8 Essential Ecommerce Metrics for Understanding Your Online Store’s Performance in 2023


Tracking the right Key Performance Indicators (KPIs)/metrics help you gauge your Ecommerce performance and make informed decisions based on your findings to improve your performance. But what is the most important KPI/metric to pay attention to? While there is no single all-important metric for measuring ecommerce performance, there are a few essential ones you should track closely as you monitor your store’s performance.

Here they are:

1.) Conversion Rate (CVR)

2.) Average Order Value (AOV)

3.) Shopping Cart Abandonment Rate

4.) Repeat Purchase Rate

5.) Customer Lifetime Value (CLV)

6.) Customer Acquisition Cost (CAC)

7.) Top Products Sold

8.) Bounce Rate

These metrics are not listed in any particular order. The focus of this article is on where to find the numbers, why they are important, what conclusions you can draw from them, and what you can do to improve them.

Where can you find the values for each variable? Google Analytics.

You will need to have or create a Google Analytics Account, ensure you have enabled Ecommerce Tracking in your Google Analytics, and add the Ecommerce tracking code to your Ecommerce store. When it is all set up, you can start tracking your Ecommerce performance. And if you find you have trouble with the setup, we are happy to help.

Conversion Rate (CVR)

Conversion Rate CVR = (Number of Purchases / Number of Sessions) x 100%

Your ConVersion Rate (CVR) is the number of people who made a purchase out of the total number of traffic that came into your website (a.k.a number of sessions). In short, it is the number of sales made from that traffic. For instance, If your EC store gets 1000 sessions and 45 places an order. Using the formula above, this will be 45/1000 = 4.5%. The CVR for typical Ecommerce websites falls between 2% and 3%, but this varies depending on the industry.

If your site is driving massive traffic with little conversions, it could indicate that your site is having conversion issues such as poor website interface, slow page speed, imprecise call-to-action, etc. You will need to take a deep dive into your site, think from a customer perspective and look for optimization opportunities.

On the other hand, if your site is not driving enough traffic, you will need to look for ways to drive more traffic, whether from paid advertisement or organic or both. Contact us if you need help with website optimisation, conversion optimization and online paid advertising.

Average Order Value (AOV)

Average Order Value (AOV) = Total Revenue / Total Number of Orders

Your Average Order Value (AOV) is the average amount spent by your customers each time they visit your Ecommerce store. This metric helps you gauge revenue, set long term goals, and budget for marketing. For instance, if your AOV is $50, and your target sale in that month is $10,000, you will know that you need to acquire at least 200 customers. You can consider increasing the AOV in order to accelerate goal achievement. To increase AOV, some common strategies you can implement are: cross-selling, upselling, bundle discounts and coupons.

Shopping Cart Abandonment Rate

Shopping Cart Abandonment Rate = (Number of Completed Purchases / Number of Shopping Carts Created) x 100

Shopping cart abandonment occurs when a customer adds a product to their online shopping cart but fails to complete the checkout process. Monitoring this metric is crucial as it helps identify areas for improvement in your checkout process. Individuals who abandon their shopping carts are typically interested in your products, but certain factors may prevent them from finalizing their purchase at the checkout, such as limited payment options, additional costs, slow website speed, and more.

A higher abandonment rate indicates a greater number of abandoned shopping carts. However, it is commonly observed that the Shopping Cart Abandonment Rate falls within the range of 69.75% to 85.65%. Only when your rate exceeds 95% to 100% should you consider it a cause for concern.

Repeat Purchase Rate

Repeat Purchase Rate = (Number of Repeat Purchase Customers / Total Number of Customers) x 100%

The Repeat Purchase Rate refers to the proportion of customers who have made multiple purchases from your ecommerce store. A higher Repeat Purchase Rate signifies the sustainability and growth potential of your Ecommerce business.

While the rate can vary across industries, the average falls between 20% and 30%. If your rate is below 20%, it may indicate lower customer satisfaction. In such cases, it is essential to assess your customer experience on the Ecommerce store and consider conducting surveys to identify areas for improvement, including post-sale service. Additionally, investing in re-targeting strategies for past customers, such as utilizing paid advertising to target both previous customers and website visitors, can be beneficial. Recognizing the significance of customer retention is crucial, as the cost of retaining existing customers is lower than acquiring new ones.

Conversely, it is important to remain vigilant when the returning customer rate exceeds 50%, as this may suggest fewer new customer acquisitions, potentially impacting your business in the long run.

Customer Lifetime Value (CLV)

Customer Lifetime Value (CLV) = Average Purchase Value x Number of Times the Customer Will Buy Each Year x Average Length of the Customer Lifespans (in Years) Formula Breakdown: Average Purchase Value = AOV = Total Revenue / Total Number of Orders Number of Times the Customer Will Buy Each Year = Number of Purchase / Number of Unique Customer Note: Unique Customer represents customers who made one or more times of purchase. If a customer made multiple purchases over a period of time, they are counted as one in the calculation. Average Length of the Customer Lifespans (in Years) = Sum of customer lifespans / Number of Customers

The Customer Lifetime Value (CLV) represents the anticipated total revenue that can be expected from an individual customer over the course of their relationship with your business as a paying customer. The specific value will depend on the industry and the product being offered. In the case of an Ecommerce store that offers various product categories, it is advisable to first segment customers based on these categories and then calculate the CLV for each segment. By increasing the percentage of returning customers to your website (while keeping it below 50%), you can elevate the CLV. This metric holds significant importance, particularly for subscription-based businesses.

Utilizing this metric enables you to identify high-value customers and customize your marketing efforts to optimize the acquisition of similar customers. Additionally, it allows you to determine the amount you are willing to invest in customer acquisition and retention while staying within your comfort zone.

Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) = Amount Spent on Marketing and other Acquisition Activities / Number of New Customers

Your Customer Acquisition Costs (CAC) represent the average expenses incurred to acquire a new customer. It is crucial to closely monitor this metric to ensure that your spending does not exceed your earnings. If your CAC exceeds the Customer Lifetime Value (CLV), your business will operate at a loss. In such instances, it becomes necessary to identify strategies to reduce customer churn by analyzing the causes and implementing effective solutions.

Top Products

This metric provides insights into the popularity of your products, indicating which ones generate the highest revenue and which ones sell the most in terms of quantity. With this information, you can make informed decisions regarding inventory management, ensuring that you have adequate stock levels to meet demand. Additionally, you can leverage these findings to introduce new products, such as variations of existing products or bundled discounts, in order to incentivize customers to make larger purchases and consequently increase overall sales.

Bounce Rate

The Bounce Rate of your Ecommerce store represents the percentage of visitors who leave your site after viewing only one page, without further interaction. A high Bounce Rate may indicate a subpar user experience or unfulfilled expectations. For example, visitors might feel overwhelmed or disengaged when they first land on your website.

Ideally, the average Bounce Rate for an Ecommerce store should fall between 20% and 45%, and it’s even better to aim for a lower rate if possible. To reduce the Bounce Rate, it’s essential to ensure that your website is easy to navigate, meets visitors’ expectations, doesn’t overwhelm them, and has fast page loading times. It’s crucial to think from the perspective of your visitors and make every effort to enhance their online shopping experience in your Ecommerce store.