eCommerce KPIs: My 13 Favorite Key Performance Indicators

Table Of Contents

In this article, we shall focus on 13 of the top eCommerce KPIs metrics that are imperative to monitor and grow your business. Our aim through this effort is to enable startups to acquire actionable guidelines that will enhance their business.

What Is a Key Performance Indicator (KPI)?

A KPI, a key performance indicator (also a performance meter) is a measure of the performance level for an accomplished process or an implemented system. The amount of the indicator is directly proportional to a pre-defined objective and is mostly given in percentage values.

KPIs are the actionable indicators that can and shall motivate your business. Our advice for starting up businesses: stay away from measuring vanity metrics. These are indicators meant to make your site appear good to visitors, but will not develop your business.

The Expected Outcomes of eCommerce KPIs

eCommerce KPIs are valuable for any online business to expand their brand and upscale their transactions. Knowing how these KPIs jointly act bestows the manager with more effective information for decision-making in the business.

We shall explain later how these KPIs should prepare the groundwork for growth and customer retention.

These KPIs can be divided into three groups.

  1. Sales-wise eCommerce KPIs: Clearly, these will focus on average purchase value, profit per order, inventory levels, customer acquisition cost, customer long-term value, and inventory turnover.
  2. Marketing-wise eCommerce KPIs: These consider site traffic, unique visits, traffic sources, and conversion rate.
  3. Customer Service eCommerce KPIs: Contact Reason Classification, Response and Resolution Time, and then Net Promoter Score.

Let’s take them in more detail…

Group 1: Sales-wise eCommerce KPIs

Sales growth and customer attraction are the most significant indicators of business progress. Therefore, they are the main KPIs to study.

1. Sales Growth

Every eCommerce business monitors its sales, and you should be monitoring your sales too. Whether hourly, daily, monthly, quarterly or annually.

Also, you should monitor sales by the advert campaigns and by channels. Sales growth indicator may take one of either:

  • Positive percentage over a given time interval.
  • Negative percentage over a given time interval.

The merchant may detect patterns in how sales are trending at nights, weekends, and holidays. Monitoring sales growth by campaign and channel indicates which acquisition attempts are succeeding, when they are acting and where.

Monitoring sales trends and comparing the same to your marketing strategy, may help the merchant spend adverts budget more effectively.

2. Average Purchase Value

The merchant should track average sales value for a customer’s first, second, and third purchase.

Average purchase value is one of the sales performance indicators that can be applied when preparing a sales growth strategy and revenue forecast.

It displays the average sales value for each transaction, in this example, you can take 3 different customer transactions. Instantly the seller can calculate the average purchase value with the number of opportunities and see how they relate, over a specific interval of time.

What’s the Average Purchase Value Formula?

Average Purchase Value = Total Revenue / No. of Orders

Average Purchase Value Formula

Additionally, this is an example of a sales-wise eCommerce KPI that can show you whether you need to provide more incentives to your customers in order to increase your chance of selling a quality product or service.

3. Profit Per Order

It is a vital stand for the merchant to recognize his/her most profitable customers, the orders they fulfill, and where they come from. Those high-profit customers are the most valuable source of income, the merchant should do all efforts to retain them.

You can calculate PPO by the following formula:

Profit Per Order = Total Sum of Profit / No. of Orders

4. Customer Retention Rate

A retained customer is a person who makes, at least, three purchase orders from your store. It is a significant indicator to apprehend the clients’ feelings toward the product, and if those clients would turn into advocates.

Retained customers are the dearest profitable sources for the sellers. As their retained customers increase, their sales will proportionally increase.

An example of excellent customer retention is Amazon Prime. It is not just 2-day shipping for free, that is just a profit that comes with the same-day delivery, online streaming, Amazon fresh, and the extra 22 advantages from Amazon Prime.

Customer Retention Rate = [(C-N)/S] * 100

  • C: no. of customers at the end of the time interval.
  • N: no. of new customers entered in the time interval.
  • S: no. of customers at the beginning of the time interval

Customer Retention Rate Formula

5. Customer Lifetime Value (CLV)

The customer lifetime value measures the generated revenue by a customer over their lifetime with your store. It is a critical metric to realize the magnitude of expenditure to acquire a new client.

The simplest formula to measure CLV is:

CLV = average value of a purchase * no. of purchases/yr * average customer relationship (yrs)

Whereas “average customer relationship” is measured in years.

Customer Lifetime Value Formula

6. Inventory Levels by Item

The seller cannot grow sales without having sufficient inventory, particularly on quality products. Thus, the merchant should maintain a high inventory position at sales peak times, and low inventory during the moderate sales times.

Minimum Inventory Level = Reordering Level – (Normal Consumption x Normal Reorder Period)

Minimum Inventory Level Formula

7. Inventory Turnover

It calculates how quickly the merchant is turning stock to cash flow to maintain sales operations. If the seller puts money into the inventory, has lines of credit, and acceptable payment conditions with store suppliers, he should be able to sell the in-stock before payment due time.

  • Average Inventory = (Beginning Inventory + Ending Inventory) / 2
  • Inventory Turnover = Net Sales / Avg. Inventory at a Selling Price

Inventory Turnover Formula

With respect to inventory management, there are so many systems there to assist the merchant to better manage inventory returns to confirm that the store has “in-stock” and to minimize cash burn.

