Essential E-commerce KPIs: What they are and how to calculate them.

In the increasingly competitive landscape of e-commerce, successful businesses aren’t leaving crucial business decisions up to chance. They are committed to tracking and evaluating key performance indicators (KPIs) to measure the progress and profitability of vital business operations. Simply put, KPIs are metrics that help measure the performance of a specific area or activity within your business. By tracking a few essential e-commerce KPIs, you can gain valuable insights into your e-commerce business’s performance and identify areas that need improvement. This post will take a closer look at the essential e-commerce KPIs and why they are important.

Customer Acquisition Cost (CAC)

The customer acquisition cost KPI measures the amount of money you need to spend to acquire a single customer. The CAC metric evaluates the total sales, marketing, and overhead costs required to gain a new buyer during a specific time period. By tracking CAC, you can gain insight into how much you spend to attract new customers. How to calculate CAC:

Essential E-commerce KPIs

Average Order Value (AOV)

AOV measures the average amount of money your customers spend when purchasing from your store. You can gain insight into how your pricing and promotions impact customer spending by tracking this KPI. You can also use this KPI to identify which products are most popular and which ones are not. How to calculate AOV:

Essential E-commerce KPIs

Customer Lifetime Value (CLV)

CLV measures the total amount of money a customer will spend at your store throughout their lifetime. By tracking this KPI, you can gain insight into how valuable each customer is to your business. This can help you identify opportunities to increase customer loyalty and which customers are most valuable to your business. How to calculate CLV:

Essential E-commerce KPIs

Conversion Rate

The e-commerce conversion rate is a metric used to measure the percentage of visitors to an online store that makes a purchase. This is an essential metric for any online business to track as it indicates how successful their website is in turning visitors into customers. The higher the conversion rate, the more effective the website is at converting visitors into customers.

To track the e-commerce conversion rate, you will need to set up a tracking system such as Google Analytics or use a third-party service such as HotJar or Crazy Egg. These tools will allow you to see valuable data such as the number of visitors, purchases, and the overall conversion rate. By tracking the e-commerce conversion rate, you can identify potential improvement areas and optimize your website to increase your sales. How to calculate conversion rate:

Essential E-commerce KPIs

Net Profit

Net profit is one of the essential e-commerce KPIs to track and consists of the amount left over after all expenses are paid. It is the amount of money that a business has earned after all costs have been deducted from the total revenue. Net profit is one of the most critical metrics for a company to track, as it is the ultimate indicator of a business’s overall financial health. Businesses that track their net profits over time better understand their overall financial performance. It is calculated by subtracting the total expenses from the total revenue to get the net profit.

Essential E-commerce KPIs

Cost of Goods Sold (COGS)

The Cost of Goods Sold (COGS) is the total cost of inventory a business sells over a period of time. It includes the cost of materials, labor, and overhead associated with producing goods and services. Tracking COGS is important for businesses to accurately measure the profitability of their products or services. Companies should track COGS regularly to identify areas of improvement, such as reducing production costs or optimizing inventory levels. Additionally, tracking COGS can help businesses estimate their future expenses, such as anticipating future inventory needs or calculating expected profit margins. Check out this post by Investopedia for more information about how to calculate COGS.

Shopping Cart Abandonment Rate (SCAR)

The shopping cart abandonment rate (SCAR) is the percentage of users who add items to their shopping cart but fail to complete their purchase. This happens for various reasons, including slow loading times, a complicated checkout process, or a lack of trust in the website. Tracking SCAR is vital to understand customer behavior and finding ways to increase conversions. In any case, you can measure it using analytics tools like Google Analytics or setting up conversion pixels on the checkout page.

The Shopping Cart Abandonment Rate is calculated by dividing the total number of completed purchases by the number of shopping carts created. Subtract the result from one and then multiply by 100 for the abandonment rate. Analyzing the data and understanding the reasons behind the abandonment can help businesses identify the areas that need improvement and optimize their checkout process.

Essential E-commerce KPIs

Customer Engagement

Customer engagement measures how engaged customers are with your store. You can measure it through metrics such as page views, time spent on site, and social media engagement. By tracking this KPI, you can gain insight into your marketing campaigns and how effective your customer service is. Calculating your customer engagement score includes many factors, so it will be a bit of trial and error but check out this post from Salesforce to get started.

How working with a 3PL can improve essential e-commerce KPIs

Working with a quality 3PL logistics company can improve several essential e-commerce KPIs. Specifically, a 3PL helps drive down margins, improving overall profits. While this directly affects net profit, it indirectly affects customer lifetime value, engagement, and cost of goods sold. Thus, working with a 3PL can lower your transportation costs, improve customer satisfaction, and gain time to focus on your business’s core competencies. There are many benefits associated with working with a 3PL.

Summing up, it is vital to track a few essential e-commerce KPIs. Regardless of the KPIs you use, monitoring and reviewing the data helps you gain valuable insights into how your e-commerce business is performing. This allows you to make informed decisions about optimizing your business for success. Talk to one of our agents today to learn more about how Falcon Fulfillment can improve your essential KPIs.

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