Key performance indicators, or KPIs, are ways by which the performance of something is measured. In the case of ecommerce websites, KPIs are multiple factors that help owners, webmasters, and marketing managers determine whether or not the site is successful, and often how it can be improved to increase revenue. Ecommerce KPIs can be different from other business models as well, which makes them important to understand for any online retailer.
KPIs are important because they can help improve the performance of a website. By monitoring and measuring these indicators on a regular basis, those involved with the site will be able to make recommendations for improvement that are based on real, actual data. Instead of making decisions for changes based on a gut feeling, KPIs can help lead to changes that immediately improve statistics like bounce rate, time on site, and so on.
Ecommerce KPIs are numerous, and just looking at a list may be overwhelming. However, not every online store needs to track every KPI out there. For example, an ecommerce site that sells very expensive products may not track its cost per conversion, because they know their margin is high enough to cover that expense, and that there is very high lifetime value in that new customer. The right ecommerce KPI for you depends on your business's specific needs.
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On this page, we’re going to discuss a few of the most important KPIs for ecommerce websites. These key performance indicators are those that should be watched carefully via a tool like Google Analytics and should be a factor when making any decisions about search engine or conversion rate optimization. After all, website performance indicators give you unique, relevant data and insights that can fine-tune your business for better user experience and profits.
As we mentioned, there are many ecommerce KPIs that you can track, but these are the handful that we feel are important for most webmasters. Depending on how your store is structured, and what kind of customers you have, you may not pay close attention to some of these, or you may want to track them all very closely.
Website traffic is probably one of the most obvious key performance indicators that an ecommerce site owner will want to watch. Generally speaking, the more traffic your site gets, the better chance you have at turning those visitors into paying customers. More traffic doesn’t necessarily mean more purchases, but a 5% conversion rate at 1,000 visitors versus 1,000,000 visitors does mean two very different things!
Increasing website traffic is often a goal for ecommerce websites. Traffic not only leads to purchases, but also a general awareness of your brand. The more people who visit, the more likely they are to remember your name, mention you to friends, or come back when they want to purchase something that you offer. That's why traffic is one of the more popular — and important — website KPIs to track.
Monitor your ecommerce site traffic carefully for large spikes or dips, or any other kind of unusual patterns. If you’re using Google Analytics to monitor traffic, you can check out your referrals to see if another website or social media network is sending you a lot of traffic. Knowing who sends you the most traffic — whether it is Google or your friend’s blog — can be very valuable in deciding how to best target the majority of your visitors.
The “who” we mentioned above, in the context of website traffic, is very important. Referral traffic can help you determine which sources are sending the most visitors to your site. This information can be extremely valuable in determining where you should focus more—for example, on organic search or additional PPC ads — or which relationships you should nurture.
Depending on the context, referral traffic can be a powerful website KPI for ecommerce performance for any number of reasons. Say your ecommerce store’s referral traffic from a particular blog is very high. Upon following the link, you discover it’s because a blogger positively reviewed one of your products or services, and linked to your website in the post. You might choose to reach out to them and nurture the relationship so that you have an opportunity to build more links in the future, or possibly to offer a special discount for the potential customers they are sending your way.
Referral traffic can also indicate potential problems. If your referrals from other websites are low or nonexistent, this may be a sign that your current marketing or link building campaigns aren’t working well. Additionally, low referral traffic from ads might tell you that you need to reconsider the keywords you are targeting, or possibly the amount you are spending.
Conversion rate is an extremely important KPI for all ecommerce stores. Simply put, this is the percentage at which your website visitors convert into actual customers. A high conversion rate indicates that you are successfully convincing a lot of visitors to buy your products or services, while a lower rate signifies that not as many customers are ready to buy, or that perhaps your traffic isn’t targeted enough. Knowing the number of buyers that visited your site can help you increase ecommerce performance by showing patterns so you can more effectively target site visitors in the sales funnel.
An ecommerce store’s conversion rate can vary based on a wide number of factors. Some stores may be happy with a 5% conversion rate, while others may want — or expect — a rate of 20% or more. While increasing your conversion rate should always be a goal, it’s important to ask a few specific questions before you blindly make changes:
Ecommerce store owners interested in finding ways to improve their conversion rates should look into conversion rate optimization (CRO), which is designed to evaluate the path to purchase and make improvements along the way, all with the end goal of increasing this important metric. For online merchants, it's one of the most critical key performance indicators for a website.
Your website’s bounce rate refers to the percentage of visitors who leave your site after arriving on it from a referral source like a search engine or another website. Although this KPI basically applies to every single person who leaves your site without making a purchase, a very high bounce rate may indicate that a majority of your visitors aren’t finding what they want when they visit your site, making it an important KPI for a website in any business.
