ECommerce KPIs: Key Performance Indicators You Need to be Measuring

9 min read

Success with your eCommerce business might seem straightforward enough. The more sales you make, the more revenue you have. The more revenue you have, the more you can grow.

Of course, nothing in the online business world is so simple. After all, if it were simple, no business would fail.

To achieve sustained success, businesses of all types need to be able to measure their performance.

Without measuring, you’re just flying blind.

So how do you measure your performance?
That’s done through key performance indicators, or KPIs.

With the right KPIs, your eCommerce business will be able to run smoothly and grow over time.

But there are tons of performance indicators out there, and knowing what they are and how to use them can often mean the difference between steady growth and running out of steam.

So let’s dive into eCommerce KPIs — what they are, the types you should measure, and why you should track them.

What are ECommerce KPIs?

First, it’s important to understand that there’s a difference between KPIs and metrics.

ECommerce metrics are basically anything you can measure about your business.

Put another way, if it can be measured, it is likely considered a metric.

ECommerce KPIs are different, though. While they’re still considered under the umbrella of metrics, KPIs are far more valuable.

Key performance indicators are the metrics that are most important for your business.

Ecommerce KPIs

Having said that, what exactly is a key performance indicator in the first place?

A KPI is a type of measurement which is used by businesses to track a certain aspect of their performance. This is most effective when it is measured against a clear and specific goal.

While there are many metrics out there, you need to focus on the ones that will have the most impact on your eCommerce company. These are the key metrics for your business.

At the same time, every KPI should have four attributes for it to be the most effective.

Let’s take a look at them.

Accurate Measurement

A KPI is no good to you if it can’t be put in measurable terms. It needs to be quantifiable, and it’s best when the measurement process is simple.

It’s also important for that measurement to be accurate.

Imagine basing business decisions off of a poor calculation. Needless to say, the results wouldn’t help out your company very much.

Timeliness

Old data can be good, but if all you have is old data, your decisions will be based off of information that’s out of date.

Instead, make sure your KPIs feature data that is timely and recent.

A best case scenario would be to have real-time or near real-time data at hand.

In this way, your KPIs will be the most up to date and accurate. Your decisions can be made on sound information.

Relevance

With so many KPIs to choose from, you need to make sure the ones you measure are actually relevant and helpful to your business.

KPIs are meant to help you progress toward a certain goal.

If the KPI doesn’t do that, then it’s best to ignore it.

All KPIs should also have an impact on your business’s bottom line. That is, after all, the ultimate measure of success.

Actionable

Each eCommerce KPI should provide sufficient insight that will lead you to action.

They should indicate what you need to do to improve.

Basically, they need to give you the information that will lead you toward achieving your goal.

A KPI that doesn’t provide that insight is one that you should discard.

KPIs You Need to be Measuring

So now that you know what KPIs are and what they should have, it’s time to look into the KPIs you’re going to want to focus on as you grow your online business.

You’ll notice that most have a fun little acronym that goes with them.

1. Average Order Value

The Average Order Value (AOV) details how much money is spent on each order.

The more a customer spends on a single order, the higher your AOV will be. And a high AOV is a clear signal that your company is doing well.

Calculating your AOV is actually quite simple.

All you have to do is take you total revenue, then divide it by the total number of orders. The result is your Average Order Value.

A low AOV means customers are purchasing your products, but they’re not spending much on their order. If your AOV seems a bit too low, that may indicate the order bumps and upsells you’re using aren’t resonating with customers.

There are lots of different ways you can increase AOV.

Some of the best strategies include cross-selling, upselling, and bundling multiple products together. You might even try giving special discounts if customers spend a certain amount (like getting $10 off if they spend $70).

2. Cost Per Acquisition

Cost Per Acquisition (CPA) is sometimes referred to as Customer Acquisition Cost (CAC).

Basically, this indicates how much it costs you as a business to get a new customer.

The lower the cost it takes for you to acquire new customers, the better position you’ll be in.

Like AOV, calculating CPA is a pretty easy formula. Just take the money you spend to acquire new customers and divide it by the total number of new customers you’ve acquired.

The costs involved in acquiring customers usually include what you spend on marketing and advertising.

There’s not necessarily a target CPA number that you should be gunning for since every business is different.

For example, if you sell a book for $20, and your CPA is $5, that’s not too bad. If you’re spending $30 to get each new customer, however, then you might be in trouble.

On the other hand, a business might have a CPA of $75, but if the product they’re selling goes for $750, then that’s a good CPA as well.

3. Shopping Cart Abandonment Rate

Have you ever been shopping online, clicked to place an item in your shopping cart, but never actually completed the purchase?

That happens with sales funnels too as someone completes only part of an order form and fails to submit it.

That would be a case of shopping cart abandonment, and it’s something that happens more than you might think.

The online shopping cart abandonment rate is simply the rate at which customers put something in their shopping cart but never go through with buying it.

According to the Baymard Institute, the average online shopping cart abandonment rate stands at 69.57%.

So that means on your order forms, two-thirds of all people don’t complete their purchase.

