Want to build a successful eCommerce store?
Then you’d better understand eCommerce metrics.
Every store lives and dies by the numbers. Keep reading to learn:
- The three kinds of metrics to measure for growth
- What factor to look for in choosing eCommerce metrics
- How to find the one metric that matters for your store
Let’s get started.
Editor’s note: This article explains the metrics that apply to every eCommerce business. But if you’d like personalized guidance on which specific metric will help your store the most right now, send us a message.
What are the most important eCommerce metrics?
Not all numbers are created equal.
Some metrics will decide your fate, while others can safely hide on your eCommerce analytics platform.
The most relevant are called key performance indicators or KPIs. But not every store has (or should have) the same KPIs.
To help you decide your eCommerce KPI, I’ve divided the following metrics into three categories based on sales expert Jay Abraham’s only three ways to grow a business:
1. Increase your customers
2. Increase your orders per customer
3. Increase your profit per order
1. eCommerce metrics to find more customers
Most eCommerce store owners start by looking for more customers. Whether you’re using paid ads, search engine optimization, or something else, you need to know what’s working and what isn’t.
The conversion rate is the mother of all metrics. It measures how many people in a group take action, measured as a percentage.
So if 100 people visited your site and 40 bought a product, you’d have a 40% conversion rate (which is excellent, by the way).
If we stack conversion metrics together—say, the number of people who add a product to their cart, go to checkout, and make a final purchase—we have a conversion funnel.
It’s called that because the total number of “converting” users gets smaller with each step in the customer journey, making a funnel shape.
From clicking a Google Ad to scrolling down a landing page, we can measure almost any action with an eCommerce conversion rate.
Shopping cart abandonment
Cart abandonment is the opposite of your cart-to-purchase conversion rate—it’s the percentage of people who add something to the cart but never place an order.
Reducing cart abandonment, so the thinking goes, is one of the easiest ways to boost sales. If a potential customer added a product to the cart, they must have wanted it, right?
One of the easiest ways to decrease cart abandonment is to improve the checkout process.
Customer acquisition cost (CAC)
Acquisition cost is the price of finding a new customer.
This matters for a very simple reason—the lower your CAC, the more customers you can get with the same money.
So a company that can find a customer for $10 will grow much faster than one in the same industry that has to spend $20.
There are plenty of ways to lower your CAC. Some examples include trying a different type of marketing (perhaps SEO instead of ads) or trying a more compelling social media marketing campaign.
2. eCommerce metrics to get more orders per customer
Repeat customers are perhaps the easiest way to grow your eCommerce store.
Someone who has bought from you once already trusts you. And getting them to spend money again is much easier than getting a new customer to buy from you for the first time.
These are the key eCommerce metrics to measure.
Customer lifetime value (LTV or CLV)
This is the total amount a person spends during their lifetime as a customer.
In other words, the average number of orders someone spends as long as they’re your customer—which is usually much shorter than a human “lifetime,” despite the name.
This number gives you a measure of customer loyalty. It’s a nice analytics tool to track how often customers make repeat purchases and how valuable those orders are.
Customer retention rate
This eCommerce metric tells you how many customers stay customers over a given period.
So if 100 people buy from your eCommerce platform this year, and only 25 of them buy next year, your customer retention rate would be 75% from one year to the next.
The best way to improve your customer retention is to focus your marketing efforts on returning customers.
Sales conversion rate
The sales conversion rate measures how many people end up buying a product.
This applies to new customers as well, but it’s key for repeat customers. For example, if 100 previous customers visit your site and 35 of them buy again, you’d have a sales conversion rate of 35%. Today’s eCommerce tracking lets you easily see who’s bought before, so following those customers will help you keep repeat buyers.
3. eCommerce metrics to increase profit on every order
Once you’ve acquired a customer who buys often, there’s still a third way to grow your business—increase the size of each order.
These are the eCommerce metrics to do just that.
Average order value
This metric measures the total value of a single purchase.
Usually, a higher average order value is better. A store where the average customer buys a $1,000 laptop is usually more profitable than one where most customers spend $3 on a pencil.
But that’s not always true. If the laptop costs $999 to make and market, and the pencil only costs $1, the second store makes twice as much profit per order.
This brings us to the next metric.
Profit margin is how much money is left after expenses, usually in percentage form.
In our example above, the laptop store has a measly 0.1% profit margin ($1 for every $1000 of product revenue), while the pencil store makes 200% profit ($2 for every $1 of revenue).
If there’s no profit, your eCommerce store is either losing money or breaking even—neither of which is a good sign.
Without knowing the profit margin of each product, how do you know your eCommerce business is staying afloat?
How to find the most important eCommerce metric for your store
While every metric can be important, I recommend finding the one metric that matters (OMM) for your store.
This single number will be the guiding light as you work to build a profitable business.
The challenge is deciding which number to focus on. I recommend looking at a figure that affects the bottom line, like customer lifetime value or profit per order.
There’s another secret to finding the best OMM for your business right now—get an outside perspective. Often, someone from outside can shed new light on the problems you’re facing, especially if they’ve worked with similar businesses before.
And if you’re looking for some outside help, we might be a good fit.