This work is so laborious to do it manually, spreadsheets can work it efficiently, but for inventory calculations you need automation.

Group 2: The Marketing-wise eCommerce KPIs

8. Site Traffic

It is crucial for the merchant to monitor his site traffic. How many visitors the site is receiving hourly, daily, weekly, and/or monthly.

It is vital to identify this, with respect to the eCommerce sales trends, because the merchant is tracking his sales trends within a specific time interval. The store may witness times where it receives high traffic and low sales, or conversely high sales and not much traffic.

Comparing and recognizing such trends can help the merchant to make better advert decisions, as it can help to create better content, and help him with the advertising channel decisions.

9. Unique Visitors

It is so significant to figure the numbers of Unique Visitors are coming to the site versus Returning Visitors. This helps the merchant to evaluate the customer retention efforts in addition to the success of advertising.

The store owner should monitor site visitors and sales following each marketing or advertising campaign he launches.

Accordingly, if the seller has launched a public relations campaign, he should track the traffic and sales in terms of the content. If he has run adverts, he ought to check the traffic and sales after each advert. Also, if he has run affiliate programs, he needs to monitor the traffic and the sales.

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10. Traffic Sources

The online store owner should always monitor the traffic sources to find out:

  • What channels his visitors are coming from?
  • What marketing strategies are working at these platforms?
  • What kind of improvements does your site need?
  • Are these visitors coming after paid search, SEO content, or due to public relations efforts?

By reviewing the channels, the seller can understand where the adverts and acquisition efforts are paying off. The merchant may find that an appreciable number of acquisitions resulted from non-paid sources.

When you identify this, you can put more effort into that channel. But, if the same has resulted from spend search, and the acquisition cost is acceptable, then the merchant can spend the extra money and will generate higher sales.

11. Conversion Rate

Actually, I cannot emphasize the conversion rate adequately, because it can easily achieve targets. Out of the customers who are visiting the site, how make a purchase order?

How can the site owner enhance this rate? If he/she categorizes them by the operating system, device, or by channel.

All of this info is available by Google Analytics.

To calculate the CR:

Conversion Rate = (Conversions / Total Visitors) * 100%

Conversion Rate Formula

The conversion rate, for an average eCommerce site, is less than 3%, on mobile, it would be less than 2%. The lower conversion rate through mobile is mainly due to payment issues. Here, you can opt to smooth platforms such as Apple, Amazon, PayPal, and Stripe.

The seller should always perform A/B tests on product pages and accordingly monitor the user experience changes.

Group 3: Customer Service eCommerce KPIs

Though these KPIs may appear self-evident, surprisingly many firms don’t calculate them. Particularly with the era of social media where customers have many spaces to speak out their infuriation and rate any product(s).

The merchant has to readily address any customer service issues. Let’s not forget about the importance of social media, because social media is visited by many clients as a channel for customer service communication.

12. Response and Resolution Time

Store owners can turn even the most irritated customer into a positive buyer, 90% of the time by quickly responding and resolving their complaints.

Also, the customer service team should classify the reason for customer calls, be it positives or negatives. This will show them patterns by sorting problems in categories, or similar positives together, this also shall uncover issues they didn’t even realize, which can enhance your business.

Customers may react to a product defect, a systems issue, or a website issue, that they didn’t know they had.

13. Net Promoter Score (NPS)

In my opinion, the Net Promoter Score is one of the simplest, and most useful, among the eCommerce KPIs. There are diverse spaces for clients to provide feedback about any online stores and products.

The merchant should know how customers feel toward their brand, how to foster advocates, who will chat about their product on social media, mention it to their families and friends, and help the seller to attract new customers.

Net Promoter Score is the indicator of the company’s performance at establishing relationships with customers. The process is easy to calculate, that is one more reason we appreciate it.

The store owner will ask the customer one simple question: on a scale of 1-10, how probable will YOU recommend our product?

Net Promoter Score

Then, divide their replies into three categories:

  • Promoters: 9-10
  • Passives: 7-8
  • Detractors: 0-6.

Now, you can calculate the Net Promoter Score as the following:

Promoters % – Detractors % = NPS

The result of the calculation is expressed without the percent sign.

For example, if 15% of respondents are Detractors, 20% Passives, and 65% Promoters, the NPS will be: 65-15=50

The merchant can implement the question survey into a normal auto-responder, retention emails, or welcome emails, and generally, he will receive %50 – 75% visits after three emails. Nearly all email service providers have a built-in template for this survey.

Here are some companies’ NPS, According to customergauge.com (benchmarks):

  • Nike: 32
  • McDonald’s: -8
  • Apple iPhone: 55
  • Vodafone: 10
  • Novartis Pharma: 32
  • HSBC: -24

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In a Nutshell

Find the exact KPIs to calculate eCommerce performance, starting with your methods and developing them will grow your business upward.

The most significant KPIs work together to measure and increase sales, measure and build customer retention, track customer acquisition costs, and calculate marketing and adverts success.

You should concentrate on the reduction of acquisition costs, enhancing customer retention, and sales growth, by managing an eCommerce with a higher converting rate. Focus on your customers, and be ready and prepared to handle service issues.

Finally, I hope we provided you with some useful information on actionable eCommerce KPIs benchmarks in this article.

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