In order to improve brand engagement and drive online sales, ecommerce companies need to track key performance indicators (KPIs). This article offers details and formulas on the KPIs that matter most to ecommerce companies. Regularly monitoring these KPIs will help you gauge how well the company is doing.
What Are Ecommerce KPIs?
Ecommerce KPIs are metrics that help a company that sells goods online monitor its performance and progress over a certain period of time. These metrics are crucial gauges of success and can help inform critical business decisions.
What Is the Difference Between Ecommerce KPIs and Metrics?
Ecommerce KPIs are the metrics a business has determined are the most important. Therefore, ecommerce metrics aren't always KPIs. In fact, ecommerce KPIs are often a combination of two or more metrics that measure progress toward an overall business goal.
For instance, "conversion rate" is a common and valuable KPI. To determine the conversion rate, you generally need to track two other metrics: the number of total visitors to your website and the total number of those visitors who then performed an action that you wanted. Most often, that action would be buying something.
Read the guide to ecommerce metrics to understand how metrics and KPIs differ.
- A KPI is a step beyond a basic metric; it measures something that the company has realized is vital to its success.
- You must choose KPIs based on company goals, maturity and other factors specific to your ecommerce business.
- For most ecommerce organizations, conversion rate and average order value will be critical KPIs.
4 Characteristics of KPIs
How do you know whether a KPI is one worth measuring? The right KPIs generally have four important characteristics:
- They make a difference in your company's bottom line.
- You can measure them with accuracy.
- You can measure them in real-time.
- They are "actionable," meaning you can make immediate changes in your processes that will influence them.
What Is the Difference Between an SLA and a KPI?
A service level agreement, or SLA, documents what a vendor commits to provide to a customer, often contractually. Those commitments are typically reflected in numbers, such as delivering a certain volume of inventory every month or uptime. A KPI reflects how an ecommerce business is operating and its goals, but doesn’t necessarily reflect a commitment to meet those benchmarks.
An example of an SLA would be how long a computer network is operational without interruption or the percentage of downtime allowed before the vendor incurs financial penalties. A KPI doesn't involve vendor contracts or penalties. It reflects how close a business is to meeting its ecommerce objectives.
Why Are KPIs So Important in Ecommerce?
Ecommerce is often a game of numbers — more orders or a higher conversion rate translates to additional revenue. The success of a company that sells online is often directly tied to these specific metrics. KPIs allow you to accurately measure a company's ecommerce progress based on performance and make changes as necessary.
Types of Key Performance Indicators
Different industries have dozens, or even hundreds, of key performance indicators. Ecommerce KPIs tend to fall into five broad categories:
- Customer service
- Project management
How to Choose the Right Ecommerce KPIs for Your Organization
You must choose KPIs that have a real impact on business goals and measure things you can change. The KPIs also must match your company’s growth stage. For example, startups may want to measure revenue growth or new customer acquisition, while an established public company may want to choose KPIs that focus on increasing profits and shareholder value.
KPIs will differ from one business to the next, even within ecommerce. Select the KPIs that best reflect your organization’s objectives and will determine its success. Identify a small set of the most important KPIs. Giving equal attention and importance to dozens of KPIs can be overwhelming and management can lose focus.
What Makes an Effective KPI?
Ecommerce businesses are able to track more data than ever, but to create a KPI that is effective and can have a measurable impact on business performance, it must:
- Impact bottom-line goals
- Be something that can be tracked accurately
- Be measured in real-time
- Be something immediately actionable
Most Important KPIs for Growing Sales
There are several KPIs crucial to tracking sales. These KPIs include a variety of metrics, like how often your company converts visitors into paying customers.
Conversion rate measures how often a visitor or customer performs a desired action on your website. Frequently, companies monitor the "sales conversion rate," which tracks actual purchases, but it can also measure actions like signing up for a newsletter or downloading a piece of content.
Conversion rate = Total desired action by visitors / Total visits x 100
A common benchmark for ecommerce sales conversion rate is around 2% to 3%.
Learn how to use on-site search to improve conversion rates.
Conversion Rate Per Traffic Channel
You can also track how well the different channels the company uses to attract new shoppers. For example, you can track how many visitors came to your website from a Facebook advertisement and performed the intended action. Conversion rate per traffic channel can help leaders determine how to best split up your marketing budget.
Conversion rate by channel =
Total conversions derived from a marketing channel / Total visits from marketing channel x 100
Average Order Value (AOV)
The average order value is how much a single average customer pays for an order.
