What are KPIs?

KPIs, or key performance indicators, are metrics that can be used to evaluate performance and measure the success of your eCommerce business. 

Why are they important?

KPIs are important to success because they can help you measure goals and determine which areas need improvement, ultimately improving your bottom line and helping you grow your business. And from sales to marketing to shipping, we’ve got you covered on the most important metrics for eCommerce. 

15 eCommerce KPIs Skyrocket Your Business Growth

1. Return on Ad Spend

Return on ad spend (ROAS) measures the revenue generated per dollar spent on an advertising campaign. So if you put $1 into a marketing campaign which generates $5 of revenue, your ROAS would be 5:1, representing $5 made for every $1 spent. It’s difficult to pin down a “target” ROAS across all of online retail, but most experts agree on a 4:1 ratio as a benchmark. 

If your ROAS for a particular campaign has not quite hit the industry benchmark, it’s not always best to just end the campaign. Instead, try experimenting with different creatives, calls to action (CTAs), audiences, and more. 

2. Average Order Value

Average order value (AOV) measures the average total of every order placed over a defined period of time. Depending on the niche your business operates in, your AOV will likely vary greatly from a company in a different niche (ex. an auto parts supplier will have a very different AOV from an apparel site). 

Understanding this metric can help you determine future marketing & pricing strategies. In the case of your shipping strategy for example, a low AOV may suggest that you need to tack on extra shipping costs to avoid cutting into your bottom line. Oppositely, if your AOV is high enough to avoid sacrificing margins, you can offer  your customers free shipping, potentially increasing your AOV even further.

3. Average Customer Lifetime Value

Average customer lifetime value is the total worth to your business of an average customer over the entire period of the relationship. It helps paint a picture of product to market fit and brand loyalty. Moreover, customer lifetime value can help you determine how much you can afford to spend to retain existing customers and to acquire new customers.  

4. Shopping Cart Abandonment Rate

Shopping cart abandonment rate is the percentage of shoppers that add products to their cart but abandon it before completing the purchase/conversion. Industry data puts the average shopping cart abandonment rate around 60-80%. And though this number may seem staggering, there are several ways to reduce this metric on your own site. 

On most popular eCommerce platforms, there are plugins & apps, commonly known as heat maps, that track the customer journey from the time they enter your site until they either purchase a product or exit the website. An in-depth look at these heat maps may indicate at which point in their journey customers are abandoning their purchase. 

One of the biggest reasons that customers abandon their cart is due to shipping costs. Offering free shipping is a great way to reduce the abandonment rate. 

If you have an email opt-in for new users to your site, sending automated follow-up emails to those who failed to complete a purchase can potentially prompt them to revisit the site and complete a purchase. 

And rather than trying all of these methods at once, it’s important to split test different options to understand why your customers are abandoning their carts. 

5. New v. Returning Customers

This metric shows the relationship in conversions between new & existing customers. 

Acquiring new customers & subscribers is how eCommerce stores grow. But, new customers are not the only way to generate revenue. 

Spending money on customer retention can lead to higher order values, brand loyalty, and increased customer lifetime value. 

6. Customer Acquisition Cost

Customer acquisition cost is the amount of money spent to acquire a new customer. 

To relate this to customer lifetime value, a good benchmark to aim for is 3:1. This means that the average customer spends three times more than the cost to acquire them. 

If your ratio is significantly lower than the benchmark, you’re probably spending too much to acquire them. 

If your ratio is much higher than this, you may be spending too little; meaning you could spend more: acquiring more new customers and increasing revenue.  

7. Conversion Rate

Conversion rate is the percentage of visitors who purchase a product or service on your site. It can also be applied to other goals on your site such as subscribing to a newsletter or filling out a contact form.

Conversion rate is closely related to many other KPIs. For example, can you afford to continue running a digital marketing campaign at such a low conversion rate in order to achieve an optimal return on ad spend? Or if your conversion rate is so low, could it be attributed to a high shopping cart abandonment rate? 

8. Profit Margin

Profit margin is the amount of profit in your company, and arguably the most important KPI for any online retail business. It’s no secret that you need to make more than you spend; that’s how business works. 

Industry standards deem a 10% profit margin as “average,” with 5% being considered “low” and 20% being considered “high.” 

As your business grows, your margins should grow as well. Using some of these KPIs, along with others, will help you develop a plan to increase your margins. 