One factor that may lead to a high bounce rate is relevancy. Let’s say your ecommerce store sells decorative feathered hats for women, and you’ve focused all of your SEO efforts on ranking for the keyword “hats.” This is a pretty broad keyword, and people who search for it might be looking for a variety of things. If you rank highly for “hats,” but most of your visitors are men looking for baseball hats, you can imagine what that’s going to do to your bounce rate.
Google actually takes your website’s bounce rate into consideration when deciding how to rank you for certain keywords, so you should watch this KPI very closely. If you are targeting broad keywords that are increasing your bounce rate, consider adjusting your SEO strategy to focus more on long-tail keywords. In our example above, you’d probably have better luck — and see fewer bounces — if you optimized your ecommerce site for “decorative women’s hats” or “feathered hats for women.”
The next KPI important for ecommerce websites to track is time to purchase. This metric tells you approximately how long it took for visitors to your site to change into actual customers. While some people may visit your site and immediately make a purchase, others may visit two, three, or even more than ten times before they decide to buy from you.
Depending on the kind of ecommerce store you are operating, a high time to purchase may not be a problem for you. If you sell very expensive computer or server equipment, you probably won’t see any impulse buys, considering how much research goes into purchases of that size. On the other hand, if you sell very inexpensive clothing, jewelry, or shoes, you’re likely to see many purchases falling within the 1-2 visits range.
Knowing your average time to purchase can help you make really smart decisions about your marketing. For example, you may want to set up a special email marketing campaign for a computer equipment store that sends detailed information to shoppers based on what they were looking at. On the other hands, general sale or new product emails will work well for stores with lots of impulse shoppers.
Repeat visits tie into the time to purchase KPI discussed above. If your time to purchase is very high, you will have a fair amount of repeat visitors, which really just represent the same people coming back to your store as they try to make a decision. But repeat visitors also represent repeat customers who have purchased from you and are coming back again.
For ecommerce stores with lower value items, repeat visits may be a sign of brand loyalty. The more repeat visits you have, the better chance you have at establishing a long-lasting relationship with a customer. But on the flip side of that, if you have very few repeat visits, you may conclude that your store doesn’t offer enough value to bring people back for a second purchase.
You can encourage repeat visitors by offering incentives to your customers. For example, giving first-time buyers a special coupon code may cause them to think favorably of you (and can help boost your conversion rate, too!). Sending them emails with special offers can also bring them back. Knowing what your repeat visit KPI looks like, and finding ways to boost it, can help you grow your ecommerce website’s revenue significantly.
If you’ve been exposed to ecommerce before, you’ve probably heard the phrase “cart abandonment” tossed around a lot. This is another important KPI to track for ecommerce stores. This KPI refers to the percentage of shoppers who add items to their cart or basket on your site, but never actually go through with a purchase.
Unlike bounce or conversion rates, cart abandon rates depend on factors far later in the shopping process, and may have almost nothing to do with your website quality or SEO. Instead, a cart is usually abandoned because of these factors:
By tracking this KPI very closely, you can identify issues with your checkout process before they start to cause significant problems for your business. As a result, this online KPI is especially important toward the end of the sales funnel.
For example, if you find that a majority of customers are abandoning their cart upon seeing your shipping rates, you might consider reducing them or offering free shipping above a certain purchase amount. If it appears that requiring an account to check out is scaring off customers, you could consider adding a “guest checkout” option.
One final KPI we recommend keeping track of is cost per conversion, or CPC. Commonly used to discuss Google’s AdWords, your CPC is the amount you essentially pay to turn a visitor into a buyer.
CPC seems fairly straightforward, especially if you’re looking at AdWords reports. Say you have a PPC ad that pays 5 cents per click, and it receives 50 clicks before there’s a conversion. This means that your CPC currently averages $2.50. As long as the purchase is more than $2.50, you’ve made a profit, right? Well, not exactly. You also need to take into consideration the time setting up the ad, the cost to ship or even produce the product, the time spent fulfilling the order internally… and so on. So CPC is actually a complicated KPI to keep track of.
Having said that, knowing what your CPC averages is extremely important. It can help you make smarter decisions about how much your products should be sold for, what you should pay for advertising, and even how you should market your business online. So it’s worth doing some work to figure out what your CPC really is. Knowing this metric can help you be more profitable than your competitors, and that may just give you the edge you need to succeed.
We know how difficult it can be for businesses to keep track of their ecommerce website goals and performance. If you need help with your ecommerce key performance indicators, WebpageFX is here for you. We can set realistic goals and optimize your store to meet them with our industry-leading SEO, marketing, and ecommerce skills. Contact us today to find out how we can make running your business easier.
Find out how WebpageFX can create an effective Internet marketing strategy for your website. Call 888.449.3239 or contact us online today for a free evaluation.