Average order value = Dollar value of all sales / Number of transactions
There are a number of ways companies can increase the average order value. They can recommend related items with purchases, sell accessory items at a discount and offer free shipping above a certain order value.
Customer Lifetime Value (CLV)
Customer lifetime value measures the total revenue a company earns from an average customer over the entire length of time they purchase from your business.
Customer lifetime value =
Company's average order value x Purchase frequency for an average customer per period x Number of periods average customer remains a customer
This metric shows you what an average customer means to your bottom line for the entire time it remains with your company. The metric helps you analyze the resources spent on acquiring new customers.
Customer Retention Rate
The customer retention rate measures the percentage of customers you hold onto over a specified period.
Customer retention rate =
(Number of customers at close of a period – Number of customers acquired during period) / Customers at beginning of period) x 100
The goal is to convince all customers you will continue to earn their business after the initial purchase. A high retention rate heightens profits, because it costs less to earn revenue from repeat purchasers than acquiring new customers. Businesses can work to increase customer retention through loyalty programs and better customer service.
Annual Repurchase Rate
This KPI measures how many customers continue to place orders year after year. For consumable goods or B2B organizations, this is another crucial measurement of customer loyalty.
Annual repurchase rate = Number of customers who made purchases in both current year and prior year / Customers who made purchases in current year x 100
The annual repurchase rate is often correlated to customer service, loyalty and engagement. Organizations with a yearly repurchase rate of more than 60% are typically in “retention mode” and can focus on pleasing current customers. Those with an annual repurchase rate below 40% are in acquisition mode and are more focused on acquiring new customers instead of retaining current ones.
Net profit is how much your business makes after subtracting all expenses.
Net profit = Total revenue – Total expenses
Gross profit is total revenue after minus the cost of goods sold.
Gross profit = Total revenue – Cost of goods sold (COGS)
This metric tells you whether your company is growing and if the growth is sustainable.
Use this KPI to measure the percentage of site visitors who add products to a virtual shopping cart. The number includes those who put products in their cart but don't make a purchase.
Add-to-cart rate =
Total website sessions where visitor adds products to cart in a specific time period / Number of total visitor website sessions during period x 100
Cart Abandonment Rate
This KPI measures how often a customer adds products to a virtual shopping cart but then leaves the site before purchasing anything.
Cart abandonment rate = 1 – Completed purchases / Number of carts abandoned before checkout x 100
The cart abandonment rate might tell you if the shopping and checkout process is customer-friendly. It is especially helpful if you can measure each stage of the checkout process to optimize any underperforming steps. For example, if customers are proportionally dropping off more at the billing phase, then it may make sense to provide more billing options.
Orders Per Active Customers
This unit measures how many orders "active" customers place in a period. You can define active customers based on whether they've purchased from you at least once in a set period, often one year.
Orders per active customers = Number of orders by all active customers / Number of active customers
This KPI offers a sense of how effectively your company attracts loyal customers and drives repeat purchases.
Gross Merchandise Volume (GMV)
This KPI determines the total revenue from all merchandise sold over a period.
Gross merchandise volume = Sales price of product/service x Number of products/services sold
To calculate the total GMV, a company would need to use this calculation for every good or service it sells.
Return on Investment (ROI)
ROI measures how much revenue and (ideally) profits an investment produces.
Return on investment = Net return or income on investment / Cost of investment x 100
This KPI is important for any company to analyze after they make large investments, especially when they are experimenting with new business strategies, sales channels or marketing campaigns.
Ecommerce companies are increasingly paying social media "influencers" to help raise awareness about their brands and sell their products. This KPI measures whether the money a company pays those individuals yields positive results by tracking the revenue or profit generated by influencer campaigns.
Influencer ROI = Net revenue from influencer investment / Cost of influencer investment
Return on Ad Spend (ROAS)
Return on ad spend is a specific version of ROI that measures how much revenue you generate from money spent on advertising. Businesses typically monitor this KPI to evaluate the performance of a particular advertising investment or channel. You can also track ROAS for all advertising in a period.
Return on ad spend = Revenue from advertising investment / Cost of advertising
A common benchmark for ROAS in ecommerce is four: $4 in revenue for every $1 spent on advertising.
Return on Marketing Investment
Return on marketing investment measures the total revenue received from all marketing efforts.
Return on marketing investment = Revenue from marketing investments in a period / Cost of marketing investments for that period
Average Profit Per Customer
This KPI measures the average profit a company makes from each customer. This number also provides insights into how much your business can pay to acquire customers.
