It’s estimated that there are between 12 and 24 million ecommerce stores globally. Saying that it’s challenging to distinguish yourself in such a fiercely competitive market would be an understatement. But fortunately, there’s a way to ensure your online store rests on solid foundations.
The success of your ecommerce shop heavily relies on tracking the right performance metrics.
These numbers will tell you how your business is doing and give you insight into its overall health. Plus, when you have quantifiable measurements, it’s possible to pinpoint areas that need improvement and make informed decisions.
However, there are many available metrics, and you don’t want to spread yourself too thin and track every single one of them. Here’s a list of five critical ecommerce metrics that you should closely watch, along with tips on how to boost them.
1.Conversion Rate
It wouldn’t be wrong to say that the sales conversion rate is the most important metric you should be monitoring.
Simply put, it’s the percentage of your online store visitors who decide to purchase something and turn into your customers.
Calculate your conversion rate using the following formula:
Number of sales/Number of users ✕ 100%.
The global ecommerce conversion rate across industries stands at 1.72%, and, obviously, you want this percentage to be as high as possible because that means more profit for your store.
There are different ways to boost the number of visitors who turn into customers. But when it comes to ecommerce stores, social proof plays a crucial role.
Consumers tend to be skeptical about online stores unless we’re talking about reputable and well-established brands. Plus, let’s not forget that purchasing a product you can’t touch, feel, or try on can be tricky.
Enter social proof!
95% of people read reviews before purchasing something. Opinions of others who have already bought and used a product can influence the decision-making process of potential customers.
By displaying what your existing customers say about the entire experience with your online store, you can build credibility and show website visitors that your ecommerce store is legit.
So, why not use this powerful tactic to boost your conversion rate?
Mannequin Mall leverages social proof all across their website. For example, you can see a review flyout, customer logos, and customer review quotes on the home page. There’s an entire page dedicated to customer reviews where you can switch between product and site reviews. Finally, there are individual reviews on product pages that include UGC photos of the purchased products.
This way, no matter where they land, their store visitors can see feedback from happy customers, and that encourages them to make a purchase.
So, take advantage of social proof to corroborate your product descriptions and claims about the quality of your service.
Other tactics include:
- Showing the number of people who bought a particular product
- Displaying expert reviews of your products
- Using Popular Choice or Bestseller badges with your best products
- Showing the “people who bought this, also bought” message after a customer completes the transaction
- Adding images and other personal details to testimonials to prove that these are real people.
Suggested reading: Alibaba Private Label
2.Average Order Value (AOV)
Besides converting more visitors into customers, another effective tactic to bring in more revenue to your ecommerce store is increasing the average order value.
The formula for calculating your AOV is:
Total revenue/Number of orders.
So, this metric is determined by sales per order and not sales per customer. Even if the same customer comes back several times to make a purchase, each of these purchases should be tracked separately.
Stats say that top ecommerce stores have a 30% average order value, so motivating your customers to buy more per single order can make a huge difference when it comes to your bottom line.
But how do you do that?
Offer Free Shipping on Order Minimums
Free shipping is one of the top purchase drivers.
9 out of 10 consumers say that free shipping is the No.1 incentive that will motivate them to buy more online. In addition to that, the value of orders with free shipping is around 30% higher. So practically, by not charging transportation expenses, you can earn significantly more.
But, for this tactic to be cost-effective and generate a better profit, offer free shipping only on orders that exceed a certain amount. This way, you’ll prompt your customers to increase the size of their order so that they can qualify for free shipping.
The psychology behind this approach is that you give your customers a choice whether they want to pay a couple of bucks for shipping or order another product to reach the value threshold.
And, of course, people love the idea of getting something for free as it feels like a reward.
Plus, they’d rather spend their money on something more tangible than shipping costs.
Bathorium offers free shipping on all orders over $100+ and offers this information on the product page right below the Add to Cart button. This strategy promotes transparency, and customers can decide to put additional products in their carts and surpass the free shipping threshold.
3.Website Traffic
Attracting more website traffic is a logical step toward growing your ecommerce store and increasing your sales.
Let’s assume your conversion rate is 1.5 percent. This means that 15 out of 1,000 website visitors will turn into your customers. Now, if you manage to improve this number using some of the tactics we mentioned to 5%, then you’re looking at 50 sales out of your 1,000 visits.
So, when we put things into perspective, it’s easy to conclude that by increasing your traffic to 10,000 visitors, you can expect about 500 sales. There’s no guarantee that this will be like in this scenario, but the likelihood is certainly significantly higher.
