The 7 Key Performance Indicators (KPIs) That You Should Track To Help Grow Your eCommerce Store

The 7 Key Performance Indicators (KPIs) That You Should Track To Help Grow Your eCommerce Store

What Are Key Performance Indicators?

A Key Performance Indicator (KPI) is a progress measurement that businesses use to track whether they are achieving their goals. KPIs offer a concise way to assess whether objectives are being met and can be used to spot areas where performance needs to be improved.

While there is no one-size-fits-all definition for KPIs, they typically fall into three broad categories:

  • Financial KPIs: Track metrics such as profitability and revenue growth
  • Customer KPIs: Focus on measures such as customer satisfaction and retention rates.
  • Operational KPIs: Gauge factors such as efficiency and output levels.

Ultimately, the right KPIs for you will depend on your specific goals and objectives.

It's very important to carefully plan and monitor the KPIs relevant to your business.  You can gain valuable insights into performance to improve the bottom line but you can also identify areas where you need to make changes.

In other words, key performance indicators are a way to evaluate whether or not a business is meeting its goals.

In this post, we highlight the 7 financial eCommerce KPIs that provide the basis for optimising your eCommerce store.

The 7 eCommerce KPIs

  1. Cookie Consent
  2. AOV
  3. Customer Acquisition Costs
  4. Customer Lifetime Value
  5. Purchase Frequency
  6. Customer Retention Rate
  7. Conversion Flow Percentage

What Will Tracking eCommerce KPIs Enable Me To Achieve?

By analysing key performance indicators, businesses can truly understand how well they are performing.  

Customer lifetime value (CLV),  customer acquisition costs (CAC), and AOV are obvious eCommerce sales KPIs. Even by tracking only these KPIs, you can benchmark progress, take actions and ensure your eCommerce business is moving towards your desired results.

For example, let's say you want to increase your CLV. You would focus on improving areas (or other customer and financial KPIs) such as customer satisfaction, purchase frequency, and average order value.  

You'll notice that the lines between financial, customer and even operational KPI's are often blurred. Improving one, often improves another KPI (usually a financial one).

Should eCommerce KPIs Be Tailored To My Business?

Yes. Ideally, you'd want to plan your KPIs based on your business goals and objectives. eCommerce businesses tend to have very similar financial KPIs.

These KPIs will tend to evolve with strategy and tactics but we can safely assume that these 7 are a good starting point for all eCommerce businesses.

By measuring these 7 eCommerce KPIs, you could quite happily start to make data-informed decisions that will lead to lower acquisition costs, a higher conversion rate, and greater profitability.

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eCommerce KPIs: No.1 Cookie Consent

There are expected eCommerce KPIs such as AOV, conversion rate, shopping cart abandonment rate, customer loyalty, etc. However, to make informed decisions, we first need to track user behavior within your online store. This is where Cookie Consent becomes essential.

What is it Cookie Consent?

When it comes to cookies and online tracking, GDPR provides some clear guidelines. First and foremost, cookie consent must be obtained from users who arrive on your eCommerce site, before any cookies are placed on their devices.

This means that website owners must provide a clear and concise explanation of what cookies are being used and why, as well as providing users the option to opt in or out of cookie usage. You also need to allow the user to update their settings at any time.

Legally, you need permission from the user before you can track behaviour.

Therefore, if you want to make decisions based on your data, it's very important to have an understanding of what percentage of users you're basing your decisions on.

Your data informs (or should do) the strategic decision-making for your eCommerce store. So it is all the more important to know whether you have data from 80% of your users or from only 15%.

Capturing consent can become very important to optimise and is in our experience, always overlooked.

Why Is Cookie Consent An Important Ecommerce KPI?

Whether to identify problems, optimise conversion rates, develop your marketing performance, or simply get accurate data on bounce rate, you need enough data from your website traffic to make decisions.

When GDPR legislation came into effect in 2018, websites targeting EU and UK users must grant consent before tracking. Therefore, tracking consent rates have decreased significantly, with a large portion of user data no longer being collected.

Safari and Firefox have extended tracking protection by blocking first and third-party cookies and Google will no doubt follow suit shortly. The results? It will become harder and harder to conclude your user behaviour from site visitors. So it's very important to start prioritising how you'll optimise opt in for your online store.  

What Should I Do About Cookie Consent?

Consider how you can elevate the consent rate for tracking on your website.

  1. Perhaps you could provide transparency of information to make site visitors feel informed.
  2. Conduct A/B tests on consent banners
  3. Implement UX optimisations.

