Running an eCommerce store is an incredibly challenging venture. You must monitor sales, oversee the latest marketing efforts, and make sure your team has the tools they need to perform at peak levels.
To do all of that well, you need reliable numbers. eCommerce bookkeeping is the process of recording every sale, refund, platform fee, shipping cost and stock purchase accurately and on time. Those records are what your key financial metrics are calculated from. Without them, managing your online store on the numbers is nearly impossible.
Below are ten key metrics you should be tracking, and how to work each one out.
How to measure eCommerce success
Measuring eCommerce success starts with accurate bookkeeping. Each measure you track regularly to judge performance is known as a key performance indicator (KPI).
It helps to separate two kinds of KPI. Financial metrics, such as revenue, profit, gross margin, average order value, customer acquisition cost and return rate, come from your books and your sales data. Website and marketing metrics, such as conversion rate, cart abandonment and traffic, come from your store platform and analytics tools. Both matter, but only the financial metrics tell you whether the business is making money.
With modern software, you can collect information on just about any metric imaginable. However, not every metric gives useful insight into your business. If you pay too much attention to the wrong KPIs, you will have an incomplete picture of your store’s overall health.
Many eCommerce stores use an outsourced bookkeeping provider to keep the books current and produce regular reports on business performance. You can then use this information to detect trends, refine your business model, and generate more revenue.
How often should you check your eCommerce financial metrics?
This depends on a few factors.
For instance, if you have just switched to a new store theme, check your website metrics each week. A new theme can change the way shoppers interact with your store, which may show up in traffic or cart abandonment rates.
Financial metrics such as profit and gross margin are usually reviewed monthly, once the books for the month are reconciled. There is no one-size-fits-all answer. The right rhythm depends on your business’s current health and growth plans.
Metrics
Here are ten eCommerce metrics worth tracking:
1. Revenue
Our first pick is pretty straightforward. Every business owner tracks their overall revenue (even those who are not very interested in analysing data).
However, revenue gives a very narrow view of an eCommerce store’s performance. Track it net of refunds and discounts, and ex GST if you are registered for GST. High top-line revenue is great, but it tells you little unless it’s paired with other metrics.
2. Profit
Profit gives a much better picture of your eCommerce store’s health and performance. If your revenue is rising but your net profit is not, you are likely leaking money somewhere else. The cause may be high operating expenses, platform and payment fees, shipping costs or disproportionate acquisition costs.
When you’re calculating profit, make sure to account for all expenses. Review it at least monthly, and more often when your business is young. That way, you can continually look for ways to reduce expenses and improve profitability.
3. Average order value (AOV)
Average order value is how much a customer spends, on average, each time they check out. Work it out as revenue for the period divided by the number of orders in the same period. For example, $50,000 of revenue from 500 orders is an AOV of $100.
Driving up your AOV can be a simple, effective alternative to generating new site traffic. There are several ways to boost AOV, such as:
- Rewards programs
- Selling bundled items
- Upselling with add-ons at checkout
- Mix-and-match deals
If you find that your AOV is low, these techniques can encourage customers to buy more in each order. Check that bundles and deals don’t erode your gross margin in the process.
4. Customer lifetime value (CLV)
Most of the metrics on our list suit just about any business. This next one is most useful for established online stores with enough history to see repeat buying.
CLV estimates the total a customer is worth to your store over the whole relationship. A simple version is average order value × average number of orders per year × average number of years a customer keeps buying. Because revenue isn’t profit, it’s more useful to multiply the result by your gross margin to get lifetime gross profit per customer.
CLV varies greatly by industry. Stores selling consumables that customers reorder regularly tend to have longer customer relationships than stores selling one-off purchases.
5. eCommerce conversion rate (CVR)
Ever wondered how many visitors to your site actually make a purchase? That’s your conversion rate: orders divided by visitors (or sessions) for the same period. It is a website metric, and it comes from your store platform or analytics tool rather than your books.
Like most eCommerce stores, you probably get a lot of visitors who browse and leave empty-handed. That is normal, and some will return and buy later.
