Are you one of those people who goes to Google Analytics, clicks a couple of times and leaves immediately?
If this is your case, you need to know that you are missing a whole sea of opportunities and knowledge that could help you make better decisions for your e-commerce.
The infamous phrase by Lord Kelvin may give you a sneak peek as to what could happen.
What is not measured cannot be improved. What is not improved is always degraded.
With a bit of effort and after you have read this guide especially made for beginners, we can assure you that you will be able to measure the most important KPIs for your online shop.
You don’t want your business to be degraded, do you?
Well, then keep reading.
What are the KPIs of an e-commerce?
They are Key Performance Indicators and they are the indicators that we use to measure the performance of an e-commerce.
If you are following a strategy (if you are not, we recommend you read this post about inbound marketing), then you need to know how the actions are working.
Accessing this data is very easy thanks to Google Analytics and any online shop can see all kinds of data in just a few seconds.
KPIs try to extract information out of that data in order to analyze the profitability of your actions and to help you make strategic decisions.
1. Which are the vanity metrics and why shouldn’t we pay much attention to them?
Once you have installed Google Analytics into your e-commerce shop , hundreds of KPIs will be available to you.
It is quite easy to get distracted with the so-called vanity metrics , which do little more than waste your time. These metrics are visits, organic traffic, or any other metric related to social media, such as followers.
If you want your e-commerce shop to continually improve, you need to know the essential KPIs ( Key Performance Indicators ).
These metrics will tell you whether or not you are achieving your goals. They are the difference between a successful e-commerce shop and one which comes to a halt and never gets any better.
For us at Doofinder, it is pretty clear that if you do not monitor these metrics, you will never know what you are doing right or wrong and that will result in losing clients and wasting your time and money.
If you don’t want that to happen to you and your e-commerce shop, just read this article to start looking at and measuring what really matters.
2. Differences between metrics and KPIs
This may seem like splitting hairs, but the truth is that there is a slight difference between metrics and KPIs.
A metric is a crude figure, for example, the number of visits or followers—measured numbers and nothing else.
A KPI is calculated with a mathematical operation involving different metrics. For example, the conversion rate is calculated by dividing the number of conversions into the number of visits and it is then expressed with a percentage.
It is the same situation with the average checkout price, which is a KPI calculated with these two metrics:
- Money invoiced
- Number of clients
Is it a bit clearer now?
Great. Then it is time to start showing you the KPIs that you need to know if you manage an e-commerce.
9 KPIs that you need to measure for your e-commerce—no matter what
Here you have a detailed explanation about each of them.
1. Conversion Rate
We are starting with a big one because there is no metric more important than this one.
This is the most important metric. Every day you should monitor the percentage of visits that is converted . Just so you know, the conversion rate usually varies between 1% and 4%, depending on the type of e-commerce.
Online businesses are getting more and more competitors and when giants like Amazon come into the equation, smaller e-commerce shops have an uphill battle ahead of them.
However, niche businesses, where big platforms cannot reach, are more likely to have higher conversion rates.
This leads us to the classic Conversion Rate Optimization (CRO): balance between traffic and conversion rate.
It is much more important to increase the conversion rate than to increase the number of visits. Remember that it is better to have 10,000 visits with a 4% conversion rate than to have 25,000 visits with a 1% conversion rate.
It is very easy to calculate it. You just need the number of visits (you can take this from Analytics or any other tool that you may use) and the number of sales or conversions.
Conversion Rate = (number of conversions / number of visits) x 100
2. Average order value
The average order value is a KPI that shows you how much a client spends on average .
Just divide total invoicing into the number of transactions and you will get a number that can be used in many ways:
- Cross-selling: most shops try to increase this number by means of cross-selling related products or by offering free shipping when you spend a certain amount of money.
- Free shipping: by knowing the average order value in your e-commerce shop, you can determine the minimum checkout value at which you can start offering free shipping. Imagine that the average order value is €50. If you offer free shipping for purchases of €60 or more, clients will most likely add something else to their carts to reach those €60 and save on the shipping costs.
