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Unlocking the Power of KPIs - 10 Key Metrics To Track eCommerce Success

Saanika Budhiraja
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As an eCommerce business, success hinges on your ability to track and measure the right performance indicators.

Knowing which key performance indicators (KPIs) to analyse and how they interact with each other is essential for understanding your customers’ journey, improving conversion rates, and driving growth.

In this guide, we'll go over why KPIs are an essential part of measuring the success of an eCommerce business, provide an overview of the key eCommerce metrics you should be tracking, and show you how to use KPI data to uncover insights and opportunities for improvement

Unpacking The Margin Paradox

Understanding the Importance of KPIs for eCommerce

The 10 Key Metrics for eCommerce Success

1. Customer acquisition cost (CAC): Measure the Cost of Acquiring Each Customer

2. Conversion Rate: Measuring Sales and Marketing Effectiveness

3. Bounce Rate: Analysing Visitor Engagement and Retention

4. Average Order Value (AOV): Understanding Customer Purchasing Behavior

5. Customer Lifetime Value (CLV): Focusing on Customer Acquisition and Retention

6. Cart Abandonment Rate: Improving the Checkout Experience

7. Return on Advertising Spend (RoAS): Optimising Advertising Budget and Strategies

8. Repeat Customer Rate: Analysing Customer Loyalty

9. Dwell Time: Improving Visitor Engagement with Specific Pages

10. Net Profit

Master the Art of Tracking eCommerce KPIs & Drive Your Business Forward

Unpacking The Margin Paradox

The concept of the margin paradox is simple: although sales figures may continue to rise, underlying profits don't improve or even decrease.

It sounds counterintuitive — after all, aren't more sales always good news? Unfortunately not.

And that's why it pays to have a keen eye on your KPIs. If you’re only focused on sales numbers, then the margin paradox can sneak up on you.

It can happen due to excessive discounts, increased operational costs, cost of returns, or underestimating the cost of acquiring new customers.

Even retail giants aren't immune to the challenge of generating profit. Despite its size and stature, in 2009, Amazon's shipping and fulfilment expenses accounted for 15.6% of sales, yet by 2021 they had reached an astonishing 32.3%.

But it's possible to make adjustments that will drive profitable growth over time by leveraging key performance indicators (KPIs).

Understanding the Importance of KPIs for eCommerce

When it comes to growing your eCommerce business, knowledge is power. And the best way to gain the necessary knowledge is by tracking key performance indicators for your online store.

Without them, it’s like shooting in the dark blindfolded. Sure, you get lucky now and then, but that doesn’t make it right — or profitable.

By connecting KPIs to particular targets and initiatives, you can determine which segments of your business are flourishing — and those that may be merely coasting. In fact, 95% of leading marketers agree that "to truly matter, marketing analytics KPIs must be tied to broader business goals."

This insight is invaluable for making strategic decisions and developing proactive strategies to ensure your business continues to grow in the right direction.

Let's take a closer look at key eCommerce metrics that can ensure your growth is profitable and sustainable.

The 10 Key Metrics for eCommerce Success

1. Customer acquisition cost (CAC): Measure the Cost of Acquiring Each Customer

Customer acquisition cost (CAC) measures the total investment a business puts into gaining a new customer.

And it includes more than just advertising costs. You must also consider any additional costs, such as salaries and technology fees, associated with acquiring new customers.

According to the Customer Acquisition Barometer survey, more than half of marketers asserted that the acquisition of customers is their biggest marketing expenditure.

This critical eCommerce KPI allows you to determine whether your acquisition strategy is efficient and cost-effective. Plus, you can verify that each euro spent adds value. If not, it might be time to adjust your marketing strategies or pricing model.

Image depicting Customer Acquisition Cost (CAC) metrics for eCommerce businesses measuring the cost of acquiring each customer.

2. Conversion Rate: Measuring Sales and Marketing Effectiveness

Every eCommerce business dreams of making a killing and the key to knowing how they’re doing is tracking your conversion rate.

After all, the eCommerce KPI that shows how many customers actually bought something after visiting a website speaks volumes about its success (or lack thereof).

It's the percentage of your website visitors that take the plunge and actually make a purchase, and it's a telling indicator of how effectively your website is driving sales.

Conversion Rate metrics for eCommerce websites that calculate sales and marketing effectiveness.

