KPIs in eCommerce - how to effectively monitor your online store's performance?

Table of contents:

• KPI - what is it?
• Key performance indicators - why are they worth using?
• Key KPIs for eCommerce
• How to Measure KPIs?
• Key Performance Indicators - how can they improve the efficiency of your online store?

Profits and sales figures are not the only numbers you should regularly track in your online store. To thoroughly assess the effectiveness of your actions and identify areas that need improvement, it's worth delving into data that allows for deeper analysis. We're talking about key performance indicators, or KPIs. These metrics not only help you monitor current results but also set long-term goals and adjust your strategy to maximise your eCommerce success. In this article, we'll look at the most important KPIs to track. We'll also show you how regular analysis of these indicators can contribute to your business growth. Read on!

KPIs, or Key Performance Indicators, are essentially a set of metrics that precisely show how well your online store is performing. KPIs are crucial for assessing the current state of eCommerce, and they serve as reliable measures for evaluating and comparing business results month to month. They help determine whether actions like marketing campaigns or sales initiatives effectively achieve set goals, such as increasing sales or enhancing customer loyalty. Analysing KPIs also aids in predicting future sales trends.

The effectiveness of KPIs comes from their focus on measurable values. This means they are based on concrete data that can be verified, analysed, and tracked over time, rather than subjective opinions or feelings.

Moreover, analysing KPIs offers great flexibility. It allows you to measure results over short periods (such as evaluating the effectiveness of marketing efforts each quarter) and set long-term goals based on observed trends and tendencies. For both large companies and smaller enterprises, regularly monitoring KPIs enables more informed and effective business management, leading to better results and greater operational efficiency.

"That which is measured is managed, and that which is not measured is unmanaged" this often-quoted saying highlights the fundamental benefit of using KPIs in business: monitoring the effectiveness of actions. KPIs allow you to track progress toward goals and identify areas needing improvement. For example, an increase in the cart abandonment rate (the number of completed orders / the total number of created carts x 100) may indicate issues in the checkout process, such as complex forms. This enables quick responses to problems and optimization of actions to achieve better results.

Why else should you use KPIs?

• They reinforce the right decisions - KPIs provide objective data that helps assess the effectiveness of various actions and strategies, enabling better fact-based decision-making rather than relying on intuition.
• They aid in better planning - regularly monitoring KPIs helps predict trends and plan future actions more accurately, leading to more efficient resource and process management.
• They reduce information overload - a well-chosen set of KPIs allows focus on the key aspects of the business, enabling managers and teams to concentrate on the most important success indicators instead of getting lost in a sea of data.
• They highlight areas needing improvement - monitoring indicators helps identify processes that are not functioning optimally (e.g., the return process) or strategies that are not yielding expected results. This allows for quick responses to weaknesses or shortcomings and the implementation of improvements.

KPIs can help grow your business, but only if they are appropriately tailored to its specific nature. It's important to remember that there is no universal set of KPIs for eCommerce. Each online store has its unique characteristics and faces different challenges, so it's crucial to define individual indicators that will effectively measure progress. KPIs should be selected based on the established goals and the type and intensity of the strategies employed. To prepare for effective KPI analysis, it's useful to first examine the sources of traffic. Users can come to your store's website in various ways organically (by typing a query into a search engine), through paid channels (by clicking on an ad), or by discovering the store's profile on social media, for example. Understanding the sources of traffic helps in investing more effectively in the channels that yield better results.

However, there are some universal indicators that work for the majority of businesses. Below, you will find a brief list of the most popular KPIs used by representatives in the eCommerce industry.

Conversion rate

The conversion rate indicates the percentage of users who take the desired actions compared to all the visitors to the site. For online stores, this action is most often making a purchase, but it could also include actions like signing up for a newsletter or downloading the store's app.

It's important to always monitor the conversion rate. Why? Because it shows what percentage of site visitors "convert" into actual customers. A high conversion rate indicates the effectiveness of the site and its offerings. It also suggests that your advertising efforts are reaching the right audience. Conversely, lower values may signal problems—either with the product offerings or the user experience on the site. For instance, if your product prices and quality are competitive, it might be worth investigating potential issues on the site itself.

