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The Ultimate Guide to E-Commerce KPIs

  1. What are KPIs for e-commerce?
  2. The top e-commerce KPIs and metrics to track
  3. Best KPIs for measuring the performance of an e-commerce business summarized

You’ve got your e-commerce site up and running. You’re building a brand that will resonate with your audience in order to scale growth to new heights. You feel like you’ve done everything right to get your business off the ground.

Now, you need to understand how to take your early wins and translate them into a roadmap to build your long-term growth strategy. That means you need to understand the core KPIs that help you measure the effectiveness of your website, communications, and customer support tactics.

Data is your best resource to adapt to successes or failures. Those key data points help your team make the necessary tactical changes so that you can stay on the right track and achieve scalable long-term growth.

What are KPIs for e-commerce?

E-commerce KPIs are like a GPS monitor for your business in that they show you the route you need to follow. Without e-commerce performance KPIs, it’s like driving blindly down the road. You’re unlikely to arrive at your destination, and you’ll have a much greater likelihood of crashing and burning along the way.

That’s why you need to keep the most important e-commerce KPIs in mind as you map out your growth plans. You want them to be aggressive, but you also want to keep them realistic.

The top e-commerce KPIs and metrics to track

So what are the top e-commerce KPIs and metrics that you should track to help manage the growth of your online business? Keep in mind that there are always additional metrics you can use to monitor customer engagement and the ability to attract new shoppers.

However, these are the 10 best KPIs for measuring the performance of an e-commerce business. Regardless of whatever other data you use to track your performance, these 10 metrics are vital to building a successful e-commerce brand that delivers results.

1. AOV (Average Order Value)

Average order value (AOV) describes the average amount that a customer spends when placing an order on your site. Higher AOVs indicate that people are enjoying their shopping experiences and finding multiple products to fill up their baskets. As an e-commerce website owner or manager, high AOVs suggest that your conversion optimization strategy is effective and that you can continue to move full steam ahead. On the other hand, low AOVs suggest people are not getting the shopping experience they want from your brand.

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Example: Conrad Electronics Conrad Electronics is one such e-commerce brand that changed tactics to scale growth. Their traffic to conversion rate was less than ideal so they implemented more effective conversion optimization solutions to encourage more shoppers to buy. The strategy proved to be very effective as it helped drive up AOV by 17%. People took advantage of related accessories and supportive products to help drive up the number of items in their carts.

2. Conversion Rate

Conversion rates are obviously one of the most important KPIs for any business, but especially for e-commerce brands. Conversion rates give a strong indication of what percentage of your website traffic will become paying customers for your products. This gives you an indication of how much traffic you need to generate per month to achieve your growth targets and scale the business.

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3. LTV (Lifetime Value)

Lifetime value or customer lifetime value (LTV) helps your brand identify how much revenue you can expect to earn from a shopper over the duration of their relationship with your company. This is very important for long-term growth. It costs far less money for your business to maintain relationships with existing customers than to constantly attract new ones. The more you can rely on the LTV of existing customers, the more profitable your company will become.

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4. Cart Abandonment Rate

Cart abandonment rates are a KPI that’s directly tied to e-commerce business success. It tells you the percentage of online shopping carts that didn’t convert and complete the purchase. High cart abandonment rates indicate a problem with your buying experience. You want to keep this rate as low as you possibly can.

To calculate cart abandonment rates, simply divide the number of completed purchases on your site by the number of carts created during that time period. For instance, if you have 1,000 purchases per month and 10,000 carts created on the site, your cart abandonment rate is 90%. This will give you a sense of how many shoppers you’re losing without earning their business.

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Example: Dressmann Dressmann, one of the largest online fashion retailers in Sweden, invested in cart abandonment recovery software to help improve their conversion rates. Recognizing that their website traffic was not converting at rates necessary to fuel business growth, they used cart abandonment emails to reconnect with abandoned shoppers and motivate them to come back to the website. This helped drive a 34% increase in website engagement that ultimately contributed a 17% boost in AOV.

5. ROI

Your return on investment (ROI) is an essential metric to any business operation. This is what tells you the amount of money you can earn from investment costs you make to get the business up and running. You want this metric to be a respectable amount to justify the decisions you make for your business.

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6. Website Engagement

Your website engagement rates are very important to your optimization strategy. Website engagement tells you how much people are invested in the content, the products, and the overall experience of your website.

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You can also use metrics like session duration, page per session, average time on site, and drop-off rates to analyze the effectiveness of your website experience. If people are spending more time on the site across multiple pages, odds are that they’re enjoying the experience and are more likely to convert. If the drop-off rate is high, there’s likely a problem that you should review. This data is essential to helping you calculate other important metrics like ROI, AOV, conversion rates, and more.

