Essential KPIs For Ecommerce and Why You Need to Use Them

What is a KPI?

Key Performance Indicators (KPIs) are tools to effectively measure progress on company business goals. By monitoring specific KPIs in ecommerce, brands can identify exactly what they need to do to reach their goals in sales, marketing and customer service, among other sectors.

There are hundreds of different KPIs out there, but they won’t all be necessary for your business - there are so many ecommerce KPI options for each goal that you have for your site, but you can choose only the most relevant metrics to help optimize your online retail business. This way, you can learn a lot about your customers and offer them the best online shopping experience possible.

At the end of the day, a KPI is just a number. But combined with careful analysis, monitoring and interaction with other indicators, it becomes more than just information; it can give you the knowledge you need to drive your business decisions.

How can I use KPIs for my ecommerce site?

If you have a specific goal in mind - like increasing site traffic - you can use KPIs to measure data that relates to this goal.

This guide will show you the most helpful KPIs for ecommerce depending on your long-term goals, as well as how to use them most effectively for your business. These tools can help you to recognize what you need to focus on in order to reach your goals.

Here is a guide to some of the most useful Key Performance Indicators for sales, marketing and customer service.

Ecommerce KPIs for sales

Broadly, KPIs for sales are used to show your progress in revenue. You can of course monitor the number of sales you have made in a certain time period - daily, weekly, monthly or yearly - but there are many more indicators that relate to specific sales goals that you can use to inform your project decisions.

Average Order Size: This indicates the average order size from a customer of your business, and how much they spend on average when they shop with you. This can be combined with the Number of Transactions for a more detailed insight into your performance.

Gross Profit: With this simple KPI, you can calculate your gross profit by subtracting the cost of the goods from the total number of sales.

Conversion Rate: This is used to calculate the rate at which customers are buying from your online retail store. It's calculated by dividing the total number of site visitors by the number of purchases, or conversions. This can be applied to the whole site, or to pages or categories.

Shopping Cart Abandonment Rate: By keeping track of customers who add items to their cart but who don’t check out, you can determine whether there are problems with your checkout process. The lower the number, the better.

Shopping Cart Conversion Rate: like the shopping cart abandonment rate, this is how to calculate how many customers complete the checkout process.

New Customer Orders vs. Returning Customer Orders: You can use this tool to compare who many new and repeat customers your site has. This is useful for tracking both customer acquisition and customer loyalty, which are both really important for an ecommerce site.

Cost of Goods Sold: This is the amount of money you are spending to sell your product, taking into consideration additional inventory costs like manufacturing expenses, overhead costs and employee wages.

Cost of Goods Sold = Beginning Inventory Costs (of the year) + Additional Inventory Costs (purchased during the year) - Final Inventory (at the end of the year)

Product Relationship: This KPI tells you which of your products are viewed consecutively so that you can more efficiently promote your products.

Product Affinity: Similar to Product Relationship, this metric tells you which goods are commonly purchased together.

Churn Rate: for brands with a subscription or membership service, the churn rate tells you how quickly customers leave your brand or if they cancel their subscriptions.

Customer Acquisition Cost: By breaking down your marketing spend per individual customer, you can calculate how much your company spends on acquiring a new customer.

Purchase Frequency: By calculating the average number of orders made by customers during a period of time, you can measure customer loyalty and more effectively promote less popular products to repeat customers.

Time Between Purchases: This metric shows how long a customer goes between purchases from your website. This can allow you to tailor your campaigns to their buying behaviors.

Ecommerce KPIs for Marketing

KPIs for ecommerce marketing are linked to your sales metrics, too. They can show you how well you’re progressing with your marketing and advertising targets, by telling you which products are the most successful, who’s buying them and why. With this information, you can guide your marketing plans in the right direction. Here are some of the most useful indicators for marketing.

Site Traffic: this is the most obvious metric, referring to the number of visitors on your retail store. The more traffic, the more hits on your ecommerce site.

New Visitors vs Returning Visitors: Just as this performance indicator is crucial for sales, it also plays a big part in effective marketing. This is one way of checking the success of your digital marketing campaigns. For example, a high number of returning visitors is good if you run retargeted ads.