- Pricing for new products: by knowing how much people spend on average, you can get an idea of the range of prices for a new product that you may want to add.
If you have the Enhanced Ecommerce option configurated, you could see your average order value. If not, this is your estimate:
Average Order Value = (total income / number of sales)
3. Cart abandonment rate
If you have already suffered from this, you will know that there is nothing more annoying than abandoned shopping carts.
They represent visits that came, added something to their carts and, for some unknown reason, left without finishing the purchase. We said that conversion rate is important—well, this rate is even more so, since it may be hiding essential information.
A high abandoned shopping cart rate may be caused by a technical error or by a buying process that is too long and that is making users run away.
At a glance, in Analytics and with the enhanced ecommerce option, we can find out at which point of the funnel clients are leaving the process.
We must try to get them back, no matter what.
You can learn how to do so by reading our article about getting clients back to their abandoned shopping carts.
Never forget to establish your objectives in Analytics or whichever other program you are using to keep track of how many people “add to” a shopping cart and how many of them complete the purchase.
Divide the second figure into the first one and you will get the percentage of completed purchases and, at the same time, the percentage of abandoned shopping carts.
Cart Abandonment Rate = (number of abandoned carts / total amount of started carts) x 100
4. Cost per acquisition (CPA)
What is the point of spending a certain amount of money to sell something when it is not profitable? You need to know how much it costs you to make someone visit your website, click on a product and buy it, in order to know whether your traffic sources or actions are profitable or not.
This KPI is usually divided into Cost Per Lead (CPL) and Cost Per Sale (CPS) since you also need to know how much a lead costs you in the case that you have a blog with subscribers or if you offer discounts in exchange for emails.
In order to know whether an e-commerce is profitable or not you just need to compare this metric with the average order value:
- If CPA is lower than the average ticket, your shop is doing alright.
- If CPA is higher than the average ticket, you are losing money with every purchase.
Cost Per Acquisition = (Total amount of money invested on generating clients – SEO, SEM, etc. / new clients)
5. Exit pages
Do you know what your e-commerce shop’s weaker points are?
A chain is only as strong as its weakest link. For us, those are the exit pages that we need to reinforce.
Do you know which pages are making your visitors leave, the pages that prevent them from buying, or that simply scare them off? You should analyze the sales process and look for the weak point in what is called the customer journey .
You may find out that your product descriptions are not good enough, you may need more payment methods to facilitate purchases.
Or maybe the shipping fees are too high and they lead to clients abandoning their carts.
Just a small change to one of these pages normally means an increase in the conversion rate and a reduction of the number of abandoned carts.
In order to get that information, go to “Behaviors” from the Analytics menu and click “Exit Pages”. You will find something like this:
Find out the URLS that incurred in a higher number of fleeing clients and improve it by utilizing different calls to action, related content, or any other strategy that promotes browsing.
6. Repurchase rate
What percentage of your sales come from new users?
Knowing whether its your previous clients that make the most purchases or if its new visitors that boost your sales tells you a lot of information.
Imagine that you verify that the majority of your clients are recurring. That means that it could think about offering a subscription to that product (the client receives it on a recurring basis without having to go to your website).
This is something that Amazon is already doing with its ‘Subscribe & Save’ program. It offers the possibility of periodically receiving disposable or replaceable products like diapers, shaving razors, and other hygiene products.
Below you can see the new payment option being offered:
They take advantage of the subscription to foster client loyalty. These are the types of products that the user buys no matter what, so it’s unlikely that they unsubscribe.
Knowing the differences between old and new clients can provide you with many clues regarding your strategy, so be sure to look into it.
7. ROI for marketing campaigns
This is probably one of the most frequent errors made by e-commerce shops and online businesses: investing in marketing and not measuring the results of the campaign.
The KPI of the returns from a campaign is really easy to calculate: you just need to know how much you have invested and how much you have earned from the traffic that was generated from the campaign.
If you spent €100 on 1,000 visitors and you have a conversion rate of 2% with an average profit per client of €20, you would have €400 in profits.
