# 10 eCommerce Metrics and KPIs You Must Measure in 2023

## **An Overview of Top eCommerce Metrics and KPIs**

Metrics and KPIs both matter when running a business. To ensure the success of your eCommerce venture, it is a good idea to track the metrics that have the most impact on your store. It is not enough to measure the total sales at the end of the month. You need to focus on some eCommerce metrics and key performance indicators (KPIs) to effectively build your business.

**What are eCommerce metrics & KPIs?**

E-commerce metrics and KPIs are measurable sets of values used to evaluate a brand’s performance in the arena of digital commerce. KPIs track performance based on key business goals, and metrics measure performance for the chosen business activities.

For example, new signups are a metric, and if it is your company’s goal to increase sales by 10% over the next few months, then you will need to focus on customer churn, signups, acquisition, upsell success, and more. This means that KPIs can be formed from multiple metrics. KPIs are built on metrics. KPIs are metrics, but not all metrics are KPIs.

(*For a metric to be a KPI, it needs to indicate something.*)

**How to Choose Which eCommerce Metrics or KPIs to Measure**

This depends entirely on the needs of your business.

You need to ask yourself the following questions:

- How will the metric affect my business? If the change it brings is going to be big (in the positive direction), the better it will be for your business.
- Will optimizing the metric affect my business? The impact on the business should be significant. The main goal is to increase revenue, so, tracking the metrics that help with it is recommended.
- Will working with this metric help me successfully improve the others? If the answer is yes, measure this metric.

**10 Key eCommerce Metrics and KPIs You Should be Tracking**

There is a list of metrics and KPIs that you should be tracking to analyze the health of your business. Keep in mind that this list does not apply to all businesses and may change depending on the nature of your business, and what goals you hope to achieve.

**1. Cost Per Acquisition (CPA)**

This is the total spend on acquiring every new customer. The formula to calculate this is quite simple:

This needs to be calculated keeping in mind a specific time frame. It could be a week, a month, a quarter, or more.

For example, if you spent $10,000 in December and acquired 250 new customers because of it, then your CPA for December is 10000/250 = $40.

**2. Average Order Value (AOV)**

This is the average amount of money spent each time an order is placed on your website.

It can be calculated using the following formula:

Total money spent on orders placed/number of orders = average order value

Other KPIs and metrics may require more funding to generate an increase in revenue. Still, AOV is a metric that can be used to its fullest potential by employing certain marketing practices. Cross-selling, upselling, offering discounts, and free shipping are only a few of the practices you can incorporate into your marketing strategy.

Increasing the AOV leads you to make more money from each transaction, yes. It also increases the customer lifetime value. (We will read more on this below.)

**3. Customer Lifetime Value (CLV or CLTV)**

This is the total amount of money a shopper/customer is expected to spend in the duration that they are your customer. Knowing the CLV helps you decide what investments you will need for Customer Retention Rate and CPA.

To calculate the CLV, you need to multiply the average order value by the number of times the customer is to make a purchase from you in a year and the average length of the customer relationship.

We understand that is it unlikely for drumsticks to be so expensive, but hey, you never know. 😁

Now, on to **how AOV increases CLV.**

It’s simple math (yes, yes, we know, *math*)- if you employ certain marketing techniques to increase your AOV from $500 to $550, then over six years of purchasing drumsticks 5 times a year, the CLV increases to $16,500.

**4. Sales Conversion Rate (CR)**

This is the percentage of people buying a product from your store after visiting it. It calculates the rate of conversion. Simple, right?

The formula for it is as follows:

This means if the number of purchases made was 450, and the number of sessions logged was 2000, then the CR is 450/2000 x 100 = 22.5%.

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**5. Shopping Cart Abandonment Rate**

There is so much revenue lost due to cart abandonment. Tracking the cart abandonment rate helps you take a step in the right direction, i.e., working on strategies to reduce the cart abandonment rate.

So, the cart abandonment rate is the percentage of people who visited your store and added products to their carts but then did not finish the purchase.

The formula to calculate the cart abandonment rate is

This means that if the total purchases made were 500, and the number of carts generated was 800, the cart abandonment rate will be (1- (500/800)) x 100 = 37.5%.

Read about how to recover abandoned carts here.

**6. Customer Retention Rate (CRR)**

This is an important metric to measure. We have repeatedly stated in a lot of our blogs that 20% of the customers are responsible for 80% of a company’s revenue. These customers are the ones you retain over time and reintroduce into the sales funnel. They buy from you repeatedly, over a period.

This is how you calculate the CRR:

Know the number of existing customers you have at the beginning of a period. Let’s call this value S.

You will also need to know the number of customers you have at the end of that period. We shall call this value E.

Lastly, you need the number of new customers added during this period. This value shall be N.

Here, if S = 5000 at the beginning of a two-month period, E = 4500, and N = 500, then your CRR is [(4500-500)/5000] x 100 = 80%.

This means that over a two-month period, you have retained 80% of your existing customers.

**7. Net Promoter Score (NPS)**

This is the economic metric that lets you know how many customers are likely to recommend your store to people they know.

This metric is all about tracking customer satisfaction and brand loyalty. Here, you need to know who your promoters and detractors are– promoters are satisfied customers who will recommend your products to friends and family, and detractors are unhappy customers who will not do so.

You may ask yourself why this metric is important. The answer is that there is no publicity better than word-of-mouth marketing. People are more likely to trust a recommendation from a friend who has used a product before than they are to trust a billboard or an ad they see online.

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**8. Refund and Return Rates (RRR)**

Sometimes, customers return the products they purchased, and sometimes, you offer them refunds.

It’s a part of running a business.

Here’s how you calculate RRR:

To know the return rate, you will need the total number of products sold, and the total number of products returned in a period.

The return rate = the number of orders returned/the number of items sold x 100

So if the number of products returned is 1000, and the number sold is 10,000, the return rate is 1000/10000 x 100 = 10%.

Tracking this metric is a little tricky because not all returns result in refunds. Products are often exchanged for others. This metric is used to provide insight into the customer’s experience with your product.

**9. E-commerce Churn Rate (ECR)**

When running a business, you are bound to lose a few customers from time to time. The churn rate will let you know exactly how many you have lost over a period.

To calculate the ECR, you need to know the number of customers you had at the beginning of a period, and the number you have at the end of that period.

Let’s say you had 200 customers at the start, and at the end, you are left with 150.

Here, ECR = [(200 - 150) / 200] X 100 = 25%

This means your ECR is 25%, i.e., you have lost 25% of your customers.

**10. Website Speed**

This is a metric that is often forgotten or overlooked. Website speed refers to the time it takes a website to load. If your website is slow, only a rare few patient souls will wait to make a purchase from you. Not everyone is as determined.

You need to work on the website speed and the content that influences that speed.

The quicker your website loads, the sooner potential customers can make a purchase. The ideal load time for a website is 1-2 seconds. A 2-second delay in website loading time leads to an abandonment rate of up to 87%. You could take the Google Page Speed test to check the loading speed of your website.

Also, website conversion rates go down by an average of 4.42% with every additional second of load time (between seconds 0-5). (Portent, 2019)

To know more about optimizing your website, click here.

**Importance of eCommerce Benchmarks**

Having access to data is the easy bit. What matters is how you use that data. Besides giving you insight into how your business is performing, e-commerce benchmarks allow you to stay competitive provided you follow industry standards.