Numbers can tell stories. Any smart business owner knows this. They know how important it is to keep track of certain metrics that, together, tell a story of the successes and failures of your store. As an eCommerce owner, you have access to hundreds, even thousands, of metrics about virtually everything that is happening with your store. While it’s awesome to have all that data, many of them won’t be particularly valuable to you. So I’ve brought together the definitive list of metrics that eCommerce store owners should be tracking, the metrics that will tell you the story that will help you improve your business.
1. Website Traffic
Website traffic is a basic metric you need to keep your eye on. It can tell you a lot about how your marketing efforts are working out. This metric can, and should, be broken down from just the total number of people visiting your site. Let’s get into the ways you can slice and dice this metric.
The first way you should break down traffic is by the numbers that tell you the quality of the traffic. The three metrics that are the perfect starting place for quality are:
- Bounce rate tells you the percentage of people who arrive on one of your pages just to exit immediately. The lower your bounce rate, the better the quality of traffic! (Typically a high bounce rate indicates that your visitors were expecting to land on something different. Check the language you have on ads and other links to be sure that you’re setting the right expectations. If you are, then you should look to clean up your landing page.)
- Time on page tells you how long a visitor stayed on your page. Longer times typically indicate a higher level of engagement from your visitors.
- Pages per session tell you how many pages a visitor viewed while on your site during a single session. The higher the number, the more engaged the visitor. For eCommerce stores, this metric matters more than time spent on page given that not every shopper does heavy research on an item before adding it to cart.
The second way to break down traffic is where it’s from. You should absolutely know how much of your web traffic comes from social media (and which platform at that), direct, organic search, ads, email, and referrals. Combine these metrics with quality, and you can learn which source is driving the most and best traffic to your site (and then work to maximize that!). This is the only way to know is Instagram is more lucrative than Facebook for you. Shopify users can find this report under the ‘Acquisitions’ in your reporting section.
The third way to break down website traffic is to learn to which pages the traffic is going. Basically: is the bulk of your traffic coming to the home page? Search pages? Is a particular ad driving a ton of traffic to a certain product page? Knowing where your traffic is going on your site can help you improve your pages for conversions. Shopify has a report for its users called “visitors by landing page” (find it on the “Behavior” tab in “Reports”) which shows you the first pages each visitor sees when they come to your site, which can help you not just keep track of where traffic is going, but to optimize their journey.
2. Conversion Rate
Your site’s conversion rate is so important to know that I recently wrote an entire piece about what it is and then another piece about how to improve it. So if you don’t know anything at all about conversion rates, I would recommend starting there.
Long story short, a conversion rate keeps track of the percentage of people who come to your site and take an action you want (like adding to cart or making a purchase). There are a few sets of conversion rates you should be keeping track of:
- Your site-wide conversion rate - the percentage of total site visitors who actually make a purchase.
- Total product page conversion rate - the percentage of product page visitors who make a purchase. You could also look at the percentage that add to cart. You can also further slice this number by categories.
- Conversion rate by traffic source - percentage of visitors from Instagram who make a purchase, for instance.
- Conversion rate of new vs. returning customers - In theory, your returning customers should convert at a higher rate than new customers. But you’ll want to know how much higher. This number will also help you determine how your loyalty programs and marketing efforts to current customers rather than to new customers are working.
- You should also keep track of your best and worst converting product pages. The differences between these two pages can help you determine what works on your site and what doesn’t. In Shopify, this report is called “sales by product” and can be found under the “Sales” tab of “Reports.”
3. Cart Abandonment Rate (and Cart Recovery Rate)
We can all agree that cart abandonment is a problem. In order to beat it, you need to be on top of the percentage of abandoned carts that your store has. You’ll want to also keep track of the percentage of those abandoned carts that get recovered, too, as you work on your marketing efforts to turn those abandons into purchases.
Shopify users should note that Shopify stores your abandoned cart data in your admin for three months so that you can observe patterns. Carts older than three months are removed every Monday. To find your cart data, go to “Orders” and then click on “Abandoned Carts.”
4. Total Revenue
You need to always know revenue your store is driving. Slice it up by week, month, quarter, day even, to get a better idea of how certain times of the year are performing for you. Keep in mind that revenue is different than profit. Profit takes into account how much you’ve made after the cost of goods and services to you.