Average profit per customer = Total profits in a period / Number of customers in that period
Revenue Per Site Visitor
This KPI measures a company's gross revenue per visit to its website.
Revenue per site visitor = Total revenue in a period / Website visits in period
Time on Site/Average Session Duration
Time on site, also called average session duration, is an engagement KPI that measures the average time a visitor spends on your website. A higher number signals greater visitor engagement with your company and increases the chances they will make a purchase. This metric should also be measured alongside conversion rates as too much time spent on site may lead to lost sales.
The bounce rate is the percentage of visitors who visit a website but leave after viewing only one page. You can also utilize this formula to calculate the KPI:
Bounce rate = Number of one-page website visits in a period / Total number of website visits in a period
High bounce rates can be attributed to bad quality traffic sources, missed expectations, poorly designed user experiences or technical issues.
Organic Search Rankings
Since search engines are such a predominant traffic source, it is imperative to track how your company's website is ranking on Google and other search engines. You should research and determine which search keywords are the most important for your business and carefully measure where your business ranks on search engine results pages.
To learn more about how to boost your company's search engine optimization efforts, read about everything you should know about ecommerce SEO.
Top KPIs to Measure Ecommerce Marketing
Experts also recommend several KPIs to track ecommerce marketing and advertising efforts. They include KPIs that measure overall website traffic and the performance of social media channels.
This KPI refers to the total quantity of visits to a website in a specified period. More visits usually lead to more purchases. It is typically measured week-over-week, month-over-month or year-over-year to see growth over time.
Mobile Site Traffic
This KPI tracks the number of visitors who visit your website using a mobile device such as a smartphone or tablet. By segmenting site traffic by mobile and desktop, businesses can analyze the mobile customer experience to ensure it converts as well as the full desktop experience.
Social Followers and Fans
This looks at the number of people who engage with your company through social media by becoming a follower or fan on Facebook, Instagram, Twitter or other platforms.
This KPI specifies how online visitors found your website — through organic or paid search, social media ads, affiliate referrers or other sources. Use this information to help you make the right marketing investments.
Top KPIs to Measure Ecommerce Customer Service
Several KPIs are vital in tracking the quality of your customer service for online shoppers.
Customer Satisfaction (CSAT) Score
Companies usually determine the customer satisfaction (CSAT) score by asking customers to complete a simple survey, sometimes consisting of only one question that uses a scale of zero through 10. That question might be: "How satisfied are you with your experience with our company?"
Net Promoter Score (NPS)
A company's Net Promoter Score measures how likely customers are to recommend your business to a friend, follower or colleague. NPS surveys ask respondents to rate how likely they would be to recommend your company, from 0 through 10. Those who rate a company a 9 or 10 are "promoters." Those who give a rating of 7 or 8 are "passives." Anyone who gives a rating of 0-6 is a "detractor."
Net Promoter Score =
Percentage of surveyed customers who are "promoters" – Percentage of surveyed customers who are "detractors"
Average Complaint Resolution Time
This KPI looks at how much time it takes (usually measured in days) to resolve a customer complaint or other customer support issue. Businesses track the time from when a customer first communicates the problem to when they resolve it.
To learn more about how to improve customer service, read the post on improving ecommerce customer service.
Top KPIs to Measure Ecommerce Store Performance
These KPIs track how well an ecommerce site is attracting customers and selling products.
Cost Per Acquisition (CPA)
Use this KPI to determine the cost of gaining a new customer. In ecommerce, those costs are associated with marketing and advertising activities. Customer "acquisition" can refer to the sale of a product or a website visitor taking a desired action, like signing up for a newsletter.
Optimizing your marketing campaigns’ CPA will help you get more campaign impressions and web store traffic out of your advertising spend.
Cost per acquisition =
Total spent on campaign to acquire new customers or users / New customers or users acquired
Customer Acquisition Cost (CAC)
CAC is the total overall cost to acquire a new customer and includes expenses related to producing, storing and shipping products they might purchase.
Customer acquisition cost = Total marketing and sales expenses / Number of customers acquired
Customer acquisition cost tells you the all-in amount you’re spending to attract each customer.
Cost Per Conversion
This KPI measures total advertising costs to attract a single visitor who then buys a product or service from your company.
Cost per conversion = Total cost of advertising or marketing campaign / Number of purchases from visitors converted by campaign
Top KPIs for Ecommerce Managers
With so many ecommerce metrics to be cognizant about, ecommerce managers can get easily overwhelmed. If company leaders need to measure the most important ecommerce KPIs, then these are the ones you need to keep your eye on.
