An eCommerce store’s success relies heavily on collecting and analyzing its metrics. As a business owner, it would be difficult to make informed decisions or understand your store’s performance without this data.
With the right formulas, you can quickly identify issues, assess your profit, gauge future inventory needs and determine customer satisfaction.
Read on to learn the 10 eCommerce metrics you should be tracking.
10 eCommerce Metrics You Should Be Tracking
1. Conversion Rate
As far as metrics go, this is probably the most important. It shows how many visitors you are successfully turning into customers, essentially indicating how many sales your eCommerce store is making.
To calculate it, use this formula:
CR = (# of sales) / (# of sessions)
2. Gross Profit Margin
What your business makes after paying for its direct costs is its gross profit margin. Direct costs can include employees and raw materials, for example. Gross profit margins should generally be stable or increasing. Unless you are investing in operations, if this metric is decreasing, it may signal a serious problem that should be addressed as soon as possible.
The formula is:
GPM = (revenue – cost of goods sold) / (revenue)
3. Customer Lifetime Value
A customer’s lifetime value is the total revenue you can expect from a customer during their relationship with your business. It measures how much a customer will spend throughout their relationship with you, and it can also help you pinpoint which ones are the most loyal.
Here’s how to calculate it:
CLV = (average value of a purchase) x (# of times the customer will buy each year) x (average years of the customer relationship)
4. Repeat Customer Rate
This metric will tell you the amount of customers that have made more than one purchase from your eCommerce store. Business owners often focus on acquiring new customers. However, selling to existing customers is easier and far more cost-effective than constantly acquiring new ones.
Calculate it with this formula:
RCR = (# of people who have purchased more than once) / (total # of purchases)
5. Refund and Return Rate
Based on the total number of orders, this is the percentage of refunded or returned orders. While accepting returns is expected, a high return rate could mean that there are issues with the product quality or customer satisfaction.
Use this formula:
RRR = (returned items) / (# of items sold)
6. Average Order Value
This is the average amount customers spend on each transaction. If you’re able to increase it, you can make more sales and profit without needing to get more traffic. It’s also an insight into how much people like your products.
To calculate it:
AOV = (total revenue) / (# of orders placed)
7. Customer Acquisition Cost
Do you know how much it costs your business to acquire a new customer? To make a profit, you must optimize your acquisition channels so you only pay for the highest-converting traffic.
The formula is:
CAC = (total sales and marketing expenses) / (# of customers acquired)
8. Cart Abandonment Rat
Track and measure this metric to see how many people add to their cart, yet don’t complete their purchase. If this is happening often, it may indicate that there are issues with your checkout. Take a look at your checkout process, make some changes to your existing setup and then test these new changes.
Use this formula:
CAR = (# of add to carts – # of completed purchases) / (# of add to carts)
9. Bounce Rate
This metric will tell you how many people visited your site and then navigated away quickly. It’s the percentage of users who came to your site, viewed only one page, and then left without taking any action. High bounce rates may mean that your UX needs improvement.
The formula to calculate your bounce rate is:
BR = single page sessions / total sessions
10. Email Marketing
Email’s not dead! While there are many other new marketing methods out there, the visibility and efficiency of email can’t be beat. It’s one of the most powerful channels you can use to increase sales on your eCommerce store.
A few of the key email metrics you should be tracking are open rate, click-through rate, plus the subscribe and unsubscribe rates.
In an industry as dynamic as eCommerce, tracking your progress and performance often is essential. Innovations happen nearly every day, and for your business to be competitive, you need to know where it stands.
Our advice to you is to start keeping an eye on at least 4-5 of these metrics and then track more as your store grows.Contact Wizard Digital today and find out what we can do to improve your eCommerce business.