In the retail business, success is never guaranteed. While you’ve probably heard about the high failure rates in the brick-and-mortar retail sector, have you ever wondered about cCommerce?
According to a recent survey from Marketing Signals, 9 out of 10 ecommerce businesses fail during the first four months of existence.
Considering just how many stores seem to pop up online, the number may not be that surprising to some. What can this failure be attributed to?
Many things, but the three biggest factors are:
- Lack of quality online marketing (reason in 37% of the cases)
- Little to no visibility in SERPs (reason in 35% of the cases)
- A market shortage for the product offered (reason in 35% of the cases)
Even though most people are aware that failure rates are so high, they still don’t know how to improve their business operations. How can you do it? Everything starts with setting goals.
Here’s what we’ll discuss in this guide:
- What are KPIs and why does your business need them
- Common types of KPIs that ecommerce businesses track
- KPIs that can help you work out your business operations and ensure success
Let’s take it from the top…
What’s a Key Performance Indicator?
A standard performance indicator is a measurement used to calculate a business operation relative to a certain goal.
Sounds too complicated? Here’s a practical example: in ecommerce, most people have a goal to boost their website traffic by 50% to 100% on a yearly basis.
There are many performance indicators. Most of them are irrelevant to your business success. For that reason, most serious business managers tend to narrow the selection down to 10 to 20 indicators.
These are known as Key Performance Indicators or KPIs for short.
Before you even start a business, you come up with a business strategy, right? You base your strategy on previous experience, business data, and so on. However, you can’t really know whether your strategy will be successful or not until you start doing business.
Your business can’t possibly survive on your gut instinct alone.
That’s why you need to measure the effectiveness of your business strategy. The best way to assess every business department is through KPIs. If they’re not nailing their KPIs, then it’s time for a change.
Different Types of KPIs in Ecommerce
While there are specific, let’s say “universal” KPIs, most industries measure success in different ways.
For instance, when you’re running a retail or ecommerce business, sales play a huge role. Let’s talk about some of the specific ecommerce KPIs.
More often than not, store owners use the following KPIs to measure their success:
- Monetary KPIs: If you want to get some return on your investment, you need to keep track of your money. In the beginning, you should pick whether to track profit, revenue, or both.
- Customer KPIs: The number of new, regular, and former customers needs to be tracked. This can help you look for new opportunities and target demographics.
- Purchase KPIs: When running an ecommerce store, the number of people that have made, tried to make and abandoned a purchase all matter.
- Conversion KPIs: How many of your visitors actually purchase something? This allows you to see if you are attracting the right kind of people to your website.
Another question on everyone’s mind is probably how many times a year you should perform business operation assessments.
During the first 6 months, you should do assessments every month if possible. After that, you can do them every 3 to 6 months.
Here’s are two different types of businesses assessment:
- SWOTT Analysis: Assessing your businesses’ Strengths, Weaknesses, Opportunities, Threats, and Trends, should be performed twice a year
- GPCT Analysis: Looking at your Goals, Plans, Challenges, and Timeline, should be performed at least once a year
Top 20 KPIs ecommerce Stores Need to Track
Choosing KPIs depends on your business goals. As mentioned, while there are literally hundreds of different KPIs you can just follow a few that are important to you. To make things easier, we also broke down the KPIs in four different categories/departments.
Here are the top 20 KPIs in the ecommerce industry…
Sales Department KPIs
Assessing the sales department allows you to see how your business is doing money-wise. These indicators relate to a period of time, sales team, or even a single employee. They are there to help you make better business decisions.
1. Overall Sales
You can monitor your sales on a monthly, weekly, daily, and even hourly basis if needed. It all depends on your product. This can be easily set up in Magento or Shopify. Another adoption is to set up sales trackers in your Gorgias dashboard and track them directly.
2. Conversion Rates
The number of people that visit your website and purchase something. While conversion rates vary from niche to niche, ecommerce stores usually have a conversion rate slightly above 3%. Unsurprisingly, you should try to get the number as high as you can.
3. Cart Abandonment Rates
The percentage of shopping orders that are abandoned at the checkout is the CAR. For most industries, CAR is usually high and ecommerce is no different. On average, more than 88% of shoppers abandon their carts.