By raising consent rates, you'll raise both the quantity and quality of the data within your online store. As a result, you'll be able to make much more informed decisions across all your eCommerce KPIs.

eCommerce KPIs: No 2. Average Order Value (AOV)

Average order value, often simply referred to as AOV, is one of the more obvious and yet essential financial eCommerce KPIs to include.

AOV refers to the average amount of money spent by each customer. Increasing your AOV can have a major impact on your bottom line.

A higher AOV will result in a greater ROAS (return on ad spend), giving you a better profit, allowing you to reinvest more in ads, and ultimately scale your business.

How To Calculate Your Average Order Value?

To calculate your average order value in a given time frame, take your total revenue and divide it by the total number of orders:

Total Revenue ÷ Total No. of Orders = Average Order Value

Why Should AOV Be A KPI?

Once this KPI is in place, you can drill down and filter your data to new and returning customers, by channels, by campaigns, by device, and even by user behaviour, giving you unique insights into what exactly is driving the highest AOV and what might cause the lowest.

AOV not only provides an insight into how your customers behave and but also what items make up the majority of sales.

Where Can I Find AOV Data in Google Analytics?

You’ll be able to get this data via enhanced Ecommerce within your Google Analytics.

Go to Conversions > Ecommerce > Overview.

Google Analytics Ecommerce Overview

eCommerce KPIs No 3: Customer Acquisition Cost (CAC)

CAC, or customer acquisition costs, is another one of these 'must have' eCommerce KPIs. CAC gives you a clear insight into how much it costs you to acquire a new customer.

By monitoring your CAC you can reliably measure the success of your marketing efforts in terms of 'return on investment'.

CAC is also a great predictor of future growth.

If your CAC is low (lucky you) and you're able to scale your business quickly, that's a good sign that you'll be able to grow at a lower CAC in the future. Conversely, if your CAC is high, you'd first need to consider why that might be.

  1. Is it just the market / competitive differentiation?
  2. Your value proposition?
  3. Product Offering?
  4. Technical Problem/ user frustration / user journey / device matrix?
  5. Targeting / Ad content/creative / audience types?
  6. Tracking issues?

The above list is probably a good place to start when considering reducing your CAC within your eCommerce KPIs list.  

How To Calculate CustomerAcquisition Cost:

Depending on your business needs, there are multiple ways to calculate your CAC.

Generally speaking, however, to calculate CAC, divide the marketing expenses for a period of time by the number of new customers acquired during that same period.

CAC = Marketing Expense / Number of new Customers (for a set period of time)

For example, if a business spends £10,000 on marketing in 30 days and acquires 1000 new customers, its CAC would be £10 for those 30 days. This obviously would include returning customers. You can of course drill down further to identify areas that need focus, such as by new customers only, by channel, by campaign and you'd see a very different figure but also potentially spot areas that need focus.

If you wanted to you could also consider additional costs within "Sales and Marketing Spend" to provide a more business-orientated CAC.

For example, you could include, taxes, credit card fees, shipping costs, platform costs, and even staff and agency costs, which could all be attributed to "Spend" to acquire a customer not just (as is usual) advertising spend.

How Can I Reduce My CAC?

Conversion rate is directly linked to CAC. The lower your conversion rate, the higher the CAC and vice versa. If you drill down into the data you can start to look at campaigns, channels, products, and segments as to what might be causing a higher CAC. You might also want to make sure technically there are no user frustrations that might affect conversion rate.

A good exercise is to look at a "Visitor Led View" to see where potential frictions / issues might be on your site.


Ecommerce KPIs No 4 - Customer Lifetime Value (CLV)

Another critical key performance indicator is Customer Lifetime Value, which helps you understand and predict the profitability of your business.

Why Knowing Your Lifetime Value Is So Important:

LTV represents the total value that a customer will contribute to your business over the course of their relationship with you. Because customer lifetime value is forward-looking, it provides a valuable perspective on the health of your business.

By understanding how much each customer is worth, you can make more intelligent decisions about your acquisition strategy, budget, and budget allocation.

For example, if your CAC is £50 but the customer's first purchase is only £45 AOV you might rightly think on the face of it, you're losing money. However, if the average customer has a  lifetime value of £250, £150 of which is profit, then £50 to acquire that customer seems low. In other words, for every £50 spent you're generating £100 profit.  

