Online stores thrive due to conversion rates, average order value, traffic, and cart abandonment rate. Therefore, it is impossible to take your business to the heights of success without tracking your ecommerce metrics. They help you keep track of your business strategies and assist you in making well-informed business decisions.
As ecommerce sales create more than 20% of retail sales, you need to track all the essential ecommerce metrics that contribute to the success of your business.
So, you should check up on these most crucial ecommerce metrics and learn how to track them because changes in any of these metrics can instantly alert you to the state of your business strategies.
As a business owner, you must know the importance of conversion rates. Your business can’t survive ecommerce challenges without loyal customers. Therefore, you need to know the ups and downs of your business conversion rate. You can calculate the conversion rate using this formula:
CR = (Total number of customers / Total Unique Visitors) * 100
This value will inform you how many visitors turn into buyers. Unfortunately, many businesses do not have a high conversion rate even after attracting tons of traffic. However, by keeping a regular eye on your conversion rate, you can plan how to compel your website traffic to buy your product.
Average Order Value (AOV)
The average order value of your website determines how much your customers are willing to pay for your products. Having high-priced products may be why you are generating high traffic but not detecting an increase in conversion rates. So, you must check the average order value of your website to keep your prices in the customer price range. To calculate AOV:
AOV = Total Revenue / Total Number of Orders
Ensure that you only calculate the total revenue of the orders placed in one period.
Every sale metric of your business is connected with website traffic. You need high website traffic to up your conversion rates. So, it is no rocket science that you should know how many people your business attracts daily. Calculate the website traffic with this formula:
WT = (Previous Users / New Users) * 100
You can change your business strategy if you are not maintaining your previous website traffic.
Customer Lifetime Value (CLV)
Customer Lifetime Value offers you a broader image of your sales. You can’t determine the success of your business based on one month’s sale only. You must know how much revenue a customer will provide your company over the years. That is why you must calculate CLV to check the relationship between your customers and your company. CLV is calculated as:
CLV = (Average Order Value * Average Purchase Frequency Rate) * Average Customer Lifespan
Customer Retention Rate (CRR)
One of the essential metrics that shows the success of your business is customer stability. If you are only attracting new customers but unable to keep them for long periods, it shows an issue. You can learn how many customers you are losing by calculating the customer retention rate (CRR). The formula for calculating CRR is:
CRR = [(New Customers in Month – Existing Customers at The End of The Month) / Total Customers at The Start of The Month] * 100
If you are rapidly losing customers, check what is compelling your happy customers to leave your platform.
Average Profit Margin
The average profit margin is the value you earn after deducting supply costs. Your average profit margin should exceed the amount of money you are using to provide your service. Otherwise, your business is going through a significant loss which can eventually shut down your business for good. So, calculate your average profit margin to check if you are any profits on the sale with this formula:
Profit margin = [(Selling price – Cost of goods) / Selling price] * 100
Remember, selling a high number of products doesn’t ensure that you are creating high profits.
Cart Abandonment Rate
More than half of your customers will abandon their carts without completing the order process. For any business, this is a pretty scary scenario. Therefore, to learn if your customers are abandoning their potential purchases or not, you need to find out the cart abandonment rate. Calculate your cart abandonment rate with this formula:
CAR = [(Completed Purchases / Created Shopping Carts) – 1] * 100
Find out whether your customers are leaving without making a purchase and why, so you can aid your customers in completing their orders.
Regularly checking your ecommerce metrics can ensure the success of your business. You can also use an ecommerce metric regulating service to stay on top of your stats to make highly effective strategies.