4. Lifetime Value
Some customers are willing to spend more money than others. LTV shows the average amount of money a single consumer will spend on your products over the duration of your relationship.
5. Acquisition Costs
While sometimes overlooked, the amount of money spent on acquiring new customers has to be tracked. An average online store spends $109 on every new person they convert.
Marketing Department KPIs
Marketing is there to expose your store to as many customers as possible. It plays a big role in your success, so naturally, you need to monitor it closely. Here are some advanced success indicators you need to follow.
6. Website Traffic
This is the total number of people that visit your store. Some 30% of your traffic will come from organic search, while the other 70% will come from social media, blogs, and referral sites.
7. Bounce Rates
The percentage of unique visitors that visit a single page on your site and leave. You should try to keep it somewhere between 26% and 40%. If it somehow falls below 70%, then you have a problem on your hands.
8. Mobile Traffic
In addition to overall traffic, you need to closely monitor your mobile traffic. That’s because a large chunk of your traffic will come from mobile devices and perhaps a majority of conversions on your website as well.
9. Social Followers
The number of people that follow you on social media needs to grow. If your growth begins to stagnate, then your marketing team might be doing something wrong. On Twitter and Facebook, the average yearly growth rate should be 24% while on Instagram, it can be as much as 100%.
Mainly used to measure the effectiveness of paid advertisements. CTR shows you the ratio of click to impressions in your ad campaign. For Google Ads, the average CTR is roughly 2%. Anything above that is considered great.
Customer Service Agent KPIs
The way you treat your customers plays a huge part in the success of your store. If the customers are leaving your website dissatisfied with your offering or customer service, you need to take action and make sure to make the needed adjustments to prevent this.
11. Customer Satisfaction
Around 86% of people are ready to pay more for a better personal experience. That’s why your customer satisfaction rates play such a huge role. Satisfaction rates are usually measured through targeted surveys.
12. Net Promoter Score
For measuring the loyalty of your customers, you have NPS. It shows you the number of satisfied consumers and their average level of satisfaction. You can also track this score using targeted surveys.
13. First Response Time
People will always come to you with questions about your business or products. This KPI shows you how long they have to wait until they get an answer to their question.
14. Resolution Time
Once your customers get a response from one of your agents, how long do they have to wait until the problem is solved? You need to keep this metric low in order to satisfy your customers.
15. Active Problems
Last but not least, you need to know how many problems have been solved during a particular period of time. Whenever there are many unsolved problems, satisfaction rates take a dive.
Project Management KPIs
Without a good team, your business is bound to fail, no matter how much money and time you invest in it. In addition to individual employee goals, your team as a whole needs to have goals in place to succeed. Project management KPIs will help you manage your workflow seamlessly.
16. Hours Worked
With this HR-related indicator, you’ll be able to know whether you’re productive or not. Let’s say your work hours have remained the same for the last few months but absentee rates have grown. You may have a problem with employee satisfaction or scheduling.
17. Project Budget
Every project, whether it’s customer service- or marketing-related needs to have a budget. You need to ensure that your workers have realistic budgets, so they don’t have to work overtime to accomplish certain tasks and finish the project on time.
18. Return On Investment
ROI is a popular metric that reveals the profit you managed to generate from a specific marketing action.
Here’s how you calculate it:
ROI = (PROFIT – INVESTMENT) / INVESTMENT x 100
19. Cost Variance
More than 80% of small businesses fail due to poor money management. Cost variance shows you the difference between the predicted costs and real ones. It gives you a close look at your finances and allows you to know where to invest your money and where to hold back.
20. Cost-Performance Index
The last indicator we have on the list should be used to compare the budgeted costs of the work you’ve accomplished during a period of time to the actual amount spent. It shows you how efficient you’ve been at that period.
Start Monitoring Ecommerce KPIs Today
Those are the most important KPIs in the Ecommerce business. How do you know to select the ones that matter to your business?
Just take the following five steps and you’ll be able to identify your main KPIs in no time:
- Identify: Find relevant KPIs for your business
- Create: Set up a set of scoreboards and dashboards for KPI measuring
- Evaluate: Check how your store is doing based on the indicators
- Change: Make a couple of corrections to your business operations
Assess: Once the changes are implemented, re-assess your performance