Knowing how much revenue (and profit) each customer will likely deliver, allows you to forecast when you can expect to break even on acquisition costs, and which channels and products are driving profit. You can then decide what you're willing to spend to acquire customers in the first instance.

How To Calculate Lifetime Time Value:

I'll be honest - it's not as simple to define.

The problem:

Shopify's Attempt:

LTV = Average order value x purchase frequency x lifespan

It's a simple idea, but really, if you were to follow this your LTV becomes a 'guesstimate', because "lifespan" in the equation is a complete estimate.

In addition, you will have different customer segments, such as "new", "active" and "dead" within your online store. Combining these different segments drags down LTV accuracy, which makes the number difficult to base reliable decisions on.

For example, customers who buy specific products might naturally lead to a higher repeat purchase rate. Good examples of this are if a user buys a product that requires refills. Whereas, email campaigns and even affiliate campaigns can re-activate supposedly 'dead' customers. So, trying to paint an 'average lifespan' can be challenging and inaccurate  

What we'd recommend is to reframe the question and get more precise data. This does require a cohort analysis though, rather than a basic calculation.

For example:

  • What is the LTV of customers after 3 months from their first purchase? What about after 6 months? Or 12 months? You could then look at churn rate of your customer base and consider tactics to reduce churn at certain time frames.
  • Where did your top customers come from?
  • Why might they be buying more than others?
  • You could also break down LTV by channel, geography or product. You want to ask, why some customers remain loyal while others only buy once.

At the very least with set timeframes such as 3, 6 and 12 months you will get a more accurate idea of 'value' compared to a general 'lifespan'.

eCommerce KPIs No 5: Purchase Frequency

Purchase frequency refers to the number of times an average customer purchases a good or service from your store in a specified time period. For most eCommerce businesses, one key way they can grow revenue and profits is by focusing on encouraging existing customers to make a new purchase.  Sounds simple.

By measuring purchase frequency you can gain insights into customer behaviour that will enable you to:

  1. Measure brand loyalty
  2. Inform marketing decisions - increase the bottom line
  3. Inform product development

1.Brand Loyalty: In theory, the more regularly a customer is buying from you (and or recommending you) the greater the brand loyalty.

Obviously, this can depend on the type of product you're selling, competition and even retailers. However, as a general rule of thumb, it can provide an insight into the state of the business.

It's an incredibly competitive world and it's becoming easier and easier to launch a brand. A strong brand will undoubtedly result ina strong business and purchase frequency is one way to help measure that.

2.Inform Marketing Decision: Purchase frequency can influence so much of your marketing decisions.

However, you do need to segment and get granular with your customer data, looking at purchase frequency and products, type category, source, campaign, can all influence decisions.  

For example, if you see customers who purchase more frequently are also more likely to purchase higher-priced items initially, you may want to focus your marketing efforts and site on acquiring those types of customers.

Alternatively, you're likely to see correlations between discounts and purchase frequency. However, those who make their first purchase with a discount code might have a very low purchase frequency.

If you can shorted the distance between first purchase, second, third, etc your LTV for a time frame will also increase.

3.Inform Product Development: Additionally, purchase frequency can inform your decisions around product development.  For example, imagine you're selling skincare products and you have multiple categories. If customers who purchase one particular category, such as 'anti-wrinkle moisturiser' repurchase more frequently than those who buy a anti-blemish moisturiser' then you can start to consider how you might support 'anti-wrinkle' category to help improve the bottom line.

  • Worth noting that purchase frequency is only one of many indications when it comes to informing product development.

Ecommerce KPIs No 6: Customer Retention Rate

Customer retention rate tells us how many customers remain active, after a certain period of time.

How does Customer Retention Rate differ from Purchase Frequency?

The difference between purchase frequency and customer retention rate is that purchase frequency measures how often a customer makes a purchase, while customer retention rate measures the percentage of customers who continue to do business with a company over time.

Both are important for businesses to track, as they can provide insight into customer behavior and help businesses gauge the success of their marketing and sales strategies.

However, purchase frequency is generally more important for businesses that sell products or services that need to be frequently replaced or replenished, such as food or clothing. This is because customers who make frequent purchases are more likely to be engaged with the brand and have a higher lifetime value.

On the other hand, customer retention rate is more important for businesses that sell products or services that don't need to be frequently replaced, such as lawnmowers or appliances. This is because it's more difficult to attract new customers than it is to keep existing ones, so businesses need to focus on retaining the customers they have.

Why it's important?

If customer retention remains low, you'll always be looking for new customers, meaning you're going to live and die by your ability to keep you CAC as low as possible.