- ROI= (Profits – Investment) / Investment
- ROI= (400 – 100) / 100 = 3
For every euro invested, you receive 3.
The opposite can also be true, and you could have a negative ROI, which would indicate that you are losing money with every sale.
If your conversion rate were cut in half (1%) and the PPC price in your niche increased to €250 per 1,000 visitors, your ROI would be:
- ROI= (200 – 250) / 250= -0.2
You don’t want to see yourself losing money with every sale, do you? Then be sure to monitor the ROI of your campaigns.
8. Bounce rate and pages visited
When you start battling for the first few positions in Google, there are new KPIs that take center stage.
We’ve already mentioned the importance of user experience as it relates to SEO several times in this blog.
Google rewards websites that satisfy the user experience more and more, and one of the ways of measuring that is the bounce rate and the number of pages visited.
Your bounce rate is the number of people who go to your website and then leave without having carried out any type of interactions with even a single click.
You don’t have to be a genius to know that if somebody goes to a website and leaves just a few seconds later without looking at anything else, then they didn’t like it very much.
To lower your bounce rate and increase the number of pages visited, an internal search engine is a really good option. ;)
An internal search offers the visitor the option of quickly finding whatever it is they are looking for (and we know nowadays speed is key because attention is fleeting).
These first few seconds on your website are essential for capturing a user’s attention and assuring that they don’t click the much-feared ‘back’ button.
Don’t believe it?
Then this is what we propose:
Go to the ‘Acquisition’ tab and then click channels in ‘All Traffic’ and you can see which keywords are bringing your visitors.
Furthermore, if you have Analytics linked to Search Console, you can click ‘reports’ and see how many times your page appeared in Google results.
Here you also have some other important information, the CTR, or clickthrough rate on the SERP—but this metric isn’t 100% about SEO.
The solution to ‘not provided’.
The most typical thing when your checking which keywords generate the most sales is that you find the infamous ‘not provided’.
SSL Certificates and supposed “safe searches” make Analytics hide that information.
Take a look at the image. Out of 7,372, 7,328 are ‘not provided’—that’s 99.4%.
Fíjate en la imagen, de 7.372 sesiones, 7.328 son “not provided”, un 99,4%…
Google isn’t telling us anything!
That is one of the greatest downfalls of web analytics, but now there is a tool that seems to provide a solution: Keyword Hero.
We’ve tried the free version for 5 urls and below are the results after using it for two weeks in an e-commerce shop.
How can we measure these KPIs?
If you are just starting out with web analytics, we don’t want to scare you.
Quite the opposite, we just want to encourage you to take KPIs seriously because it is easier than it may seem and the possibilities for improvement that you will discover will compensate any effort.
Some years ago, when measuring tools were just making their way to the scene, an Excel sheet was the best option for any basic monitoring.
There are many e-commerces that still work with them.
The large majority webmasters, and this is our recommendation, use Analytics. This free tool by Google also has the “Enhanced Ecommerce” option, which is amazing.
If all this isn’t enough and you still need new KPIs that Analytics doesn’t offer, you can creat your own events by using Google Tag Manager. This is a bit more advanced, but with this tool you can even measure when a user sneezes. The measuring possibilities are endless!
However, we insist on not being overwhelmed by these tools.
Once you have gotten past the learning curve of using these tools the first few times, you’ll soon start to take full advantage of them.
And if you still haven’t mastered Analytics, you have a few other options out there:
- Modules and plugins: Prestashop, WordPress, and Shopify all permit you to install extentions to track the most important metrics.
- Hosting data: hosting providers often provide statistics on traffic, downloads, and more in the server’s control panel. The unfortunate part here is that they typically don’t offer transaction data.
Keep in mind that all of the extentions for PrestaShop, WooCommerce, etc. take their data from Analytrics, so it’s better to go straight to the source of the information, don’t you think?
Do you like this information about KPIs for e-commerce?
Well, then it’s time to put it into practice.
Set up your Analytics account, set your goals, and start measuring your online shop’s KPIs.
You’ll thank us in a few months. ;)