandably, a high cart abandonment rate hurts an e-commerce business.

Here's how it's calculated, by the way:

Cart abandonment rate = {1 - (number of completed purchases ÷ number of shopping carts created)} × 100%

To lower this crucial e-commerce metric, you need to simplify the checkout process. Try remarketing (which includes follow-up emails and targeted ads) to encourage shoppers to complete the purchase.

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7. Bounce Rate

This refers to the percentage of people abruptly leaving your e-commerce website without taking any action. A high bounce rate (check your Google Analytics page to determine yours) is indicative of serious problems with your website.

Some of those might be:

• Navigation delays
• Poor UX and UI
• Poor page load times
• Improper targeting, because of which visitors don't find value in the products or site

If users don't stick to your website, you might as well forget about converting them. One study puts the average bounce rate of e-commerce websites (across industries) at 45% on tablets, 51% on mobile, and 43% on desktop. You should try and keep it below 40%.

User experience is now a critical ranking factor as per the June 2021 Google Page Experience Update. Hence, you must brainstorm with your developers, designers, copywriters, and marketers and ensure that the core web vital metrics are met.

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8. Refund and Return Rates

How can one talk about e-commerce metrics and not mention refund and return rates? Most customers in their lifetime have experienced issues with the products received, which eventually led to returns and refunds.

From the perspective of an e-commerce business owner, though, these rates must be as low as possible. Small brands, particularly, cannot afford high returns.

The high return rate doesn't paint the big brands in a positive light either because it generally suggests problems with customer satisfaction or product quality. But it could also mean poor lead quality.

Since returns take time for processing, they prove to be quite costly for e-commerce brands.

Return rate or Refund rate = (Orders returned or refunded ÷ total number of orders) × 100%

To minimize return and refund rates, you first need to identify the reason(s) behind high rates. For example, if it's a quality issue, it needs to be fixed (obviously); If the products get damaged during shipping, you might need a new shipping partner.

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9. Average Time to Purchase

You saw something (a new curling iron, perhaps?), and you instantly liked it.

From the Instagram ad where you found it, you visit the e-commerce brand and almost immediately place the order. Call it your love for curling irons, or an impulse to buy; you probably took less than 10 minutes to place an order after your first click.

In another scenario, you might need some motivation. Instead of shopping immediately, you might wish to consult someone, or probably wait for your paycheck to arrive.

Whatever the reason may be, not every interested user purchases something as soon as they set eyes on it. Some may even require multiple visits to your e-commerce site before making their first purchase.

The time taken to convert from a website visitor to a paying customer is called "time to purchase." How does knowing this e-commerce metric (refer to Google Analytics to check your average time to purchase) help?

Here's how:

• If your products require deep research, you can run email campaigns to help potential customers make an informed decision
• If your products entice more impulsive purchases, you can create campaigns that include discounts, flash sales, and newly launched products

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10. Traffic Volume

Traffic volume is a multi-faceted e-commerce KPI that can be further broken down into:

• Number of monthly, weekly, or daily visitors to your e-commerce site
• Pageviews per visit
• Time spent on the website
• Revenue generated from different traffic sources
• Bounce rate
• Returning customers vs. new customers

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Make sure your site is integrated with Google Analytics so that you can easily track these e-commerce metrics, draw meaningful insights, and take your business to new heights. Now, empowered with the knowledge of the 10 most important e-commerce metrics, are you ready to rock your sales?