- Conversion rate: This KPI does a great job of assessing the overall performance of your ecommerce store.
- Average order value, customer acquisition cost and customer lifetime value: Track these three KPIs separately, but analyze them together. Combined, they can tell you whether your investments in acquiring and keeping customers are paying off. They can also show if you’re spending more money to acquire customers than the customers are worth.
- Customer retention rate: Look at this KPI to see how satisfied and loyal your customers are, which is vital to long-term success.
- Net Promoter Score: Your NPS score is also a measurement of customer satisfaction and offers warning signs when you need to make improvements to acquire and hold onto clients.
Key Performance Indicator Dashboards
A dashboard is an easy-to-read way to track all company KPIs in a single place. Your company's ecommerce platform will likely provide a custom dashboard that you can set up to track the KPIs most important to your organization.
The analytics tool should also offer a way for you to drill down into each KPI. You want to see how the numbers behind each KPI are trending and how they compare to company goals. These stats can inform how and when to makes changes that will have a real impact on business success.
KPIs to Include in an Ecommerce Dashboard
Ecommerce KPIs should align with company goals, so what’s included on a dashboard will vary by organization. These are some popular KPIs that many online sellers track:
- Conversion Rate
- Customer Lifetime Value
- Average Order Value
- Customer Acquisition Cost
- Cart Abandonment Rate
- Return on Marketing Investment
- Average Profit per Customer
- Customer Retention Rate
- Site Traffic
- Net Promoter Score
KPI Dashboard for Growing Sales
When looking to expand sales, you want to track KPIs that reveal how customers shop on your site. This data provides insights into what is working and where you can improve the online customer experience. Some frequently used KPIs for an ecommerce sales dashboard include:
- Conversion rate
- Cart abandonment rate
- Add-to cart-rate
- Bounce rate
- Orders per active customer
Ecommerce KPI Dashboard to Measure Marketing Efforts
Whether you’re using paid advertising, search engine optimization or influencer marketing, a dashboard can help you see which efforts have the biggest ROI and how they’ve performed over time. With that information in hand, you can make adjustments as necessary. Typical KPIs to use in an ecommerce marketing dashboard include:
- Site traffic
- Mobile site traffic
- Traffic source
KPI Dashboard to Measure the Performance of an Ecommerce Store
It’s imperative that ecommerce businesses constantly monitor how well their site is performing. A site that doesn’t have visitors won’t make sales. This dashboard will help you determine whether you’re spending wisely to draw customers to your store. Some common KPIs to measure the performance of your ecommerce store include:
- Cost per acquisition
- Customer acquisition cost
- Cost per conversion
The Best Ecommerce Analytics Tools for Tracking and Reporting
It's important to track ecommerce KPIs in conjunction with other processes across your company. Companies that sell both online and at physical stores must track their performance through these channels in an integrated way.
Organizations can no longer afford to have departments working in silos. They need to understand how all of their processes — including marketing, sales, merchandising and inventory — are working together. Tools like Google Analytics, email marketing platforms, shipping providers, digital payment processors and social media management tools can all provide critical information. However, having all these tools unified in a single platform can save time and money. Look for a solution that helps you identify and track KPIs across all areas of your business.
Often ecommerce companies, especially those with brick-and-mortar stores, can benefit greatly from using a cloud-based platform that delivers real-time analytics. Learn more about whether an on-premises or cloud platform is right for your company.
How NetSuite Helps You Track and Improve Ecommerce KPIs
Identifying the right KPIs and monitoring them regularly can be the difference between success and failure for an ecommerce company. That’s why business leaders need a tool that can provide real-time analytics on all their processes, from production to marketing and sales.
NetSuite’s platform, which has all the required capabilities for both B2C and B2B ecommerce, is unified with ERP, CRM and inventory management to give the whole organization, including finance and ecommerce managers, full visibility into KPIs and ecommerce metrics that can help it thrive. There are no integrations between systems necessary, eliminating the risk of those links breaking or only updating data sporadically. Having information from across your business in one place with NetSuite’s ecommerce solution makes it far easier to understand the relationships between various functions. For example, finance can see how an increase in customer acquisition cost is affecting overall profit margin for the quarter.
NetSuite also offers email marketing tools that deliver personalization, insights via sophisticated analytics and help to reduce cart abandonment. NetSuite ecommerce offers full omnichannel capabilities that connect the online and brick-and-mortar channels to offer an outstanding customer experience.
Get more resources on how NetSuite delivers leading ecommerce capabilities.