10 Vital Ecommerce Metrics to Measure Your Success

Your ecommerce website is up and running — but how can you tell if it’s successful? And how do you know where there’s room for improvement? That’s where ecommerce metrics and key performance indicators (KPIs) come in. With ecommerce reporting tools, ecommerce metrics and KPIs give you a window into how your business is performing. Together they help paint a detailed picture of everything from sales and service to marketing and operations. Tracking the right ecommerce metrics and KPIs over time enables you to glean insights that can help guide business decisions, improve revenue, increase customer loyalty and drive growth.

But before we get to insights and innovation, let’s make sure we’ve covered the basics of ecommerce. Fully utilising ecommerce metrics and KPIs to your benefit requires a detailed understanding of what these terms mean, how they differ and why they’re so vital to your business. So, let’s dive in.

• What’s an ecommerce metric?
• What’s the difference between an ecommerce metric and an ecommerce KPI?
• Why is tracking ecommerce metrics and KPIs important?
• 10 key ecommerce metrics to track and how to improve them
• How to get started

In ecommerce, a metric refers to a specific measurement (or data point) that allows you to track the success or performance of your online business across a variety of areas. This could be anything from sales to marketing to loyalty and beyond. In short, a metric provides a numerical snapshot of your business.

A KPI or key performance indicator, refers to a specific measurement used to evaluate your online business’s success in achieving its goals. KPIs often serve as ecommerce benchmarks, allowing ecommerce businesses to evaluate how well they are performing against their outlined objectives. For example, you may have a target KPI of $100,000/month in revenue; whether you achieve, fall short or surpass that goal gives you insight as well as data you can use to shift strategy or drive further growth.

While these two terms might seem synonymous, there are nuanced but important differences. As mentioned, a metric is a simple data point, giving you a snapshot of your business at a specific point in time. A KPI is the measurement of progress against that data point. It serves as a benchmark of success and enables you to calculate how well you are doing based on the initial goals and objectives you set. Without a KPI, you don’t really know how you’re performing and you can’t evaluate whether your strategy is working. Ecommerce KPIs can provide insights around things like top-selling products, customer buying patterns, site usability and more, which you can then use to make data-driven decisions more likely to drive growth and increase success.

For example, if you set a KPI for a sales target of $100,000 per month and you sell $200,000, this means you doubled your KPI and crushed your sales goal. The total amount of sales ($200,000) is your metric. When viewed together, your metric and your KPI give you insight into how you’re performing against specific goals and objectives.

Tracking the right ecommerce metrics and KPIs allows you to make more informed decisions, better understand your inventory needs, gain insight into customer behaviour, increase loyalty and strategise for future business growth. In short, it gives you the information you need to gain a competitive edge in this fast-paced, ever-growing market.

As a business with a digital presence and an ecommerce site, you can collect data about customer behaviours and preferences in real time as shoppers search, browse and click through your digital shop front. Even better? With the right tools like a customer data platform, you can put it all to good use to drive revenue and customer satisfaction.

Ultimately, the ecommerce metrics you track should be determined by your main business goals and objectives. You should track them regularly so you can continually improve, adjust strategies and fuel data-driven growth. While it’s true different companies may have different goals and prioritise different things, there are some key ecommerce benchmarks most companies should be tracking.

Here are the top 10 metrics to track to gain an overarching view of your ecommerce performance and lay a foundation for success.

Conversion rate is the holy grail of ecommerce metrics. It encompasses the percentage of website visitors who actually make a purchase, thereby becoming customers. Naturally, the goal of any ecommerce business is to have a high conversion rate. Average conversion rates vary by industry and by channel (such as email, search and social media), but in general seem to hover somewhere around 3%.

If you want to improve and optimise your conversion rate, the right strategy will greatly depend on why people may (or may not) be converting at the rate you want them to. For example, if your website navigation is too complicated or not user-friendly, changing the design and simplifying the path to purchase might increase conversions. If your products are newer to market or unique, more demos or customer reviews might help people evaluate functionality so they can better assess whether they need what you’re selling. Or if you notice that shoppers tend to abandon their baskets at the page outlining delivery details, this could indicate that the cost of delivering is creating barriers.