One of the ways to attract more website traffic is through content marketing.
Create Super Relevant Content
By producing and sharing relevant, useful, and informative content that resonates with your target audience, you can expect to grow the number of website visitors.
The trick is to understand your potential customers’ needs and problems and to offer them helpful solutions. In other words, your content doesn’t (and mostly shouldn’t) revolve around your products. The point is to write about topics related to your business that your audience will find interesting.
Google Keyword Planner, Semrush, Ahrefs, or similar keyword research tools can give you insight into the most popular topics your potential website visitors are searching for on the internet.
Besides allowing you to identify new business opportunities, these tools will allow you to find the best keywords and implement them in your content. This tactic will increase the visibility of your blog posts and their ranking in search results.
Given that 90% of people say they’re very likely to click on one of the top search results on the first page of the SERPs and never get to the second page, relevant, well-optimized blog posts have a huge potential to drive a lot of traffic to your website.
Bed Bath & Beyond’s blog is dedicated to various lifestyle and home improv topics, as that’s what their audience is interested in. But, apart from giving practical tips on how to, for example, declutter your home or throw an outdoor party, they cleverly include useful products that can help in the process.
4.Shopping Cart Abandonment Rate
The average online shopping cart abandonment rate is almost 70%.
Put differently, only 30% of customers actually complete their transactions and make a purchase.
You can calculate your shopping cart abandonment rate using the following formula:
1−Transactions completed/Shopping carts initiated ✕ 100
Before we can discuss a solution for improving this metric, it’s important to understand some of the biggest culprits behind your customers’ decision to abandon their shopping carts and leave your store without completing the transaction.
Tweak your checkout process
According to surveys, the following factors can be blamed:
- High extra costs
- The long and complicated checkout process
- Lack of transparency regarding the total costs
- Mandatory account creation
- Unsatisfactory return policies
- Not enough payment options
- Payment security risks and concerns.
In a nutshell, it’s crucial to revisit your checkout process, analyze it, and improve it accordingly. By eliminating at least some of these issues, you can reduce shopping cart abandonment and encourage more customers to complete the transaction.
Nordstrom’s checkout process checks almost all the boxes, as the brand allows making a purchase without creating an account, provides trust badges, and offers detailed information about the total costs. Customers can see how much they will pay for shipping, duties, and additional taxes upfront. Plus, it’s also possible to use PayPal.
5.Customer Lifetime Value (CLV)
Repeat purchases are also crucial for the success of your ecommerce store.
Customer lifetime value refers to the total revenue your store can expect to earn from a single customer throughout their relationship with your business.
Here’s how to calculate your customer lifetime value:
Average purchase value ✕ Average purchase frequency ✕ Average customer lifespan
For example, a regular customer who spends on average $50 on a shirt from your store, buys five times a year, and stays with you for five years is worth $1,250 over their lifetime.
The importance of this metric lies in helping you understand your customers better and tailor your marketing and pricing strategies to fit their needs and preferences.
When you know your CLV, you can figure out how much you can spend on the acquisition of a similar customer without eating into your profit or what products customers with the highest CLV purchase. Finally, this metric will give you particularly valuable insight into who your most profitable customers are.
So, how do you boost your CLV?
Email marketing is a powerful and cost-effective way to generate repeat purchases and turn your one-time customers into loyal ones.
By sending your customers regular newsletters, you can stay top of mind and inform them about the latest products and special offers. For your newsletters to be effective, it’s essential to segment your audience, personalize your messages, and include valuable content.
For example, it’s a good idea to identify your highest-spending customers and create an emailing list, especially for them. Then you can target them with VIP offers, discounts, coupons, and other special deals. Such incentives will encourage them to keep on buying from you.
But, since there are strict privacy protection rules in effect in many countries, you can’t simply start sending newsletters to your customers, even if you have their email addresses. You need their explicit consent; that is, they need to subscribe to your newsletter and give you their permission to email them.
One of the most effective ways to encourage newsletter subscriptions is by introducing a monthly giveaway competition, just like GILI does. Their customers have the chance to win their monthly giveaway if they become newsletter subscribers.
Conclusion
Although these ecommerce metrics are just the tip of the iceberg and are by no means the only ones you can monitor, they are an absolute must. Another thing is that once you improve a single metric, it will have a ripple effect and impact other ones. Knowing all these details about your ecommerce store will allow you to tweak and fine-tune it.
