Main metrics you need to know if you have an ecommerce business and how to calculate them

Ecommerce metrics or Key Performance Indicators (KPIs) are performance indicators that can be measured and verified on a regular basis in order to understand the effectiveness of a digital marketing strategy.

In other words, metrics for online shops are tools that provide you with information about the performance of a campaign and help you make important decisions in order to create a solid business model.

Moreover, if you know how to analyse them well, they will become a valuable source of suggestions that, like a tip-off, will show you what aspects you need to change if you want to improve your results.

As you can already deduce, knowing exactly what the main ecommerce metrics are and how to measure them is one of the keys to success in the world of online marketing.

In this post, you will learn what these metrics are and what mathematical formulas are used to calculate them.

The 12 essential metrics for your online shop

Increasing the conversion rate is the main goal of every business.

Without a doubt, some ecommerce metrics can help you manage an online shop and optimise your marketing strategy.

Below, we are going to look at 12 of these main indicators that will allow you, among other things, to measure the profitability of your strategies, optimise the conversion funnel or detect certain adjustments necessary for a better user experience.

1. Sales conversion rate or Conversion Rate or CR

The sales conversion rate measures the ratio between the number of sales made versus the total number of visitors in a given period of time.

In this case, it focuses on the percentage of sales achieved, but it could also refer to the number of new customers or leads obtained.

The formula to calculate this particular conversion rate is:

Sales conversion rate = Number of sales / Number of visits * 100

2. Customer acquisition cost or CAC

Customer acquisition cost or CAC is the amount of financial resources a company invests to acquire a new customer.

It relates to the average investment of the entire sales funnel from the time the customer is a lead until they make a purchase.

How is CAC calculated?

CAC = Marketing spend / Number of customers acquired.

This value will also help you to calculate the next parameter we are going to see.

3. Customer Lifetime Value

Customer Lifetime Value (CLV) is one of the most important ecommerce metrics. It measures the total revenue that a customer or user has generated in an e-commerce site since registration.

CLV is an online metric that relates to the engagement a brand generates, the quality of its products and the effectiveness of its loyalty strategies.

There are different ways to calculate the customer lifecycle depending on the type of business.

Here is a general formula for guidance:

CLV = Total average customer revenue over estimated lifetime – CAC

The total revenue is calculated by multiplying the average ticket by the number of years they usually remain as a customer.

4. Bounce rate or abandonment rate

The bounce rate is another ecommerce metric that requires attention. This KPI is the percentage of visitors to your website who leave without taking any relevant action, such as reading a piece of content, clicking on a link or viewing a product.

It is also a sign that the user experience needs to be improved: perhaps the website is slow to load, has usability issues or fails to connect with potential customers.

The bounce rate formula is as follows:

Bounce Rate = Number of visitors without interaction / Number of visits * 100

This value is usually calculated through platforms such as Google Analytics and other SEO applications, as it is one of the parameters that can influence our positioning.

5. Abandoned cart rate

The cart abandonment rate measures the percentage of visitors who add products to the cart but do not complete the shopping process.

Cart abandonment also indicates that there may be a technical problem related to policies, design, site loading, or something that inspired enough distrust in the customer to change their decision.

How can you calculate this rate?

Abandoned cart rate = Total orders / Initiated shopping carts * 100

Total orders are completed transactions.

6. Returns rate

This ecommerce metric determines a customer’s dissatisfaction with the product received, either because of damage, poor packaging or because the content does not meet the actual expectations of the product.

The mathematical formula for calculating the return rate is:

Return rate = Number of orders returned / Total orders * 100

Product and service returns are a real problem if they are not handled properly.

7. Return on investment or ROI

ROI evaluates the relationship between an investment and the results obtained. It is used to determine the performance of a given marketing strategy or action.

To calculate ROI we must apply this formula:

ROI = (Revenues – Costs) / Costs * 100

Average Order Value

This metric indicates how much a customer spends on average on each ecommerce transaction.

The higher the average basket spend, the more revenue the e-commerce business will earn. Therefore, it is important to use cross-selling strategies or offer complementary products at the end of the first transaction.

The formula for the average order value (AOV) is:

AOV = Total revenue / Number of orders

Abandonment rate

This rate determines the percentage of shoppers who have abandoned over a specific period of time.

This digital marketing metric is related to customer loyalty and satisfaction. To understand this, you can also calculate the Net Promoter Score (NPS), which measures customer loyalty based on customer recommendations.

It is also directly related to the effectiveness of marketing actions, customer service and the marketing of high quality products.

The mathematical formula for calculating the churn rate is:

Abandonment rate = Number of lost customers / Number of customers at the beginning of the period * 100.

To find out the number of customers lost in a given period of time, simply subtract the number of customers you had at the beginning of the period from the number you had at the end of the period.

Revenue per traffic source

This metric assesses the different sources of traffic coming to your website, to determine which is the most effective in driving sales.

This can vary depending on the possible seasonal periods to be analysed, the day of the week, the type of offers or product, etc.

Some of the most powerful traffic sources are organic SEO, email marketing and social media.

Using this rate, you can identify the best sources of revenue. This will allow you to allocate your budget effectively to multiply your sales.

The formula is simple:

Revenue per traffic source = Revenue per type of traffic source / Total revenue * 100

Depending on the result, you will know for example if you are more profitable with direct traffic from sending emails to promote your products, if it is more profitable to leverage social media or if you should invest more in SEO.

Revenue by device type

It is also useful to know which device type generates the most revenue for your online business.

You can do this with the ecommerce metrics of revenue by device type.

The formula for this metric is:

Revenue per device type = Revenue per device / Total revenue x 100

Revenue by type of traffic: new visitors vs returning visitors

The last of the ecommerce metrics we are going to analyse today measures the effectiveness of the current marketing strategy versus the previous ones, as it relates the revenue left by new visitors compared to recurring users.

How do we calculate revenue per traffic type?

Revenue per traffic type = Revenue per new visitor / Revenue per returning visitor

  • If the value is less than 1: Revenue from returning customers is higher. The previous strategy was better.
  • If the value is greater than 1: Revenue from new customers is higher. The new strategy is better.
  • If the value is equal to 1: Revenues from both types of customers are equal, so the different strategies have the same performance.

Do you want to increase your ecommerce sales and profits?

Knowing and calculating all these actionable metrics will give you a lot of very relevant data and information with which you can make decisions that improve the performance and conversions of your ecommerce.

They also serve to interpret the tastes of your audience and be able to act accordingly, until you achieve a profitable business model.

Without a doubt, to optimise your online shop, it is essential to measure the main KPIs, but there are other decisions that can also help you to achieve this…

Find out how Boardfy helps you boost your profits

Harness the power of the world’s fastest price monitoring and Dynamic Pricing tool.

Thanks to Boardfy you will be able to:

  • Keep an eye on your rivals to act quickly on any price change.
  • Discover in which products you are competitive and bet on them to optimise your Google Shopping campaigns.
  • Identify in which products you have no competition and you can increase your margins.
  • Win the Amazon BuyBox.

You can achieve all this and much more if you trust Boardfy.

Plus, you can try us for free!

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