If however, you have a strong retention rate, then you can afford to push your acquisition costs because you'll know your retention will drive up LTV and profitability.

The appropriate length of time to review retention, is usually over 12 month period, but we think it's often useful to segment customers often products first purchased and look at the retention after 3 months, after 6 months, 12 months etc. There is usually a correlation between active customers and those who purchase regularly.

It can be useful to get granular with the data here as you'll get more insights into where you can make improvements to your retention activities but also the types of products you should be pushing first.

Why Have We Included Retention Rate as a KPI?

Unless your business model is primarily driven by one-time purchases instead of ongoing customer engagement, the retention rate is one of the essential eCommerce KPIs. Moreover, it provides a suitable indication as to customer satisfaction and brand loyalty to your eCommerce store.

How To Measure It?

Reviewing customer retention rate doesn't require a lot of effort. The metric flows automatically into your Google Analytics report (select “Audience View,” then go for “Behaviour” and choose “New and Returning”).

New vs Returning Users in Google Analytics


To get more granular, a cohort analysis, again can allow us to better understand retention rates from particular marketing campaigns for example.

Caveat.

There are downsides to looking at a general retention rate as a sole ecommerce KPI.  It doesn't consider new and reactivated customers, which may skew the overall assessment of your marketing effectiveness. Those would need to be factored into the calculations so you have a more useful and actionable KPI to track.

Ecommerce KPIs No 7: Conversion Flow Percentages

Conversion flow is designed to help visualise your conversion rate. It visualises the customer journey through your store. The easier it is to navigate the higher your conversion rate, the greater your customer loyalty.

All eCommerce KPIs should be visualised on a dashboard but this one in particular needs to be viewed. Simply because it's much easier on our brains to see where we are losing customers.

What Flow Should I focus on?

There are 3 stages of the conversion flow we'd recommend you visualise.

  • Stage 1. Homepage To Basket %
  • Stage 2. Basket To Checkout %
  • Stage 3. Checkout To Conversion %
Stage 1. Homepage to Basket.

Homepage to basket will give you a clear understanding of how users move through your site. Is it a traditional funnel such as, homepage, category, product, basket? Or due to advertising, are users entering the site on the product page, perhaps visiting category, then homepage. Once this is visualised it's much easier to understand where you are losing customers and you can start to put yourself in your ccustomer'sshoes.

Stage 2. Basket to Checkout.

It's a short hop from Basket to Checkout but you'd be surprised at how many potential customers are lost at this stage. There are a multitude of potential reasons for users exiting your basket, everything from can't find a discount field or discount, to using the basket as a comparison tool or wish list, or perhaps they are unsure of security or your returns policy, or how to cancel a subscription.

Stage 3. Checkout to Conversion.

On a Shopify site, it's a 3 stage process, but you'll always see users dropping off. Perhaps it's your shipping fees, delivery times, gift wrapping, lack of paypal or Amazon pay.

What's next?

Once you have these 3 stages visualised, each stage acts as its own eCommerce KPI. You're then able to start to benchmark them and try to improve the user journey, through these stages.  

For example.

Imagine you get 10,000 visitors monthly.

  1. 10% of Users Reach Basket = 1,000 potential customers have added something to their basket.
  2. 60% of those users reach Checkout - 600 potential customers are now in the checkout funnel.
  3. 50% of those users reach Thank You Page - 300 actual customers.

That's a 3% total conversion rate on your site.

However, understanding that now, you can work backward from the point of purchase. You could have had 600 customers but you only converted 300. Ask yourself why do 50% of users leave your checkout funnel? At what stage of the funnel?

This will immediately help you find ways to improve your conversion rate.

With this type of visualisation, you can now start to hone in on areas where you can improve the journey for the customer and ultimately improve your conversion rate.

How Do I Identify the Customer Journey?

In Your Google Analytics You can already see your checkout to conversion journey. Simply go to:

Conversion > eCommerce > Checkout Behaviour.

Checkout Behaviour in Google Analytics

You can also get an overview of all shopping behaviour.

Conversion > eCommerce > Shopping Behaviour.

Shopping Behaviour in Google Analytics

eCommerce Key Performance Indicators Summary

By tracking these seven eCommerce KPIs, you’ll be able to make data-driven decisions that improve your acquisition, reduce costs and increase profit. If you need help getting started or would like a free strategy session to look at your business with fresh eyes, contact us today. We’re excited to work with you and see how we can help grow your eCommerce business!