Ecommerce metrics and KPIs—key performance indicators—help business owners know when they’re successful and where they need to make improvements. These tools offer insight into how your business is performing, a detailed look into everything from marketing to sales, service, and operations.
Tracking metrics with ecommerce accounting services enables business owners to forge better business decisions, increase customer loyalty, improve revenue, and drive growth. Before you can utilize the tools, you must become familiar with the terms, how they differ, and understand their importance to ecommerce.
Understanding Ecommerce Metrics
A metric in ecommerce refers to a measurement or data point that enables business leaders to track the performance of their online business across various areas. It can range from marketing to sales, or beyond. This measurement is essentially a numeric depiction of the business.
A KPI—key performance indicator—is a measurement that evaluates an online business’s success in reaching set goals.
These serve as benchmarks, enabling business leaders to assess how well they’re performing against distinct objectives. Whether you surpass, fall short, or accomplish these goals, you have insight you can use that allows you to shift strategies to drive growth.
While ecommerce metrics and KPIs seem synonymous, there are important differences. The metric represents a simple data point, showing a snapshot of the company at a certain point in time.
A KPI represents a benchmark of success, enabling business leaders to calculate their progress based on initial objectives they’ve set.
Tracking appropriate metrics and KPIs enables more informed decision-making, helps you gain insight into customer behavior and loyalty, better understand inventory needs, and develop better strategies for future business growth.
These measurements give you a competitive edge in what is a constantly growing and fast-paced market.
While each company will have different goals and priorities, some key ecommerce benchmarks are relevant for most companies. Consider a few metrics you want to track to gain insight into your ecommerce performance and lay a foundation for its success.
Conversion Rate
The conversion rate is a primary metric to track. It encompasses the percentage of website users who ultimately buy a product or invest in a service to then become a customer.
The objective of any ecommerce business is to achieve high conversion rates. The average conversion rate varies by industry and channel, such as search, email, and social network, but in general sits at roughly 3 percent.
If you want to improve your conversions and optimize this rate, the best strategy will depend on the reason people are or are not converting at the rate you want. If your site navigation is complex, simplifying the design could lead to more conversions.
The objective is to make the process of becoming a customer as easy as possible. That means tracking the buyer’s journey to determine when, where, and how the conversion is interrupted.
Bounce Rate
The bounce rate measures the percentage of users who visit a page briefly and then leave to go to another site. Ideally, e-commerce sites will have low bounce rates since success usually depends on visitors being engaged with each page’s content, browsing the varied products, and ultimately making a purchase.
A high bounce rate can mean the pages need content optimization to encourage user interaction. You want to assess the landing pages for signs that they need to be improved. Perhaps you need more enticing descriptions or catchy headlines. CTAs should be readily identified and accessible.
Landing pages are a digital version of your store window. These need to be personalized and welcoming. People will bounce if they find the website confusing, overwhelming, or disorganized.
Customer Retention Rate
It can be costly to acquire new customers. Successful ecommerce businesses are those with a loyal stream of consumers who continue to return. That stream of customers or those your brand retains for a prolonged period makes up your customer retention rate.
A healthy business will have a high retention rate. This ecommerce benchmark indicates your customers enjoy your products or services and continue to choose your brand over the competition. High retention correlates to a loyal audience and greater profitability.
This attests to the fact that you have met and likely exceeded the customers’ needs and expectations.
Add to Cart
This rate tracks the percentage of website users who add something to their shopping carts. You must remember that this metric solely accounts for those who add an item, not whether the user actually buys the product. This measurement can offer insight into how interested people are in certain items.
The products that get added most frequently are favored by the targeted audience and those least chosen might need a different marketing strategy or cost adjustment.
If your add-to-cart rate needs some improvement, it’s wise to consider checking out the competition and how they price comparable products. In that same vein, assess the website to ensure the product images are of high-quality and that the speed and function of the site are adequate.
You can also entice customers to buy instead of browse by offering promotional deals such as reduced or free shipping.
Cart Abandonment
An abandoned cart is far more common in the ecommerce world than in a brick-and-mortar store. This is when customers add items to their cart and then don’t follow through with the purchase.
Consumers have many reasons for abandoning their digital cart, but it’s a behavior that businesses can use to understand the user better.
If this rate is high, you want to see if the checkout process needs to be improved or if people are abandoning the cart when they get to the shipping fees. That could mean the costs or delivery times are creating a barrier.
If it occurs during payment processing, it could be a complicated checkout, or perhaps there are surprise charges or fees at this point.
Final Thought
Ecommerce metrics and KPIs are valuable tools to have at your disposal. These allow ecommerce business leaders to establish a foundation and gain the necessary insight to ultimately build a successful future.