Example: Helly Hansen The e-commerce brand Helly Hansen opted to improve website engagement by investing in AI and machine learning technology to generate real-time website engagement. They used the technology to engage in one-to-one digital dialogue with shoppers, reminiscent of an in-store sales associate providing support and service to in-store shoppers. The tactic proved very effective as it generated a 10% increase in onsite engagement, which then fuelled a 25% boost in AOV.

7. Cost Per Acquisition

Another metric that is universal for all types of businesses, but especially e-commerce brands, is cost per acquisition (CPA). This metric is used to measure the amount of money spent to acquire a new customer. You can then use that number to calculate how many customers are needed to make your business profitable without exceeding your budgets.

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8. Purchase Frequency

Purchase frequency is a metric that analyzes the average number of orders made by each paying customer. Similar to LTV, it gives you an idea of repeat buying habits that you can use to influence your growth model and acquisition/retention strategies as your business continues to grow and develop.

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9. User Satisfaction Rate

User satisfaction is an important indicator of how well shoppers perceive your brand and their experiences while interacting on your website. A positive user satisfaction score suggests that people will become repeat buyers, which influences other KPIs like purchase frequency rates or LTV. A negative score can potentially disrupt your growth plans.

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Example: Elkjøp Elkjøp is an example of an e-commerce company that made user satisfaction one of the core pillars of their growth strategy. As they expanded into international markets, they increased their operating hours and invested in AI-powered chatbots to help manage daily enquiries from shoppers. This helped reduce the burden placed on their customer support team while still providing the level of service necessary to satisfy shoppers. Ultimately, this strategy led to a user satisfaction rate of 80% for Elkjøp customers.

10. Customer Service KPIs

Customer service is one of the cornerstones of effective e-commerce business. As with any shopping experience, people will always have questions about items they’re looking for, prices or discounts they can leverage, and the shipping experience to their door. They want to have someone provide clear concrete answers to their questions to alleviate their concerns. That degree of support is what will convince many shoppers to go ahead with their decision to buy. While there are many customer service KPIs, we recommend that the one of the main ones you look at is First Contact Resolution (FCR), meaning the amount of support tickets that are resolved on the first contact.

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Example: Adecco and Norwegian Airlines Using AI-powered chatbots, e-commerce brands can reduce the workload placed on their human support staff with automated responses to common customer enquiries. This can help manage costs like time and resources dedicated to handling common enquiries and allow your company to invest more in big picture business goals. Examples of brands that effectively used AI technology to enhance customer service are Adecco, which lowered live chat enquiries by 75%, and Norwegian Airlines, which lowered live chat enquiries by 20%.

11. Return Rate KPIs

Return rates are an important metric to measure in order to optimize the post-sale experience. If the majority of your buyers opt to return items immediately after delivery, it’s not a great experience and it sours the reputation of your brand. According to the National Retail Federation, over $420 billion of merchandise was returned in 2020, costing companies millions in additional shipping and order processing costs. Some of that volume is influenced by the COVID-19 pandemic as people rushed to buy items online with no access to physical stores. But it reinforces why companies should optimize the online shopping experience - if for nothing else than to minimize the rate of returns.

If you can program your website to be fully transparent in regards to things like sizes for apparel or shoes, and your return policy, people will be more confident they’re buying the right item. Similarly, if you illustrate how your products differ from those provided by other brands, you can inspire people to feel motivated to make the purchase and not make a return.

Example: Birk sport E-commerce brands can use Kindly’s Virtual Shopping Assistant, a platform with a suite of conversational AI solutions, to help provide this kind of information. In this above example, the Norwegian bicycle retailer Birk Sport uses a Kindly Chatbot to find the right bicycle for their needs. The bot is connected to the brand’s product catalogue and includes details about the type of bike, size guide, accessories, and other specifications to help people make the right purchase tailored for their interests. This helps people feel confident they’re buying the right bike, which helps lower return rates for the Birk Sport brand. Shipping and returning bikes is expensive and a returned bike might mean the customer goes and buys a bike elsewhere. So this chatbot is an investment for Bike Sport that pays off.

Best KPIs for measuring the performance of an e-commerce business summarized

When you map out your e-commerce growth plan, make sure that you keep these KPIs in mind. They help you monitor your performance, identify any gaps in your path to success, and allow you to adapt your strategy to deliver more effective results.

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Always keep in mind that your KPIs are your benchmark to measure the success of your growth plans. You want to make your benchmarks aggressive yet realistic in order to facilitate the type of growth you want to achieve.

If your e-commerce KPIs are below target, you’ll need to adjust your strategy and potentially reforecast your growth targets. On the other hand, if they’re at or above target, you can rest assured that you’re on the right track to achieve your optimal business results.

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