Average Session Time: This shows the average amount of time that a visitor spends on your website during a single visit. It can be calculated by dividing the total session duration by the number of sessions. The more time they spend on your website, the better they are engaging with your brand. On the other hand, a longer period of time spent on checkout pages indicates some issues with the checkout process. You can work out the number of pageviews with this formula:

Pageviews Per Session = Total Number of Pageviews / Total Number of Visitors.

This can help you change up your design if visitors spend too much time trying to find the right product.

Bounce Rate: The bounce rate shows you how many visitors leave your website after viewing only one page. If this number is high, it suggests that site visitors are not fully engaging with the brand.

Bounce Rate = Total Number of One-Page visits / Total Number of Entries to a Website

Mobile Site Traffic: This is particularly important when making sure that your site is optimized for mobile devices. If you have a high level of mobile site traffic, this should be a priority.

Traffic source: This KPI tells you exactly where your visitors are coming from, or how they are finding your site. This can include organic search, paid advertising or social media campaigns. By seeing which traffic sources are most effective, you can give your marketing campaign a better focus.

Email List Growth Rate: This is the first of a series of important metrics for ecommerce sites that use an email list for marketing. It's crucial to pay attention to the growth rate of your mailing list.

Email List Growth Rate = [(Total Number of New Subscribers - Total Number of Unsubscribers) / Total Subscribers] x 100

Email Bounce Rate: Of course, you have to know how many customers can actually read your emails, by calculating the percentage of emails which were not successfully delivered to the recipient.

Email Open Rate: it’s also possible to identify the percentage of recipients who open the email, in order to judge how effect your email marketing is.

Email Open Rate = (Total Number of Unique Open / Number of Total Emails Sent Successfully) x100

Email Conversion Rate: Like the standard conversion metric, this shows the email recipients who completed a purchase after clicking through the links provided in the emails.

Social Media Engagement: Social media becoming more and more important in digital marketing, It's important to keep track of your followers and fans, and the ways that they interact with the company on social media sites.

Ecommerce KPIs for Customer Service

Customer service is an incredibly important part of ecommerce, no matter how big or small your business is. Call centers, email support and social media can all use Key Performance Indicators to make sure that your customers are having a good experience when they interact with your brand.

Customer Satisfaction Score: To measure customer satisfaction, you need a customer feedback survey, usually asking a simple question like ‘How satisfied were you with your experience?’, answered with a numbered scale.

CSAT = Sum of All Scores / Total Number of Respondents

Net Promoter Score: Another key question for customers is how likely they are to recommend your company to others. The answers to this can be separated into three categories, based on a score out of ten:

• Promoters = respondents giving a score of 9-10

• Passives = respondents giving a score of 7-8

• Detractors = respondents giving a score of 0-6

Then , you can calculate the NPS using this formula:

NPS = % of Promoters - % of Detractors

Customer Service Count: This is the total number of times that your customer service team is contacted. This can be done by looking at the number of email, phone calls and live chat engagements you have on your site.

First Response Time: First response time is the average length of time a customer waits to receive a reply to their customer service query. The less time, the better!

Average Resolution Time: Another key figure, this is how long on average it takes for issues to be resolved, starting from when the customer first got in contact about the problem.

Refund or Return Rate: It’s good to keep track of how often customers are requesting to return items or are asking for a refund. This is how to check whether your website, products or checkout process are meeting the standards of the customer.

Active Issues: The number of active issues show how many customer support queries are in progress at any given time.

Concern Classification: By classifying and categorizing problems that your customers raise, you can pick up on any patterns in the issues, and use this information to make site improvements and in turn more effectively meet the expectation of your customers.

Service Escalation Rate: This metric keeps track of the number of times that customers have asked customer service representatives to redirect them to a supervisor or member of senior management. This number should be kept low, so that customers can resolve their issues quickly and effectively.

Using KPIs for Ecommerce

The first step to using Key Performance Indicators to reach your ecommerce business objectives is to know your goals. Once you are clear on what your goals are, you can work out which areas of business will have an impact on your progress.

Consider the industry that your business is a part of, how well-established your brand is and the kind of goals that you should be setting for your current stage.

Once you’ve chosen the right ecommerce KPIs to track your performance, you can create a schedule and set up benchmarks or milestones to achieve your goals. Once you’ve got your business targets and KIPs established, it’s important to monitor them closely and adapt them regularly. Remember that it isn’t set in stone - you can continuously tweak your metrics and strategy until you find what works best for your business.

The KPIs that you use should have an impact on your performance and ultimately drive your business decisions.