You want to break revenue down by traffic source, as well. Shopify users can find that report here. Again, this helps you learn the quality of your traffic and of your traffic sources. It may be that Instagram has a really high conversion rate for you, but Pinterest has a higher revenue. Such a fact would tell you that Instagrammers are currently buying your cheaper products, but at a reliable rate, while Pinteresters tend to be less interested, but more likely to purchase higher value items. You can then use that data to start optimizing.
5. Average Profit Margin
Profit margin is a metric you can use to see how much your business is actually making. Rather than just looking at the amount you made off a sale, profit margin is what you’ve made after you account for the cost it took to acquire the item and customer. There are two ways to look at profit margin:
- Net tells you how profitable your business is and is calculated by finding your net income (which is your total expenses subtracted from your total revenue). Then divide the net income by your total revenue and multiply by 100% to turn it into a percentage.
- Gross profit margins get more focused. They are the margins of specific products. It’s the same calculation process, but on a product level. Gross profit margins help you determine which products are your most lucrative and give you important data to guide your inventory and other spending decisions.
Your profit margin (specifically your net margin) can also help you determine your success in relation to other companies. For instance, Marketing Sherpa reports that the average profit margin eCommerce businesses see is between 30% and 45%. If you’re performing under that, you know you have some work to do. And if you’re performing over 45%, congratulations! Share your tips with us!
6. Customer Acquisition Cost (CAC)
Customer acquisition cost is pretty self explanatory: it’s the cost it required of you to acquire a single customer. The basic way to find this metric is to divide all the costs spent on acquiring more customers by the number of customers acquired during that time period. Again, though, you’ll likely want to break down your acquisition costs by channel.
7. Average Order Value (AOV)
Average order value is another self explanatory one: it’s the average spent on an order. Basically, you take the average dollar amount of all your orders. This is another metric that can be broken down by traffic source. Shopify users can calculate this number using the “sales by month” report. Divide total sales by order count for whatever amount of time you’re interested in.
Along with average order value, you may want to keep an eye on average number of items per order. If you notice that people tend to only buy one item, you can work on optimizing your site for multiple item purchases.
8. Customer Lifetime Value (LTV/CLV)
Customer lifetime value tells you how much a customer is worth to your business during the time they remain an active customer. CLV is most often used for predicting revenue, but it can also be a solid marker of how your company is performing in terms of experience, quality, and service.
The formula to find your CLV is to multiply your margin by your retention rate divided by (1+discount rate- retention rate). Or, for Shopify users, just multiply your average order value by your purchase frequency. (Your purchase frequency is your total orders divided by total customers.)
9. Return on Investment (ROI)
If you’re spending money, you need to know you’re making it back and more. Tracking the ROI of your advertising and other marketing dollars will largely mean keep track of your conversion rates and spend by channel (in the case of email) and by campaigns (in the case of both email and ads). Tagging your ads with utm parameters is key to keeping track of your campaign spend. It’s a rookie mistake to spend money without keeping track of your returns. And remember: if your marketing is driving a good amount of traffic but no sales, it’s typically your site that needs the work, not the marketing.
Churn rate is the number of customers who quit purchasing from you in a given time period. For non-subscription based companies, you won’t have a clear “unsubscribed” event to mark as a churn, so you will need to define was counts as “no longer being your customer” - X days since last purchase, for instance.
Churn rate helps you determine average customer lifespan, which again, tells you a lot about the quality of your products and service.
11. Return Rate
eCommerce has created a sort of “buy-then-try” world for consumers. It’s very common for customers to buy multiple items online just to test them out in person and send back what doesn’t work. This means that it’s imperative for eCommerce store owners to keep a close eye on the percentage of things that are returned (break this number down by product and channel, too). This number is a key piece to understanding how your store is actually performing beyond revenue.
Shopify users can track their reviews right in the daily sales report.
Put the Story Together
All these numbers are important to keep track of because together they tell the story about the health of your business - which of your efforts are working, which aren’t, which are close, etc. In the context of each other, you can find out information such as Instagram has the highest CAC of any channel, but also the highest CLV and average order value. If you were only tracking CAC in that case, you might choose to stop advertising on Instagram. The other two numbers, though, tell you that it’s totally worth the higher CAC.
Cara is the digital marketing manager here at ShopPad. She's passionate about eCommerce, marketing automation, and great wine. When she's not hard at work innoventing new marketing automation techniques, you can find her trying to stop her beagle from getting into the trash.