Ultimately, you want to make it as easy as possible for site visitors to become customers. That means carefully tracking where, when and how people are converting — or not converting — across your site.

To calculate conversion rate, simply divide the number of conversions (or sales) by the total number of visitors. So, if your ecommerce site had 500 visitors over the course of a week and 25 purchases, your conversion rate for that week would be 5%.

Bounce rate measures the “stickiness” of your website. It refers to the percentage of visitors who visit a page briefly and then “bounce” or leave for another site. Ideally, an ecommerce site would have a low bounce rate, as its success generally depends on visitors engaging with page content, browsing different products and completing a purchase.

On the flip side, a high bounce rate can signal your pages need design or content optimisation to make them more engaging. Take a deep look at your landing pages to see if there’s room for improvement. For example, can you make your content stand out with catchier headlines and descriptions? Can you make CTAs larger or more recognisable? Is your product imagery the best it can be?

Remember that landing pages are the digital version of your shop window. They should be inviting, enticing and personalised. If a visitor’s first impression of your website is that it feels overwhelming, disorganised or lacklustre, people will bounce — the same way they might walk past a shop that doesn’t catch their attention. This is why it’s incredibly important to invest in an ecommerce site that captivates consumers and demonstrates value from the moment they land on the page.

To figure out your bounce rate, divide single page visits by the total number of visits to your site.

Without customers, there’s no commerce. However, there’s a cost associated with attracting new customers; you need to spend on marketing and sales to create brand awareness and inspire purchases. This ecommerce metric is known as your customer acquisition cost (CAC). Most businesses want to keep customer acquisition costs fairly low because every dollar spent on CAC is a dollar shaved off your profits.

By examining your customer acquisition cost, you can better understand the value generated by your marketing efforts and gain insight into your advertising strategies. Knowing your CAC will help you to fine-tune your marketing, effectively budget and build out campaigns with a higher likelihood of success.

Is your customer acquisition cost higher than you want it to be? This could indicate improper targeting, a marketing journey that’s either too complicated or too simple or even a lack of automation causing your efforts to rely too much on human to human interaction (which is more expensive). Lowering your CAC usually starts with better targeting, more refined customer segmentation and the creation of a well crafted marketing journey. This can all be done with the help of robust customer relationship management (CRM) technology.

A CRM platform can take what you know about your current customers and use it to attract new ones. A CRM also has the ability to incorporate automation and AI to help you to create marketing materials and journeys (at scale) that are more personal and thus more likely to resonate with potential customers. This has never been more important: Today, a whopping 73% of customers expect companies to understand their unique needs and expectations and 56% expect offers to always be personalised. Automated, personalised marketing is key to lowering your customer acquisition costs.

To determine your customer acquisition cost, divide your total marketing expenses for a set period of time by the number of customers acquired during that same period.

Your customer relationships are far more nuanced than a simple number, but there are calculable, definitive indicators of the strength of those relationships. Customer lifetime value (LTV) is one of the most important. It’s a figure that predicts how much total revenue an average customer will generate for your business throughout the entire time they shop with you.

Customer LTV is indicative of customer loyalty, which is increasingly important for businesses. In fact, commerce leaders say that deepening relationships with existing customers is one of their top three priorities this year. Your customer LTV can also be a helpful tool to assess whether your acquisition costs are too high or too low and may help to define limits around marketing and advertising budgets. For example, if your customer acquisition cost is $110 but your average customer only spends $100 over a lifetime of patronising your business, you’re actually losing money and probably want to reevaluate your marketing strategy.

Customer lifetime value is determined by subtracting average order frequency rate from average order value and then multiplying that number by the average customer lifespan.

Acquiring new customers can be costly. Successful businesses are those with a reliable stream of consumers who keep coming back for more. That stream of consumers or the number of customers your brand has retained during a period of time, makes up your customer retention rate.