Bounce rate

The percentage of visitors who leave the site without taking any action (e.g., clicking a button, filling out a form) is known as the bounce rate. This metric can suggest that your site is not meeting user expectations. Reluctance to stay on the site may be due to several factors, most commonly:

• lack of intuitive navigation,
• content that doesn't match visitors' expectations,
• long page load times,
• errors in ad campaign settings that attract the wrong users,
• or simply - clicking on an invalid link or giving up browsing.

There are many reasons that can lead to an increased bounce rate, so it’s essential to regularly analyze results and implement gradual changes on the site. If you notice a decrease in the bounce rate after making modifications, it's a sign that your actions are having a positive effect.

Customer Acquisition Cost & Customer Lifetime Value

Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV) are two indicators that are valuable to analyse simultaneously. This combination is particularly useful for industries that place significant emphasis on maintaining customer loyalty and engage in actions to support it.

CAC helps assess the effectiveness of marketing efforts and indicates whether the costs of acquiring customers are justified by the generated revenue. CLV, on the other hand, measures the long-term effectiveness of these efforts. A high CLV suggests that a company effectively retains customers and their trust, for example, through successful promotions, loyalty programs, or strategies like up-selling and cross-selling.

Analysing CAC and CLV together provides a comprehensive view of customer relationships, which is crucial for sustainable growth and long-term profitability of the business.

Rate of return

The Rate of Return (RoR) is an indicator that shows the percentage of returned orders. This is a crucial KPI in eCommerce, as a high rate of return can signal customer dissatisfaction with received products for various reasons. This could be due to low product quality or inappropriate product presentation on the website. Inaccurate descriptions, inadequate photos, or a lack of detailed information can lead to discrepancies between customer expectations and the reality of the received products, resulting in a high RoR.

Optimising the RoR not only minimises costs associated with returns but also builds customer trust and loyalty. Satisfied customers are more likely to make repeat purchases and recommend the store to others, which, in the long run, translates into increased revenue and improved financial performance for the company.

Remember that the list of KPIs is extensive, and some may be more suitable for the specific needs of your business. Therefore, it's important to continuously expand your knowledge about KPIs and adjust them to changing market conditions and company strategies.

To delve deeper into the topic of KPIs and learn more about specific indicators, we invite you to read the articles from the "Numbers First" series. In these articles, we provide detailed discussions of 15 eCommerce KPIs, offering practical tips on how to interpret and use them to optimize actions in your online store. You can find the series of articles below, where you'll find descriptions of such indicators as:

Abandoned cart rate, average order value

Mobile traffic analysis, return on investment

Repeat purchase rate, sales growth rate

Have you already selected the set of KPIs you want to monitor? That's essentially just half the battle. Besides being conducted regularly, the examination of indicators should also meet certain criteria to provide valuable information. Below are some practical tips to help you correctly monitor KPIs.

First, the chosen indicators should be simple to calculate and understand. Overly complex metrics can complicate analysis and cause confusion. The most commonly used KPIs are based on comparing two values, allowing for clear and specific conclusions.

Also, remember the importance of data currency. Outdated information can lead to incorrect conclusions and inappropriate business decisions. Regularly updating data is crucial to ensure that the analysed information is reliable and accurately reflects the current situation.

Furthermore, prepare an appropriate environment for data analysis organised and readable values will streamline your work with the indicators. Depending on your preferences, choose your set of tools. You can create reports in Google Analytics, Looker Studio, or compile data in Excel. It's important that these tools are easy to use and allow for quick data interpretation. This way, you can effectively monitor KPIs, identify trends, and make informed decisions based on reliable data.

Lastly, regularly compare results over time. Analysing trends and comparing indicators across different time periods helps to notice changes and identify areas needing improvement. Comparing results allows you to spot long-term trends and better plan future actions. Systematic comparisons help identify effective strategies and those that need modification.

In summary, effective KPI monitoring requires regularity, simplicity, data currency, objectivity, appropriate tools, and systematic result comparison. Adhering to these principles will enable better business management and improved results.

Is it really worth spending time each month calculating and analysing KPIs? Yes, as long as you have a developed plan and strategy—meaning you know what and why you want to measure. KPIs not only allow for an assessment of the current situation but also help identify areas for improvement and set long-term goals.

However, remember that KPI analysis is a continuous process. It’s not enough to conduct it once and wait for results. Therefore, regularly monitor your indicators, analyse trends, and draw conclusions. This way, you can react to changes in real-time and optimise your actions to achieve your set goals.