When looking at trends in conversion rates over time, e-store owners can understand whether any strategic adjustments to their website design or product offering might be necessary to improve overall sales performance.

Investing in ways to boost conversion rates can definitely pay off — just remember they're an aggregate measure, so breaking down visitor data by demographic or other criteria can often provide useful insight into which tactics work best.

That said, you need to ensure that your investments contribute in some way to your ROI. And Shopbox gives you more for less — our customers experience an unparalleled 100% ROI within the first month.

Make the smart choice and invest in Shopbox to achieve profitable growth and boost conversions.

3. Bounce Rate: Analysing Visitor Engagement and Retention

In essence, the bounce rate measures how often people who visit your online store page decide to leave without taking action.

It's a great way to compare the effectiveness of different marketing and advertising campaigns, as well as determine which areas of your eCommerce site might need some improvement.

But don't be discouraged if the numbers seem high. It's completely normal to experience a high bounce rate. In fact, the most recent figures demonstrate that the eCommerce bounce rate for Q2 2022 was at a whopping 47%.

For instance, if you run an ad campaign and you see a high bounce rate, then you know that the traffic it’s bringing in isn't actually engaging with your site. This could suggest a misalignment between the message of the campaign and what visitors are looking for.

Alternatively, if you have an online store page with consistently low bounce rates, then you can assume visitors are finding exactly what they’re looking for and are more likely to stay, explore more of the product catalogue and make a purchase.

The bounce rate KPI provides an important insight into visitor engagement that can help you tailor your website, sales funnel, and overall marketing strategy accordingly.

Bounce Rate calculation to understand visitor engagement and retention on eCommerce sites.

4. Average Order Value (AOV): Understanding Customer Purchasing Behavior

Without a good understanding of customer purchasing behaviour, it’s virtually impossible to identify potential opportunities for sales growth. And what eCommerce marketer doesn’t want to buff up their basket size?

Average Order Value (AOV) is calculated by dividing the total revenue from customer orders by the number of purchases made and it indicates how much customers usually spend on a single transaction.

Monitoring AOV reveals how well you’re pricing your products, as well as provides insight into customer preferences in terms of cost and product selection.

Analysing this data can be imperative in deciding the right time for pricing changes as well as which strategies will drive the most success with promotional activities like discounts and coupons.

Average Order Value (AOV) metric for eCommerce businesses, providing insight into customer purchasing behaviour.

5. Customer Lifetime Value (CLV): Focusing on Customer Acquisition and Retention

Customer Lifetime Value (CLV) is one of the most important KPIs for eCommerce businesses as it reflects both customer acquisition and retention efforts.

CLV KPI tracks the amount of revenue that a customer is likely to generate over the entire lifetime of their relationship with your business.

To get an accurate picture, it's important to measure CLV in terms of multiple metrics, including purchase frequency, average order value and attrition rate.

And when it comes to acquiring and retaining customers, it's all about the long game. The long-term growth of any successful business lies not only in stellar customer acquisition strategies but also in effective retention tactics, which can dramatically influence a company's bottom line. In fact, by simply increasing retention by 5%, you can drastically boost your profits by 25-90%.

Focusing on CLV helps tie together these two efforts into a cohesive strategy designed to make sure your customers remain devoted to your brand.

By keeping tabs on CLV, you can take targeted initiatives to improve customer retention and ultimately ensure that your eCommerce store is built for longevity.

Customer Lifetime Value (CLV) metric that focuses on customer acquisition and retention in eCommerce.

6. Cart Abandonment Rate: Improving the Checkout Experience

It's every eCommerce store manager's nightmare — customers abandoning their shopping cart before checkout.

Shopping cart abandonment has become an epidemic, leading to eCommerce brands losing a shocking $18 Billion in annual sales revenue each year, according to Forrester research. Clearly, this is not something that should be taken lightly.

When this metric is high, it’s a telltale sign that something just isn’t right. And forward-thinking merchants understand this and use data to drive change.

Simple yet effective improvements can have a far-reaching impact on the user experience on your site, helping lower those pesky abandonment rates.

Formula for Cart Abandonment Rate metric that helps improve the checkout experience for eCommerce businesses.

7. Return on Advertising Spend (RoAS): Optimising Advertising Budget and Strategies

Return on Advertising Spend (RoAS) is a key eCommerce metric to keep top of mind.