A high retention rate is an indicator of a healthy business. This ecommerce benchmark tells you your customers enjoy your products and services and continually choose your brand over your competitors. High retention directly correlates to loyalty and profitability and is a testament that you are not only meeting customer needs, but exceeding them. If your retention rate is lower than you’d like, here are a few questions to ask:

• Are my products living up to their promise?
• Is my customer service timely, attentive and caring and do most issues get resolved?
• Have I got a loyalty programme that rewards people for making subsequent purchases?

Shoppers want friction-free, personalised interactions from the brands they do business with. In fact, 88% of customers say the experience a company provides is as important as its product or services. This suggests companies looking to raise their customer retention might do best by investing in initiatives that improve the overall customer experience. For example, you may want to make changes that assure you have quality control efforts and a strong customer support network in place or even create a more engaging loyalty programme that incentivises customers to keep buying.

To calculate customer retention rate, subtract any new customers acquired during a period from the number of customers at the end of that period and then divide that number by the number of customers at the start of the period.

Add-to-basket rate tracks the percentage of your site visitors who add something to their shopping baskets. It’s important to remember the add-to-basket rate solely measures the act of adding an item to a basket, not whether or not that item was purchased.

That said, purchase metrics aren’t the only ecommerce benchmarks that can give you insights about visitors’ shopping habits. For example, add-to-basket rate can tell you how interested people are in certain products. Which items get added to baskets most frequently? These are likely your most popular products. Which products do customers pass over? This can be indicative of a pricing strategy that doesn’t align with your target market.

If you’re looking to improve your add-to-basket rate, the first place to look is your pricing strategy. Scope your competitor’s products to see how your pricing stacks up and see if tweaking your prices has any effect on your add-to-basket rate. That said, you should also examine the design and usability of your product detail and product listing pages. Are your CTAs featured prominently? Have you got high-quality images showcasing your products? Also consider the functionality and speed of your site. You want to be sure that when someone clicks “add to basket,” the basket loads quickly and there’s a clear next step. Other things that may help: Consider offering free or reduced delivery or promotional deals that encourage shoppers to buy instead of browse.

Calculating your add-to-basket rate is simple — divide your total site visitors by total shoppers who added to basket. Similarly, your add-to-basket conversion rate can be calculated by dividing total converted customers by the total number of shoppers who added to basket.

If you’re shopping in a brick-and-mortar store, adding an item to your basket takes an intentional effort. Online? It takes nothing more than a simple click. This makes the “abandoned basket” far more common in the world of ecommerce. Basket abandonment rate represents the number of shoppers who add to basket, but don’t follow through with the purchase.

There are many reasons consumers might abandon their digital shopping basket, but it's a definitive behaviour that can help businesses better understand their customers. If you notice your basket abandonment rate is higher than you’d like it to be, the first step is to determine whether there is a specific step in your checkout process that might need improvement. Do most shoppers abandon when they get to the page that lists delivering fees? This could mean your delivery costs or delivery times are causing barriers to purchase. If shoppers abandon during the payment process, this could mean your checkout is too complicated or clunky. Ensure there are no surprise fees at checkout, the payment process is simple and fast and long delivery or pricey delivery rates aren’t creating barriers to purchase.

To calculate basket abandonment rate, divide the total number of completed purchases by the number of baskets opened and added to.

Average order value (AOV) gives businesses a quick sense of the amount a given customer typically spends in a single purchase. This ecommerce metric provides insight into product pricing, buying patterns and marketing strategies, allowing business to more accurately market to customers with the most value potential. Increasing your AOV directly affects your ROI because it increases the value of each customer and justifies your marketing spend.

If your AOV is low, there are a couple of ways you can increase it. With AI tools for personalised product recommendations, you can suggest relevant items based on a customer's current (or past) purchases. Cross-selling and bundled discounts can also help increase AOV.

