7 E-Commerce Metrics You Should Know and Actively Monitor

7 E-Commerce Metrics You Should Know and Actively Monitor
If you’ve been dragging your feet on setting up your e-commerce site, it’s time to seize the day. It’s now easier than ever to get started — and get started right.
by Square Jun 03, 2015 — 3 min read
7 E-Commerce Metrics You Should Know and Actively Monitor

If you’ve been dragging your feet on setting up your e-commerce site, it’s time to seize the day. It’s now easier than ever to get started — and get started right. Not only can you integrate your Square account with e-commerce platform Bigcommerce, but also we have their Managing Editor, Tracey Wallace, on tap for a series of e-commerce 101 guest blog posts. The past few weeks, she’s walked us through how to increase sales and e-commerce social media tips. Today, she’s tackling a biggie — data.

So you’re new to e-commerce. Maybe you’re looking to grow your side business or maybe you’d like to grow your current one in a new direction. In either case, analytics and metrics are your best friends.

Using analytics helps you learn the best way to scale your business quickly and intelligently. But which data points should you be looking at? Here’s what you need to monitor and benchmark as part of your e-commerce efforts.

1. Conversion rate

This is a basic building block of measuring your online business. Your conversion rate is the number of people who have visited your site and then converted into actual buyers or taken another action, like signing up for a newsletter. To determine your conversion rate, you divide the above total number of conversions by the number of visitors to your site.

Your conversion rate isn’t limited to just your website. You should also be evaluating conversion for your different advertising sources –– i.e., email campaigns and promotions –– to understand which efforts were the most effective at driving sales. Then you can plan accordingly and allocate resources to the channels that are working.

2. Cost of acquiring a customer (CAC)

The cost of customer acquisition is the amount of money you have to spend to get one customer. The lower the cost of acquisition the better — you always want your cost of acquisition to go down. As a quick example, your CAC is $40 if you need to spend $200 (on advertising, for example) to get five visitors to buy on your store.

You can try different techniques to bring in those visitors — like SEO, paid ad campaigns, and social media — but all of them cost you money or time.

There are a lot of factors that affect your cost of customer acquisition, so it’s important to get an accurate number here. As a best practice, you should always try to find marketing outlets that lower your CAC valuation.

3. Shopping cart abandonment

This is the percentage of visitors who added your products to their shopping cart but didn’t complete the checkout process. (For example, your shopping cart abandonment rate is 75 percent if 75 out of 100 visitors with a cart leave without buying).

Obviously, the lower your cart abandonment rate the better. So make sure that you’re doing everything you can to improve your cart abandonment rate — it’s your lowest-hanging fruit when it comes to driving sales.

4. Average order value (AOV)

The average order value tells you the average order amount at your store. For example, your AOV is $35 per order if you made $140 from 4 orders. The higher the average order value the better.

By monitoring AOV, you can figure out how much revenue you can generate from your current traffic and conversion rate. So if most of your orders are really small, that means you have to get a lot more people to buy in order to achieve your target. It’s important to have at least a few high-value orders so that your overall average is on the higher side.

Looking to boost your average order size? Consider offering free shipping at a certain dollar amount or volume discounts.

5. Gross margin

Your store revenue is the amount of money your store has taken in over a period of time. But after the bills are paid, how much is left in your coffers? That’s your gross margin. Keeping an eye on your gross margin — the difference between your revenue and the cost of goods sold — is important as you look to reinvest profits for growth in the new year.

6. Subscriber growth rate

Email marketing is a great way to get people to visit your e-commerce site — whether you’re promoting a sale, a product, or even an update. But to keep your email marketing from getting stale, you want to make sure that you’re always growing your subscriber list. If you’re not seeing growth on your subscriber list, look for ways to expand your audience — via things like social media or in-person events.

7. Customer lifetime value (CLV)

Customer lifetime value is the single most important metric for your e-commerce store. If you’re not already familiar with this metric, get up to speed on how to calculate CLV now. Here’s why it’s so important — the top one percent of e-commerce customers spend 30 times more than the average customer. So the lifetime value of these customers isn’t just a little better, it’s dramatically better.

In all, your customers are not all the same, and you shouldn’t be treating them as if they are. Figuring out your CLV can have a big impact on how you view all the other metrics mentioned above. After all, spending $15 on a customer whose lifetime value is $35 probably isn’t a great move. But spending $15 on a customer whose lifetime value is $1,050 is a no-brainer.

Be sure to get familiar with e-commerce metrics utilizing Google Analytics or the e-commerce analytics offered by your e-commerce technology provider. Let data drive your growth efforts to bring your American dream to fruition.

Learn how to link your Square account to Bigcommerce.

The Bottom Line is brought to you by a global team of collaborators who believe that anyone should be able to participate and thrive in the economy.


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