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15 Most Important E-commerce KPIs And Metrics To Track
The Indian Direct-to-Consumer (D2C) market is rife with opportunities, making it a hot favorite for entrepreneurs and investors alike. According to the Confederation of Indian Industry (CII) data, the segment is growing at an impressive Compound Annual Growth Rate (CAGR) of 40% (FY22-27). Further, the consolidated revenue of D2C brands is projected to increase from $12 billion in FY22 to $60 billion in FY27. Those are some numbers!
But not all businesses can expect huge profits because it requires strategic marketing and growth initiatives. Even if you find the right strategies for your e-commerce store, you cannot take a set-and-forget approach to them. Tracking and monitoring your E-commerce metrics are essential, and so is fine-tuning your strategies over time. How do you decide which ecommerce KPI to follow and which one to leave? What are the most important ecommerce metrics for your business?
Picking and leaving e-commerce metrics sounds challenging, but digging deep can help you choose wisely. Let us give a comprehensive overview of the most critical key performance indicators eCommerce business owners should consider to track and measure their success.
What Are E-commerce KPIs?
E-commerce KPIs are the metrics defining the successes and pain points of an e-commerce store. They can help you measure your performance and see where it lags so that you can implement improvement tactics accordingly. Together, they can draw a complete picture of where your D2C brand stands in terms of customer expectations and the competitive landscape.
From here, you can decide in which direction in which you want to steer your business. Adopting a data-driven approach requires sifting through a mountain of data, from demographics to browsers, devices, keywords, bounce rates, conversion rates, exit rates, acquisition, and more. But it need not be a mammoth effort. Everything boils down to segregating KPIs and picking the most valuable ones.
Why Are E-commerce Metrics So Important?
According to statistics, data-driven ventures are likely to be 23 times ahead on the customer acquisition front and six times on the retention front. D2C brands are no exception. By closely monitoring your business KPIs and metrics, you can make informed decisions about the core areas like customer experience, marketing tactics, and revenues.
You can also rely on them to determine which strategies are good enough and which ones need your attention. They even offer insights into how you can rectify problems that hinder customer satisfaction and overall growth. You can imagine how much better things become when you eliminate guesswork from operational decisions.
How To Determine Which E-commerce Metrics Matter For Your Business?
Becoming data-driven sets up your e-commerce business for success, but you should think beyond tracking and monitoring every metric you come across. In fact, every e-commerce KPI you choose should effortlessly blend with your business instead of drowning you in a sea of random numbers. How do you choose the ones that matter for your business?
It’s as simple as picking the KPIs central to your store’s success. You can do it by identifying your highest priority goals and working backward from your desired endpoint to find the most relevant eCommerce metrics to achieve your goals. You can simplify the choice by asking a few questions, such as:
- Will improving this KPI contribute to your strategic objectives?
- How will a change in this metric affect your brand’s growth?
- Is this metric likely to improve other connected KPIs?
Once you have a list of KPIs that work for your business, you are all set to maximize their benefits.
15 Most Important E-commerce Metrics You Can’t Skip
There are several essential e-commerce metrics that e-commerce business owners must track and monitor to get a clear view of their performance. Here is a comprehensive list of KPIs that high-performing D2C stores follow:
E-commerce Conversion Rate (CR)
What is the end goal of e-commerce sellers? Of course, conversions because they drive revenues and profits! Conversions are also the cornerstone of long-term retention. Not surprisingly, the conversion rate is the top ecommerce KPI for sellers. It enables you to see if your store is driving visitors to the right products and pages.
Conversion Rate is calculated by dividing the number of conversions by the total number of visitors. You can use the following formula.
CR= Number of conversions/ Total number of visitors
Point to remember: While calculating CR is pretty straightforward, you must remember that the average industry-specific numbers can vary drastically. For example, a D2C luxury jewelry brand with a low CR is good to go. Conversely, even a high CR may not be healthy enough for a fashion retailer. So, you must use industry-specific benchmarks while evaluating your brand’s performance.
Average Order Value (AOV)
Average Order Value (AOV) is one of the most important ecommerce metrics D2C sellers must follow. It determines the average spending of each customer per transaction. It gives an in-depth insight into customer purchasing patterns. A low AOV means that you should find ways to increase it. The best measures include offering discounts on a minimum order, upselling, and selling product bundles. Once you implement these measures, track this metric to see the changes and plan a strategy.
