Most e-commerce businesses these days are data-rich but information poor. But, with the convenience of access to digital analytics, this is a golden opportunity that is being wasted. While sales, traffic, and profits are obvious KPIs for e-commerce operations, there are many other metrics that could be tracked as well.

KPIs are important in business analytics because they provide objectivity. Without KPIs, one may make business decisions based on instinct or personal preferences, which could be potentially dangerous for a business. On the other hand, KPIs help businesses make strategic decisions by providing clear and accurate understanding of businesses and leading to valuable insights that lead to the growth of businesses.

What are the key performance indicators that businesses should track? This article will cover the importance of e-commerce KPIs and how they can be used to improve a business. Let’s get started!

What is a KPI?

The three letters stand for Key Performance Indicator.

KPIs are used to measure the performance of an organization and outline where it needs to improve.In other words KPIs are like signposts on a journey, indicating where you are in relation to your business goals and which path to take to achieve them.

Types of KPIs

Key performance indicators, or KPIs, can be quantitative, qualitative and revealing trends in the past or predicting the company’s future. In some cases, specific KPIs can also touch on the company’s business operations.

In the eCommerce industry, some of the most important KPIs fall into the following five categories:

1-Sales

Sales key performance indicators are one of the most important metrics for tracking to evaluate your team’s performance against the organizational goals and sales made by the company. Sales key performance indicators can help a business optimize its sales and sales process while ensuring that it is prioritizing the right strategy for growth.

Sales KPIs can be analyzed according to a specific time frame, channel, team, employee, etc. 

A few examples of sales key performance indicators include net sales, average order size, gross profit, number of transactions, conversion rate, etc.

2-Project Management

Each project or division within a business has specific tasks and goals. Project management KPIs are key performance indicators in specific measurement tools that indicate how well the team prioritize and achieve their goals, as well as insight into how well they complete specific tasks and how their processes help them achieve them.

A few examples of project management key performance indicators include budget, hours worked, cost variance, return on investment or ROI, CPI or cost performance index, etc. 

3-Customer Service

Customer service KPIs are a way to monitor, measure, and optimize customer relations. Collecting data allows businesses to create more efficient and friendly services. This is also important in determining if your business is meeting customer expectations, and ultimately helps provide a positive customer service experience. 

Examples of customer service KPIs include CSAT or customer satisfaction score; hit rate; net promoter score; active issues; backlogs; escalation rate; concern classification; etc.

4-Manufacturing

Manufacturing KPIs are well-defined key performance indicators and metrics that are used by the manufacturing team to analyze its production process over time. They help companies monitor their productivity and budget, as well as compare their efficacy to the competitors in the business. 

Some examples of manufacturing KPIs include yield, OLE or overall labor effectiveness, OEE or overall equipment effectiveness, cycle time, number of non-compliance incidents, etc.

5-Marketing

Marketing KPIs analyze the business's marketing campaign performance and advertising goals. These metrics are present in the form of quantifiable measures, and it helps determine the right social media strategy for increasing sales, traffic and consumer leads.

A few examples of marketing KPIs include new visitors vs. returning visitors, time on site, site traffic, page views per customer, mobile site traffic, bounce rate, daypart monitoring, newsletter subscriptions, open email rate, social media followers, pay-per-click traffic volume, affiliate performance rates, and so on. 

10 Metrics to Track for Ecommerce Success

Now that we have given you a comprehensive understanding of what KPIs are and why they are important to eCommerce businesses, let’s look at some key markers of your e-commerce KPI dashboard:

1. Return On Ad Spend (ROAS): Return on Ad Spend or ROAS is the amount of money a business earns back in revenue for every dollar it spends on advertising. ROAS helps eCommerce businesses generate cash flow and is one of the most significant markers of eCommerce KPI.

By tracking ROAS, a company can determine how effective their advertising campaign is and predict how much revenue they can generate.

2. Shopping Cart Abandonment Rate: Shopping cart abandonment is when visitors place items from the store to their carts but don't finish checkout. If a business has a high cart abandonment rate, it may mean that customers are not fully satisfied with their purchase or that they feel pressured to make a decision within a certain timeframe. The average shopping cart abandonment rate for businesses is almost 70 percent.

To calculate your page’s shopping cart abandonment rate, divide the number of completed purchases by the number of shopping carts.

3. Customer Lifetime Value (CLTV):Customer Lifetime Value (CLTV) is one of the most unique and determining key performance indicators to gauge the progress of an e-commerce business. No other metric can quite capture the overall functioning of an e-commerce business like CLTV does. CLTV in itself implies several important KPIs such as average order value, conversion rate , return customer rate, and so on.

4. Conversion Rate: One of the most important eCommerce KPIs is your conversion rate. Study your landing pages and calls-to-action to evaluate how effective they are at converting visitors into buyers. The conversion rate includes any actions visitors on your page make, such as making a purchase or adding things to the cart or signing up for the newsletter.

To calculate your conversion rate, you need to divide the total number of conversions by the number of visitors your store attracts and multiply it by 100. 

5. Customer Retention Rate:The success of a business depends on its customer retention rate. If your customers frequently come back to your business, it means that your business has something special to offer—something that will contribute to its long-term success.

6. Return on Marketing Investment:In today's competitive business environment, businesses in the eCommerce industry put a lot of emphasis on marketing. Therefore, return on marketing investment is one of the most important key performance indicators for these types of businesses.

To calculate return on marketing investment, add up your advertising/labor/tools cost and divide it with the total revenue. 

7. Cost Per Acquisition (CPA):The cost per acquisition (CPA) is the single most important key performance indicator in the eCommerce industry. CPA calibrates for all other key performance indicators and informs the company if their performance and progress are sustainable. If an eCommerce business knows its CPA, it can easily calculate return on investment (ROI) and this will help them scale up.

8. Orders Per Active Customer:For eCommerce businesses, orders per active customer is considered a vital metric to gauge their performance over time. Orders per active customer refers to the average number of orders that a store's active customers make during a specified period. It implies whether or not the company is doing well and attracting frequent customers. This directly affects revenue and growth for the company.

9. Average Profit Per Customer:Average Profit Per Customer is important because it tells you how much of your customer's money customer X is worth to your company. 

For example, if each of your customers on average is worth $500 to your company, you can afford to spend anything less than $500 and still be profitable. On the other hand, if your competing business’s average profit per customer is only $100, they can't spend anything above that. Therefore, your customer is worth more.

10. Gross Merchandise Volume (GMV):Gross Merchandise Volume, or GMV, is the total value of merchandise sold over a given time period. This metric is useful in determining how profitable your eCommerce platform is. If the overall volume of your store is increasing, it implies that the business is growing and customers have an affinity towards the system.

Conclusion

The key is to take the time to figure out what you want and need from your business. Once you have identified the goals and aspirations of your company, it’s time to figure out KPIs that align with those objectives. As we said, each business is unique, so be creative in how you track metrics that fit your needs.

The KPIs mentioned above are an effective way to drive business, improve your customer activity cycle, and build brand loyalty. Remember to be critical and thorough when tracking KPIs.