9. Primary Traffic Source

Unless you’re a massive eCommerce brand, it’s likely that an overwhelming majority of your traffic comes from one source. And whether it’s social media, organic, paid campaigns, or email, this is likely where you’ve focused most of your attention when evaluating customer acquisition. 

If you don’t know your primary traffic source, there are several tools such as Google Analytics which can help you determine the primary source, along with thousands of other data points.

10. Site Traffic

Site traffic is the amount of visitors entering your site through a particular acquisition channel. 

Site traffic is a pretty broad KPI, especially given the amount of acquisition channels: organic, direct, social media, and email, to name a few. And depending on your digital marketing strategy, some of these traffic sources will be more important than others. 

If you’ve allocated a majority of your resources to a search engine optimization (SEO) strategy, then you’ll primarily be tracking organic traffic. Conversely, if you are running a paid social media or pay per click (PPC) campaign, you’ll be tracking paid traffic. 

By examining the amount of site traffic across all acquisition channels, you can determine if you should spend more or less acquiring customers from certain channels. 

11. Email Open Rate

Email open rate is the percentage of emails opened in an email campaign. This metric can be even further examined by looking at total opens (the total number of times an email was opened) vs. unique opens (the amount of people who have opened your email).  

And though not one of the top acquisition sources for eCommerce companies, email is one of the most successful re-acquisition sources. If a customer subscribes to your newsletter, it’s because they’re interested in your products. By sending them new product alerts, sales announcements, special offers, and more, the likelihood of them making a first, second, or third purchase increases tremendously.

Fortunately, email related metrics such as open rate are automatically calculated if your eCommerce brand utilizes an email marketing tool. 

12. Inventory Levels

Inventory levels are simply the amount of units available at any given time for a particular product. Maintaining proper inventory levels is critical for any eCommerce business; you don’t want to find yourself with too many customers and too few products or vice versa. 

To properly manage inventory, you’ll need to look back at your sales history & rate of growth to determine future inventory requirements. As your business grows, so too will your inventory.

No Storage Fees for Your Inventory

13. Shipping Error Rate

Whether you’re shipping yourself or using a fulfillment partner, shipping errors are bound to occur. Common errors include sending the wrong product, the wrong size, the wrong color, or even shipping it to the incorrect address. 

Ideally, this number should be 0%. But unfortunately, mistakes do sometimes occur. 

The benchmark for shipping error rate is < 0.5%; meaning that for every 10,000 orders shipped, 50 of them are incorrect in some way.

At Dollar Fulfillment, our error rate is just 0.02%, meaning that for every 10,000 orders shipped, just 2 are incorrect.    

Maintaining a low shipping error rate is critical to creating a positive customer experience, enticing customers to purchase from your store again in the future (increasing your customer lifetime value).

14. Shipping Delivery Times

Living in the age of Amazon, consumers have come to expect their products to ship for free and arrive in 1-2 days. Given that your eCommerce store doesn’t have quite the delivery network that Amazon has, these expectations are a bit unrealistic. 

Therefore, you must still try to meet customer expectations without breaking the bank and cutting into your bottom line. 

If feasible, offering free shipping is a great way to positively affect certain KPIs like conversion rate, average order value, average customer lifetime value, and more.

If you partner with a fulfillment company, make sure to be up front about delivery time expectations to make sure that your goals align with the service they can provide.

And if shipping through the USPS, UPS, FedEx, or DHL, it is very possible to deliver orders to domestic customers within 3-5 business days. 

Same Day Shipping if Ordered Before Noon

15. Customer Satisfaction Score

The Customer Satisfaction Score (CSAT) is the percentage of customers who are satisfied with a brand’s products and/or services. 

Essentially, it’s a measurement to evaluate your average level of customer service. After completing a purchase, you can prompt customers with a pop-up after the checkout process or send them a follow-up email to rate their level of service after they’ve received their product.

Maintaining a high CSAT score is critical not only to customer retention, but to word of mouth advertising and product review performance. 

Set Realistic KPI Goals for Your Business

It’s possible that all of these metrics won’t apply to your eCommerce business, and that’s fine. Depending on the stage of growth, you may choose to track certain KPIs rather than others. 

Regardless of your current stage of growth, it’s important to set goals for each of your focus KPIs. Once you’ve reached these goals, you can either choose to set new goals or maintain them.