Ecommerce is hard.

There are thousands of factors that contribute to a merchant’s success. From strategic email marketing and intuitive on-site product placements to the right pricing and amazing customer service, the considerations for building a successful ecommerce business are endless. But how do you know if you’re succeeding? And what are the best metrics to gauge ecommerce success?

A quick google search for “ecommerce metrics” pulls in more than 56 million results 🤯 with lists ranging from 15 to 55+ metrics.

We don’t know about you, but trying to track even 15 metrics while you’re balancing everything else you need to do to run a successful business sounds rough. So, we took it upon ourselves to dig deep, analyze dozens of metrics, consolidate the information and pull out the ecommerce metrics that you actually need to care about.

TL;DR

To keep you out of the weeds, we narrowed our list to 5 key metrics that drive top and bottomline growth: 

1. Daily web traffic 
2. Average conversion rate 
3. Average order value 
4. Repeat customer rate 
5. Customer lifetime value

1. Daily Website Traffic

Without overcomplicating, more ecommerce website traffic leads to more customers. Imagine standing on a stage and trying to sell your product to an empty room. Not going to happen. The more seats you fill, the better the chances of selling your product. 

If you’re reading this blog, we’re assuming that you have at least some consistent web traffic, but If you’re starting from 0, go check out this awesome guide to SEO from the experts at Moz.com.

Once you have solid web traction and a consistent flow of daily website visitors, you can start scaling. Monitoring the growth of daily traffic will allow you to dig into different channels (social media, organic, paid search etc.), double-down on the digital marketing channels that are working, uncover trends and focus on improving conversion.

2. Average Sales Conversion Rate

This one is pretty cut and dry, but when it comes to ecommerce there isn’t anything more important than conversion. If shoppers aren’t buying your products, your online store is going to fail. Shocker right? Furthermore, it’s no secret that online marketing is increasingly competitive, which is driving customer acquisition costs (CAC) through the roof. Taking advantage of every visitor you get is absolutely crucial to building a successful online business.

Knowing your conversion rate is one thing, but knowing how to act on it is another. Conversion rate varies drastically by industry, so make sure you have a clear understanding of how you stack up against your specific competition. Check out the 2021 average conversion rates by industry 👇

Pro tip:

Once you have a good understanding of your conversion rates, take it to the next level and look at your conversion rates by device type (ie mobile vs. desktop). Why? Mobile shopping (or m-commerce) makes up more than half of global retail ecommerce sales.. If your mobile customer experience is lacking, it can drastically hurt your overall conversion rate. 

Want to see how Route is changing mobile commerce? Check out the Route App.

3. Repeat customer rate

Repeat customer rate refers to the total number of customers who have purchased from you at least twice. The calculation for repeat customer rate is simple: divide your number of repeat customers by your total amount of customers. A low returning customer rate could mean that most of your customers are first-time purchasers that never came back for more. 

Repeat customer rate is one of the most accurate predictors of ecommerce business health. Most merchants spend 80% of their marketing budget on acquiring new customers. But did you know that 40% of an average ecommerce store’s revenue is created by only 8% of its customers? Like we mentioned above, customer acquisition is increasingly expensive and if your repeat business is suboptimal, you will end up spending more in topline advertising while your bottomline revenue suffers. 😔

From the not-so-great data available online, it looks like the average ecommerce repeat customer rate falls somewhere between 20 and 50%. Once again, this varies greatly by industry. Something consumable like coffee, wine or supplements would be at the upper end of the average while products that are kept for years like furniture or yachts (yes you can buy yachts online) will be at the lower end.

From the data we analyzed, here’s a simple breakdown: 

>20% – call for help

20-30% – good 

30-40% – great

<40% – amazing

Pro tip:

Don’t give your customers reasons to leave after they click ‘buy.’ Providing a premium post-purchase experience is a key factor in driving repeat business. In fact, more three quarters of Amazon shoppers in the United states cite post-purchase experience (i.e. free and fast shipping) as a primary reason for shopping on the site. 

Here are 6 ways to offer free shipping.

4. Average order value (AOV)

This metric needs very little introduction. Average order value is exactly what you think it is; it’s the average price your customers pay when they place an order. Once again, it varies from business to business and product to product, but the formula is the same. Here’s how to calculate average order value: Divide your revenue over a given period of time by your number of orders received during that same time period.

Knowing your AOV is critical in helping you understand the lifetime value of your customers (we will get into that next), and will help you uncover and implement various growth strategies. For example if your total revenue last month was $10,000 and you had 1000 total orders, your AOV would be $10. Simple right? Now that you know your AOV, you can work on strategies to get your customers who spent less than $10 to spend more. 

There are only a few things that you can do to grow your ecommerce business that don’t require extra cash upfront. Increasing AOV is one of them. Optimizely offers some solid ways to boost AOV;

• Cross-selling (offer a product that is relevant to the product customers are interested in)
• Upselling (offer an upgrade option, or premium product, during the checkout process for just a little more)
• Volume discounts (offer a discount if a customer buys multiples of the same product)
• Free shipping (offer free shipping when the customer hits a minimum dollar threshold)
• Coupons (offer customer loyalty discounts/rewards on the next purchase if they hit a minimum dollar threshold)

Pro tip:

Get creative with product bundling. Makeup Geek took bundling to the next level with their “create your own eyeshadow palette.”. Instead of simply offering similar products, they encourage potential customers to customize their own kit and really make the product their own. Individual eyeshadow costs ~$6, but the kit motivates them to add 9, potentially increasing the order value to $50+! 🚀

5. Customer lifetime value (CLV or LTV)

Customer lifetime value is arguably the most important metric you can track in ecommerce. Why is it so important? A good understanding of your ecommerce LTV allows you to generate real ROI from customer acquisition and is the basis for determining gross profit, efficiency of your ecommerce marketing spend and success over time. 

But here’s the kicker, it can be hard to calculate. Depending on your industry and whether you need historical or predictive data there are about 5 different ways to calculate it. For the sake of simplicity, here is a basic formula.

T = total orders 

AOV = average order value 

AGM = average gross margin 

ALT = average lifespan (in months) 

LTV is the culmination of every other metric we’ve covered in this post. At its core, LTV measures loyalty. How often are your customers buying your products? Do they come back time and time again? Are they spending more per order? Building a loyal customer base is the difference between your brand being a household name and a ‘one-hit wonder.’ 

Treat LTV like a group of growth levers. You can’t improve LTV unless you improve some other metric. If your LTV isn’t where you want it to be, dig into the other metrics. Is your AOV hurting? Retention suffering? Conversion rates below the industry average? Identifying and optimizing any one of these areas will have positive impacts on your LTV.

Pro tip:

I know this is where you expect us to give you some sweet tips on how to improve your LTV… Luckily for you, we have too many to put here. Learn more.

Conclusion

By simplifying and reducing the amount of metrics that you’re tracking you’ll be able to stay in tune with your business health and identify gaps and areas for improvement. But at the end of the day, the most important thing you can do is START tracking!

Ecommerce metrics and ecommerce KPIs FAQs