Optimising your advertising budget and strategies is crucial in the industry today. Tighter margins, an increasingly saturated market, and continually-evolving algorithms mean that those who succeed in online retail must stay vigilant when it comes to staying in front of the competition.

RoAS helps businesses measure how their ad investments are paying off based on revenue and cost, enabling them to make better decisions about what works and what can be improved.

By understanding this key eCommerce KPI and how it relates to your business goals, you can get a better picture of where to allocate your advertising budget for the highest returns.

Return on Advertising Spend (RoAS) metric to optimize advertising budget and strategies for eCommerce.

8. Repeat Customer Rate: Analysing Customer Loyalty

At the risk of sounding like a broken record, retaining customers is essential for long-term business growth.

And the Repeat Customer Rate KPI is the holy grail of any eCommerce business. It's the ultimate benchmark for knowing how well your business is doing in terms of creating lasting relationships with customers.

Understanding exactly who your repeat customers are and which products or services they prefer will allow you to tailor your strategies accordingly. The ROI from Marketing to Existing Customers report uncovered that returning customers account for a staggering 40% of overall store profits.

Therefore, analysing this KPI will help you understand customer loyalty and build better relationships with them, ultimately leading to greater success.

Formular for Repeat Customer Rate metric to analyse the customer loyalty on eCommerce websites.

9. Dwell Time: Improving Visitor Engagement with Specific Pages

Dwell time is an often overlooked yet key eCommerce metric showing how engaging visitors find a certain page on your site or your store overall.

Understanding how long each visitor spends on a page (and where they go when they leave) can be invaluable information that helps build better customer experiences.

Think of it this way: if someone spends three or four minutes on a product description, they're definitely interested in what you have to offer.

On the other hand, if someone visits a page and bounces off within a second or two, you know something needs to be fixed.

By analysing dwell time, you can make the necessary improvements to make sure your customers are seeing the information they need in a format that meets their expectations.

But you can also leave the hard work to Shopbox. It can revolutionise the shopping experience with tailored recommendations and relevant products for every customer. This creates a better experience for shoppers and significantly increases the chances of purchasing. In fact, product page visits can increase three to five times when Shopbox is in charge.

Dwell Time metric to improve visitor engagement with specific pages on eCommerce sites.

10. Net Profit

Finally, a KPI that needs no introduction — net profit.

Net profit is the KPI that matters most in any eCommerce business.

It's a measure of the money left over after accounting for all expenses and revenues, so tracking it regularly helps you stay on top of your company's bottom line.

Keep an eye on this KPI on a regular basis, and use it to help inform your decisions related to marketing, product development, and pricing.

Net Profit metric for analysing profitability on eCommerce businesses.

Master the Art of Tracking eCommerce KPIs & Drive Your Business Forward

Tracking the right KPIs is essential for any eCommerce business looking to succeed in 2023.

By understanding each KPI and its relevance to your business, you can make data-driven decisions that help drive growth and profitability.

To recap the key metrics driving eCommerce success:

  1. Customer acquisition cost (CAC) — the cost to acquire a new customer
  2. Conversion rate — the rate at which visitors to your site become customers
  3. Bounce rate — the rate at which visitors to your site leave without taking any action
  4. Average order value (AOV) — the average amount spent on each purchase
  5. Customer lifetime value (CLV) — the total revenue generated by an average customer over the course of their relationship with your business
  6. Cart abandonment rate — the rate at which customers add items to their shopping cart but don’t complete the purchase
  7. Return on advertising spend (ROAS) — the measure of your return on investment for each ad campaign
  8. Repeat customer rate — the rate at which customers return to make a purchase
  9. Dwell time — the amount of time a customer spends on a particular page
  10. Net profit — the amount of money your business generates after subtracting all associated costs

It may seem like a lot of work (and it is), but mastering the art of KPI tracking is worth it. As you hone in on monitoring the key metrics and comprehend how they work together to present a coherent understanding of your company's performance, you can make informed decisions that will skyrocket your eCommerce business.

Are you aware that leveraging AI Shopping Assistants enhances your eCommerce site's overall Key Performance Indicators (KPIs)? By providing shoppers with a seamless and hassle-free shopping experience, they are likely to spend more time on your site, interact with your store, purchase additional products, and become repeat customers. Take advantage of AI to boost your eCommerce success today. Seeing is believing — check out Kitlocker's case study to see how Shopbox AI has delivered real and measurable results to their business.


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