That’s a ridiculously high number.

Now there can be a number of reasons customers end up abandoning a purchase. It could be due to a credit card getting declined, for example, but much of the time it might indicate something is wrong with your website or your sales process.

If you have a high abandonment rate, make sure that the checkout process is a smooth one for the customer. Ensure that your website is free of errors and is easy to navigate.

Also be sure to set shipping costs at a reasonable rate; that’s another reason people might not follow through on making a purchase.

A low order form abandonment rate is the goal here, so if yours is low, you know you’re on the right track.

To measure it, just divide the number of completed transactions by the number of initiated transactions.

4. Conversion Rate

Measuring the effectiveness of your sales funnel is crucial to ensuring continued success for your online business.

The one key performance indicator that can help you measure that effectiveness is conversion rate.

In essence, your conversion rate shows you how many visitors to your website actually end up taking an action.

That action can come in many forms. It might mean downloading a free demo or report. It could mean signing up for future emails and offers. Often it takes the form of buying something, which is usually the goal.

A high conversion rate can indicate that your sales funnel does its job well. It effectively shepherds the customer along until they make the final purchase.

Having a low conversion rate may show that improvements need to be made to get people to act.

So what would be a good conversion rate?

Data from Statista shows that the average conversion rate among online shoppers usually hovers around 2.5% to 3%.

Get your conversion rate above that, and that would be a good sign for the direction of your business.

5. Customer Lifetime Value

Customer Lifetime Value (CLV) is a measurement of how much a customer is expected to spend at your business during the course of his or her lifetime.

This key performance indicator speaks to the value that a single customer can give you for years provided that you work to retain them.

By calculating CLV, you can determine just how well your company is able to retain customers.

As for figuring out customer lifetime value, you first need to take your AOV, multiply it by the average number of times that a customer buys from you every year, then multiply that by the average customer retention time in either months or years.

A high CLV means that you’re getting a lot out of each customer.

A low CLV means you need to start working harder to increase your retention rates. After all, a mere 5% increase in your customer retention rate can lead to a 25% to 95% bump in your profits.

If you’d like to learn more about Customer Lifetime Value and how to increase it, make sure to read this article.

6. Traffic Indicators

This category is somewhat broad, so let’s break it down a bit more.

Back in the day, the goal of most eCommerce sites was to get as much traffic onto the website as possible.

The reasoning went a bit like this: the more people that go to your website, the more conversions you’ll have.

While that’s sort of true, simply measuring the amount of traffic you get isn’t clear or detailed enough to tell you much about your customers or your company’s performance.

That’s why so many eCommerce businesses have decided to delve deeper into the data and figure out better key performance indicators when it comes to traffic.

One such indicator is “page views per visit.”

This key performance indicator shows the average number of pages that a visitor to the site looks at.

If a potential customer is looking at a lot of pages, it may indicate they like what they’re seeing and want to know more.

Page views per visit shouldn’t be the only thing you track, however. A high number, while sometimes good, could also indicate customers are searching all over your site for something they can’t find.

At the same time, you can keep a close eye on the number of “unique visitors” compared to “returning visitors.”

As the terms suggest, unique visitors refers to people who come to your site for the first time, and returning visitors are those who visit more than once.

Knowing these numbers can help you get an idea of how well you perform at retaining customers.

It can also demonstrate your effectiveness at attracting new people.

Another KPI related to web traffic is “time on site.”

As you can probably guess, time on site measures the amount of time a user spends on your site.

Generally speaking, the more time a visitor spends on an eCommerce site, the better. It means they’re attention is being held, and that could lead to a purchase.

Note that sometimes a high time on site duration may be from simply having a page open in a browser for a while. Even so, time on site is an average, so it gives you a good indication of how long the average user is spending looking at your content.

7. Gross Profit Margin

We’ll cap off our KPIs with gross profit margin.

Most businesses do this anyway, and it should be no exception for your eCommerce company.

Tracking your gross profit margin helps you focus on what will keep your business going for many years to come — making money.

With so many KPIs to keep track of, it can be easy to lose sight of the end goal.

Gross profit margin takes care of that.

To calculate it, you’ll need to start off by figuring out your profit, which is your total revenue minus the cost of the goods you have sold.

Next, divide that profit by total revenue, then multiply that number by 100.

The result is your gross profit margin.

Track Your KPIs For ECommerce Success

That’s a lot to take in, isn’t it?

Don’t feel overwhelmed. Over time, terms like CLV, AOV, conversion rate, and more will sound common.

You’ll no longer have to feel like you’re flying blind and reacting based only on gut instinct.

You don’t have to do it all alone, though.

ClickFunnels can help.

In addition to helping you build your sales funnel, ClickFunnels can assist in tracking the most important KPIs.

With ClickFunnels, you’ll experience incredible success as more people enter your sales funnel and buy your products.

Want to give it a try? You can sign up for a free 14-day trial right now and see the difference ClickFunnels can make.

What’s been your experience with KPIs? Which ones have you found to be the most important? Talk about it in the comments below.

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