There is no single healthy conversion rate. It varies widely by product, price point, traffic source and device, so compare your own rate over time and against the most specific benchmark you can find for your category.
A rise in your CVR can make a real difference to revenue. For example, say your site gets 500 visitors a day. A CVR of 3% means 15 people make a purchase. Lift your CVR to 5% and you get 25 purchases a day. If each customer spends $100, that is $1,000 more revenue each day. How much of that reaches profit depends on your gross margin and fulfilment costs.
6. Customer acquisition cost (CAC)
Many new business owners overlook CAC. Work it out as your total sales and marketing spend for a period divided by the number of new customers you won in that period.
The useful comparison is CAC against the gross profit a customer brings in, not their first order’s revenue. Say you spend $20 to acquire a customer whose first order is $100. If your gross margin is 30%, that order earns $30 of gross profit, so you recover the $20 on the first purchase. If your gross margin is 15%, the first order earns only $15 and you need repeat purchases to come out ahead. Over time, compare CAC with lifetime gross profit per customer (CLV × gross margin). If CAC is close to or above it, each new customer is costing you money.
7. Return rate
Alongside CAC, track your return rate: the share of orders (or of sales value) that come back as returns, exchanges or refunds. If you are processing lots of them every month, your profit will suffer, and returns take up your team’s time too. Track chargebacks separately: they are payment disputes, and card schemes penalise stores whose chargeback rate climbs.
Return rates vary greatly by product type, so look for comparable figures within your category and watch your own trend. If your rate is rising, look at the reasons why. Is it quality, change of mind, or the wrong product being sent?
8. Cart abandonment rate
Most eCommerce platforms let you track cart abandonment: shoppers who put items in their cart and leave without completing the purchase. Like conversion rate, it’s a website metric.
A high cart abandonment rate is a concern, but it also presents an opportunity. Shoppers who load up their carts are interested in buying. You may just need to give them a little extra incentive to follow through.
An automated email sequence can help. It targets shoppers who abandon their carts with messages that prompt them to complete their purchase.
If you want to sweeten the deal, include a discount code or shipping offer, and weigh its cost against your margin.
9. Gross margin
If you plan to scale your business, gross margin is one of the most important metrics to track.
Gross profit is revenue minus the cost of goods sold (the cost of the stock you sold, plus direct costs such as inbound freight). Gross margin is gross profit as a percentage of revenue. For example, $50,000 of revenue and $30,000 of cost of goods sold gives a gross profit of $20,000 and a gross margin of 40%.
By examining gross margin, you can judge whether your current growth is sustainable. Make sure you have strong margins before you try to scale. Otherwise, you may find you don’t have the funds to keep stock on the shelves.
10. Traffic volume
Traffic volume is how many visitors your site receives. You can break it down into smaller measures, such as bounce or engagement rate, time on site and pages viewed. These can help you see where shoppers are leaving your website.
Use the definition for your analytics platform. In Google Analytics 4, bounce rate is non-engaged sessions divided by total sessions, multiplied by 100. A session is engaged if it lasts longer than 10 seconds, includes a key event, or has at least two page or screen views. A one-page session can therefore be engaged. A high bounce rate may mean the page isn’t showing shoppers what they came for, or that it loads slowly, which quickly discourages potential customers.
Increasing your site’s traffic is an essential part of growing your eCommerce store. You can drive more traffic through paid ads and search engine optimisation (SEO). Judge that spend through CAC, not traffic alone.
Closing
That rounds out our list of ten eCommerce metrics to track.
Now that you know which data to monitor, it is time to put these numbers to use. Tracked together, these KPIs show how your business is really performing, what you are doing well and which areas need work.
Visory runs bookkeeping, payroll, accounts payable and receivable for growing businesses, with a dedicated team and our AI, Delphi, overseen by that team. With Visory Insights, a Business Performance Partner walks you through a plain-English read of your numbers, monthly or quarterly, so you have more time to focus on growing your store. Book a discovery call to see how it would work for you.
About this article
Written by The Visory Team. Published . General information for Australian businesses, not advice for your situation.
