Launching and running an ecommerce operation requires time, planning, and a significant financial commitment. Considering all of the resources that have gone into your endeavor, it is essential that you arrive at ways to measure how well your store is performing.
Ecommerce metrics are building blocks, fundamental indicators that help you to understand your day-to-day operations. By contrast, Key Performance Indicators (KPIs) relate to specific goals. KPIs utilize lower-level metric components to create an overarching business strategy.
Before you can come up with an all-encompassing plan for your growth, however, you need to start gathering the most important ecommerce metrics. The good news is that your smart POS system can make this process easy and seamless.
Conversion rate
This is the number of people who visit your website and complete a specific action.
While it is nice when someone clicks on your site and pokes around, the real magic only occurs when they purchase one of your products, sign up for your newsletter, or request more information. When this desired action occurs, you will have achieved what is known as a conversion.
To calculate your conversion rate, divide your total number of conversions in a set time period by the total number of visitors, and then multiply this number by 100. In general, you should shoot for a conversion rate ranging between 2.5% and 3%.
Average order value (AOV)
This figure denotes how much each customer is spending on an individual purchase.
The average order value gives you an approximate idea of what is being spent on each individual sale. Calculating it is simple: Just divide your total revenue for a set time period by the number of orders. For instance, if your total revenue for October was $10,000 and you had 20 orders, your AOV would be $500. Knowing your AOV can be vital in helping you to develop your sales strategy.
Customer lifetime value (CLV)
This number estimates the revenue you can expect to make from one customer over the entire time that they will purchase from you.
While it is necessary to attract new customers in order to continue to grow your business, the real source of profits comes from retaining existing ones. It is these loyal shoppers who can bring in sustained revenue for your company, a phenomenon represented by the CLV metric.
Calculate this by multiplying the AOV, by the average number of purchases per customer. In our previous example, this would mean multiplying the AOV of $500 by the average number of purchases per customer (let’s say 10), the CLV would be $5000.
Knowing your CLV can be instrumental in assisting you with marketing and customer acquisition. Using this example, if you are spending $5,200 on attracting each new customer and your CLV is only $5,000, you should probably rethink your strategy.
Customer acquisition cost (CAC)
CAC represents how much you pay to bring in a new shopper.
Netting a new customer can be an expensive proposition. It might involve paying for print and electronic advertising, social media campaigns, and blog articles.
To calculate CAC, divide the cost of your combined sales and marketing campaigns during a set period of time, by the number of new customers gained. For example, if you spend $5,000 on ads and marketing over six months and gain 50 new customers, your CAC is $100 per customer.
Shopping cart abandonment rate
Clicking on and browsing through your website is not enough, nor is creating a shopping cart that is never converted into a purchase. Abandoned carts are the bugaboo of many businesses, and this metric must be taken into consideration.
Calculate your abandonment rate by dividing the total number of purchases, by the total number of carts created, and multiplying this by 100. If your rate is higher than the average in your industry, you should re-examine your payment choices or the ease of navigation of your checkout process.
Bounce rate
This reflects how many people clicked on your website and then left without taking action.
People tend to flit like butterflies from site to site when they go online. They might click on your home page only to be distracted and go elsewhere. Or they could read one of your blog articles, become interested in a side topic, and click away to explore it further. In all cases, this bouncing means that you have not gotten a conversion.
Fortunately, most POS reporting tools and dashboards include bounce rate as one of their features. You can also add it to your Google Analytics reports.
Reach
This refers to the number of individual viewers who see your content on a search engine results page, website, or social media.
Your content most likely appears in various places, including on your website, on social media, and in search engines. You need a quantitative measure of the number of individual viewers who have seen your content. This is known as reach.
When you request this number from your analytics reports, you can learn a lot about the effect of your distribution tactics. A low number might be exactly the inspiration you need to jump-start or modernize your marketing strategies.
Engagement
This shows the extent to which your customers are interacting with your content via shares, clicks, likes, and comments.
The beauty of modern marketing strategies is that they are highly interactive. Customers are no longer passive recipients of information; their opinions drive the dialogue forward.
Your reporting features will give you the details of this customer reciprocity. Each social media platform’s analytics section can show you how many likes, shares, and comments you are receiving for your content. In terms of paid ads, a high engagement rate will occur when many customers click on your post.
Click-through rate (CTR)
This number reflects how many times someone clicked on your advertisement, web page, or social media content.
The more attractive, inspiring, and appealing your content is, the better the chances that someone will be interested enough to click on it. Click-through rate is the metric that measures how many times someone engages with your content in this way.
When your click-through rate is high, you know that more people are taking the opportunity to explore your products and content in detail. With every person that does so, your chances of conversion rise.
Store sessions by traffic source
This metric identifies how people find your store.
These days, there are numerous paths that can lead to a sale and a long-time customer. People might find you from your social media pages, your print ads, or the blog articles that you share on influencers’ websites. This metric lets you know where your clients are originating.
Once you know where your shoppers are coming from, you can market yourself more efficiently. If you notice that fewer clients are coming to you as a result of your print advertisement campaign, consider scaling it back or changing your approach until you achieve the desired metric.
Refund and return rate
This metric reflects how many customers have requested returns/exchanges or refunds for your products.
In ecommerce, you run an even higher-than-average risk of requests for refunds and returns. This is because customers cannot physically see or touch what they have bought until it arrives on their doorstep.
If your analytics reveal that return and refund rates are high, you can take action. Perhaps your product quality is lacking, or your advertising could use improvement. Another possibility is that your merchandise listings are unclear. Whatever the reason, this data gives you the insights that you need in order to implement corrective measures.
With ecommerce metrics, you have the foundational details that you can use to evaluate and enhance virtually every aspect of your ecommerce operations. Don’t let another day go by without building these key measurements into your infrastructure.
North is a leading financial technology company that builds innovative, frictionless end-to-end payment solutions designed to simplify and grow businesses of all sizes. From the front door, to the back office, the developer world, and partnerships that expand the payments landscape, North offers proactive, comprehensive merchant services, in-house processing, and more.