Another tried-and-true tactic? Offer free delivery on orders over a certain value. A free delivery threshold can entice shoppers to increase their order to avoid delivering fees (especially when the delivery fees are not far off from the amount by which the order needs to increase). Consider this scenario: A customer adds $15 worth of merchandise to their basket and they realise delivering will cost $8. Then, they get an automated alert that any order over $25 includes free delivery. In an instant, AI suggests a relevant $10 item and the customer decides to make the purchase rather than pay the delivery fee. It’s a classic win/win: The customer gets more for the money and walks away from the purchase more satisfied and you increase your AOV.

When calculating average order value, simply divide total revenue by the number of orders.

While it’s never the desired goal, chances are some of your customers will return products. It’s estimated for every $1 billion in sales, the average retailer incurs $165 million in merchandise returns. Your refund rate refers to the total number of purchases later returned or refunded. This is a key ecommerce metric to track because it can have a huge impact on overall profit (so much so that some businesses account for refund rates in their financial models).

If you have a high return rate, the first thing to look at is your quality control measures. If items arrive at customers’ doorsteps damaged, you may need to examine your supply chain more closely, change shippers or talk to your warehouse management.

Another area to investigate if you have a higher-than-normal return rate? Product descriptions and product detail pages. You want potential customers to get an accurate idea of what they’re buying and set the right expectations before they make a purchase. AI and augmented reality can help here. Many brands implement this technology on their digital shop fronts to give shoppers a “virtual try on” experience and reduce the chances they will return. For example, AR allows customers to see what apparel will look like when they wear it or what home furnishings will look like in their rooms. Reports show a 25% decrease in returns from AR-guided purchases.

However, your refund rate is a delicate balance. The incentive of a free return can often be the push a potential customer needs to click the “buy” button. Free returns and easy refunds can go a long way in increasing customer satisfaction and creating customer loyalty. All this is to say that your refund rate is a delicate balance. The key is to use your refund policy to generate sales, growth and customer loyalty, while at the same time assuring it does not come back to bite you in the end.

To calculate your refund rate, divide the number of items returned by the total number of items sold, then multiply that number by 100 to get a percentage. For example, if you sold a total of 1,000 items and 200 of them were returned, your refund rate would be 20%.

Website traffic refers to how many users visit your website. This key ecommerce metric can help businesses assess brand awareness, discoverability and how attractive they are to potential customers. However, it’s important to take a deep look at the nature of your website traffic: how much of it is organic and how much is paid? What brought visits to your site — was it your social commerce efforts, a search engine result or a paid ad?

Organic traffic is defined as the visitors who land on your site through unpaid means, like SEO optimisation or word of mouth. This is different from people who find you via pay-per-click ads, paid social posts or a sponsored search engine result. Knowing how much of your web traffic is paid and organic can give you insight into how well your online marketing is working and whether your site is optimised for search. Knowing these things allows you to focus your efforts and expand your reach. For example, if you find you’re getting a lot of paid traffic but very little organic traffic, that might be a sign you need to optimise your site for SEO.

You’ll also want to know what kind of devices your visitors use to access your site. Are they on mobile or desktop? This information provides valuable insight about the effectiveness for your marketing campaigns as well as the usability of your website.

To figure out whether your site traffic is increasing, subtract the current month’s number of site visits from the prior month, then divide the result by the number of visits last month. You can then multiply that number by 100 to get a percentage.

The ecommerce metrics you choose to measure will depend on the unique needs of your business. However, no matter what your goals may be, it would be prudent to set up a defined strategy that outlines exactly which metrics are important to you, set KPIs against those metrics, then measure them routinely. This will give you the agility to work with (not against) ecommerce trends, enable you to better understand your customers’ buying patterns and needs and adapt your business strategy accordingly so you can be sure you’re hitting all your ecommerce benchmarks.

Ecommerce metrics and KPIs are some of the most valuable tools you have at your disposal. With them you can lay a foundation and ultimately gain the insight and knowledge needed to build a successful future of ecommerce growth.