AOV equals revenues divided by the total number of orders for a specific period. Here is the formula used for calculating Average Order Value
AOV = Revenue/total orders
Customer Acquisition Cost (CAC)
With CAC, you get a number showing how much money goes into getting a paying customer for your business. A high CAC is a pain point for an e-commerce business as it suggests a need to improve your conversion rate, optimize your ad spending, invest in organic tactics such as SEO and social media promotions, and get referrals for your brand.
CAC equals the cost of customer acquisition divided by the customers acquired in a said period. The formula for calculating CAC is as follows:
CAC = Cost of customer acquisition/customers acquired
Point to remember: While CAC is a critical metric, it hardly offers enough information to make decisions. You must take a blended approach by considering it with other metrics such as AOV, customer lifetime value, and traffic volumes. Also, calculating CAC by source, such as different traffic channels, is a good approach.
Customer Retention Rate (CRR)
Customer acquisition is only half the work for e-commerce stores. Retention is the other, and perhaps the more significant, part of running a successful business. Retention costs less than acquisition, which is the reason why business owners should focus on it. The CRR eCommerce metric assesses your ability to make the customers stick and correlates to customer loyalty. A low retention rate is a sign of gaps in your product quality or customer relationship strategy. You can tweak them to bring your CRR on track.
CRR is calculated by subtracting the number of new customers gained from the number of customers at the end of a period, and dividing the value by the number of customers at the start. The following formula is used for the calculation:
CRR= ((number of customers at the end – number of new customers gained)/ number of customers at the start) x 100
Customer Lifetime Value (CLV)
Another ecommerce KPI that relates closely to retention is Customer Lifetime Value. It determines the amount a customer spends with your store during their lifetime as a buyer. CLV offers valuable insights into your store’s performance as it reflects several metrics, such as conversion rate, average order value, and customer retention. You can enhance this KPI by building long-term relationships through superior customer service and personalized marketing campaigns.
CLV is the product of the average purchase value, average purchase frequency, and average customer lifespan. You can calculate CLV with this formula:
CLV= Average purchase value X Average purchase frequency X Average customer lifespan
Return On Ad Spend (ROAS)
RAOS measures the revenue that ads generate for your e-commerce store. It links with Cost Per Acquisition (CPA) but is only a part of the overall cost of acquisition. Additionally, acquisition cost does not consider the order value, so a high number is a reason to worry. But RAOS takes into account the actual return in terms of order value.
ROAS us the total sales divided by the total ad spend. Here is the formula to compute ROAS:
ROAS = Total sales / Total ad spend
Channel Mix Metrics
Channel mix metrics are not a separate category, but they dig deep into the key e-commerce metrics such as conversion rate , Average Order Value (AOV), and abandonment rate channel-wise. For example, you can identify the channel feeding the high-conversion-potential traffic for your store. You can also research to uncover the buyer experience for each channel and decide whether they have a consistent and optimal user experience.
Shopping Cart Abandonment Rate (SCAR)
SCAR is a measure of shoppers not completing their buying journey on your website. A high cart abandonment rate is a reason to worry because it indicates something wrong with your shopping experience. For instance, shoppers may not be happy with the checkout process, shipping fees, or payment options. Checking this metric enables you to reach the root cause and address it to reduce abandonment and maximize conversions and customer satisfaction in the long run.
SCAR is the sales divided by the number of carts, and multiplied by 100. The formula for calculating SCAR is as follows:
SCAR = (Sales/ Carts) x 100
Shopping Cart Conversion Rate (CCR)
CCR is the opposite of SCAR as it measures the number of shopping orders completed concerning the number of shopping carts initiated by the visitors. Simply speaking, it evaluates the effectiveness of your eCommerce store to convert potential buyers into real ones. You can improve it by working on the same factors as SCAR, such as the checkout experience, payment options, and shipping fees. [1]
CCR is the visitors placing an order divided by the total number of visitors initiating a shopping cart. You can calculate the CCR with the following formula:
CCR = (Visitors placing an order/Total number of visitors initiating a shopping cart) x 100
Repeat Purchase Rate (RPR)
Repeat purchase rate (RPR) refers to the customers purchasing again from your store. It is a significant ecommerce metric because it indicates customer retention and loyalty. A high RPR is also a good thing from a cost perspective because it means you are maximizing the value of your existing buyers instead of spending on bringing in new ones. You can increase the RPR by running rewards programs and creating retention email campaigns to encourage customers to shop again.
