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e-Commerce KPIs You Should Measure and How

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The digital world has opened more ways to measure e-commerce success than we ever could have imagined.

Here’s an example:

  • Do you know how many people click on your website seeing your Google AdWords? Yes.
  • Do you know the number of people who come to your clothing store after seeing your ad on a billboard? No.  

Let’s see how we can make the most of these metrics and speed up e-commerce growth.

 

Metrics vs. KPIs

People often use “metric” and “KPIs” interchangeably. But do they actually mean the same thing?

A metric is a consistently defined and quantifiable number of the website’s performance. For example, the conversion rate, cart abandonment rate, traffic source, average order value, etc. You can find these metrics from Google Analytics, your online store pages, social media and more. All these combined will give you a clearer picture of your business and help you strategize and optimize your business plan for the future.

KPIs, or key performance indicators, are important metrics that track the growth of your business. It is actually a subset of metrics. KPIs are usually a handful of critical numbers that determine your business success. They are subjective and specific targets that your business wants to achieve.

 

Types of KPIs

KPIs can range from qualitative to quantitative or predictive of the future to understanding the past. In an e-commerce business, these five categories are generally considered:

  1. Sales
  2. Marketing
  3. Manufacturing
  4. Customer Service
  5. Project Management

 

How Do You Measure Progress?

It can be overwhelming to decide which KPIs to measure and how. You have to choose which KPIs to measure according to your specific goals. For example, if you’re reselling luxury products, then you don’t need to measure the customer acquisition cost. Your margin is high, and it will be covered anyway. 

Another example might be if you’re getting all the business from email marketing, then click-through rate, response rate, etc., are critical to measure. 

Let’s break down KPIs per category:

 

KPIs in Sales

Conversion Rate: A very crucial KPI for all stores. It is the percentage of website visitors that convert into customers. The higher the conversion, the better it is. A lower conversion rate means not a lot of visitors are ready to buy, or maybe your traffic isn’t targeted correctly. 

While coming up with a conversion rate KPI, consider some of the following questions: 

  • What is the average conversion rate in your niche?
  • If the conversion rate is low, are customers choosing in-store experience over the website?
  • Is my website slow?
  • If the conversion rate is low, are my products priced very high?

Average Order Value (AOV): This is calculated by dividing the revenue by number of orders. 

Cart Abandonment Rate: This is the percentage of shoppers who add items to their carts but never complete the checkout process. There could be many reasons for them to not complete the purchase — for example, high shipping rates. 

 

KPIs in Customer Service

KPIs under this category assess if you are meeting expectations of your customers. This helps in providing a positive customer experience and satisfaction. Some of the examples are: 

Customer Satisfaction Score (CSAT): It is measured by what customer responds to questions like “How satisfied were you with your experience?” This is usually in numbered ratings.

First Response Time: The average amount of time it takes to answer a customer’s first query. 

Average Resolution Time: The amount of time it takes for an issue to be resolved by the customer support. 

Hit Rate: For this, you need to divide the total number of sales of product X by the number of customers who enquired about product X.

 

KPIs in Manufacturing

These KPIs will help you understand efficiencies and inefficiencies in production and supply chain. If measured correctly, you will be better able to take care of expenses and productivity.

Cycle Time: How long it takes to manufacture a product end-to-end. This KPI will give you insight into best practices for production.

Yield: Number of products manufactured.

Overall Labor Effectiveness (OLE): This will assess how efficiently the workers are operating the machines. 

Number of Nonompliance Events: There are several sets of license, regulations and political businesses to comply with. They are related to working conditions, safety and quality of the products. 

 

KPIs in Project Management

This gives you an overview of the tasks completion and performance by teams.

Hours Worked: The number of hours put into a project. You could also assess estimated hours versus actual hours worked to understand future projects better. 

Return on Investment (ROI): It relates to all the expenses and earnings related to a project. A higher ROI reflects efficiency and growth. 

Budget: How much money has been allocated to a specific project. The budget should be realistic so that adjustments could be made in future planning to the best of the ability.

Cost Performance Index (CPI): It tells you how much resource investment is worth. If the earned value divided by the actual costs is less than one, you need to plan better.

 

Creating Your Own KPI

  1. State your goals.
  2. Which areas are under focus?
  3. Monitor them according to the set time.
  4. Improve the KPIs to be more realistic if there is any discrepancy.

Example 1: Grow sales by 40% in the next year.

Here you will measure:

  • Site traffic
  • Conversion rate
  • Daily sales

Example 2: Boost website traffic by 10% in the next month.

Here you will measure:

  • Website traffic
  • Bounce rate
  • Traffic sources
  • Performance of paid traffic, organic traffic and social shares

How often you should measure the e-commerce metrics depends on your goals. Some KPIs are better to measure daily, whereas some could be monitored weekly. For example, traffic, impressions, bounce rate, etc. could be monitored daily, whereas average conversion rate could be monitored weekly or biweekly.

 

Conclusion

When running an e-commerce store, there are a lot of things to focus attention on, but it is important to set specific business goals (preferably quantitative) and prioritize accordingly.