RPR is the number of customers buying more than once divided by the total number of customers. Here is the formula for calculating the RPR:
RPR= Number of customers buying more than once/ Total number of customers
E-commerce Churn Rate
Like employee churn rate, customer churn rate measures the turnover of your e-commerce customers. You may have an extensive time investment in user experience, so the churn rate spells a loss of investment. The best way to deal with a high churn rate is to find strategies to engage and delight customers when they visit your website. The more you impress them, the less you worry about acquiring new customers. Additionally, happy buyers are always keen to recommend your brand.
The churn rate is the number of lost customers divided by the total customers at the start. It can be calculated using the following formula:
Churn rate= (Lost Customers/Total Customers at the Start)/ 100
Net Profit
Net Profit is the key indication of the overall health of your e-commerce store. The profit value determines your long-term spending on marketing, customer experience, and strategic growth, so it is worth the attention. You can boost a struggling number by working on areas such as product quality, customer experience, conversions, costs, and margins.
Net profit is the difference between the total revenue and total expenses. Here is the formula to calculate the net profit:
Net profit = total revenue – total expenses
Gross Margin
Besides Net Profit, Gross Margin is another e-commerce KPI D2C sellers must consider. Essentially, it is the profit you make over and above the cost of goods sold (COGS). The number indicates your profit after the sale, considering the amount you spend on the inventory. Knowing your gross margin on each sale enables you to set the pace for growing and scaling properly. It is also a key metric to understand how sustainable your business growth is.
Gross margin is the difference between the revenue and cost of goods sold. It can be calculated using the following formula:
Gross Margin= (Revenue- COGS)/100
Net Promoter Score (NPS)
Net promoter score is a non-financial metric that measures the customer experience instead of revenue and profit. It indicates the number of customers who are your promoters, detractors, or passive buyers. You can segregate them by devising a rating scale that asks them to assess the probability of recommending your brand to others on a scale of 1-10. People scoring your business at 9-10 are considered promoters, 7-8 are passives, and below 6 are detractors.
NPS is the difference between the percentage of promoters and detractors. The formula for the NPS is as follows:
NPS = % of Promoters – % of Detractors
Refund & Return Rate
Another e-commerce metric you cannot miss out on is the refund and return rate. You can expect online buyers to seek a refund and return because they may not like the product or have fit issues. Returns are relatively more common in the fashion and home décor industries, so you should factor them into your financial model. Additionally, you must do your bit to minimize them in the first place by ensuring product quality and adequate information on your website.
The refund and return is the value of goods returned divided by the value of goods sold. Here is the formula to calculate the refund and return rate:
Refund & Return Rate= Value of goods returned/ Value of goods sold
How Often Should You Check Your E-commerce Metrics?
Once you decide on your e-commerce performance metrics, it isn’t the end of the job. You must check them frequently depending on your needs and goals. Here are some recommendations when it comes to the frequency of checks:
Weekly: Metrics such as website traffic, impressions, and social media engagement
Bi-weekly: Cost per acquisition, Average order value, and shopping cart abandonment
Monthly: Cart abandonment rate, email open rate, and multichannel engagement
Quarterly: Customer lifetime value, email click-through, and subscription rate
Use Velocity Insights To Keep A Close Eye On Your KPIs & Metrics
The sheer volume of data and variety of metrics you need to track as an e-commerce seller may sound overwhelming. But there’s no shortcut to data-driven decisions. Velocity Insights is a one-stop destination to track your eCommerce metrics every day so that you can gauge the performance of your business effectively. With Velocity Insights, you can keep an eye on six metrics (Net Sales, orders, AOV, ad spend, Blended CAC, and RAOS) and get a comprehensive report right on your WhatsApp.
Besides centralized data management of multiple metrics from various sources, Velocity Insights offers features like effective data visualization, industry benchmarking and real-time analytics to unlock better decisions. The platform is secure and scalable, which makes it ideal for a growing e-commerce business. It is truly the right tool to take your e-commerce store to the next level!
Want to try it out? Signup and get started!