4 Financial Metrics Every E-commerce Business Should Track
Master 4 essential financial metrics and KPIs for e-commerce success in Singapore with Choco Up’s guide to tracking business finances and optimising cash flow.
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Data is meaningless without context. Without e-commerce metrics to help you understand what you’re measuring, data can’t be used in a meaningful way.
This article is a complete checklist of 13 key e-commerce metrics, covering aspects such as website traffic, sales and customer retention to inform your online growth strategy.
Read on to learn how you can track your brand’s online performance with a structural approach and set key performance indicators (KPI) for your e-commerce business!
1. Traffic-related metrics
1.1 Sessions
1.2 New users
1.3 Bounce rate
1.4 Average page views per session
1.5 Average session duration
1.6 Source / medium
2. Sales-related metrics
2.1 Shopping cart abandonment rate
2.2 Sales conversion rate
2.3 Average order value (AOV)
3. Customer-related metrics
3.1 Customer acquisition cost (CAC)
3.2 Customer lifetime value (CLV)
3.3 Number of new member registrations
3.4 Repeat purchase rate
Traffic refers to the number of people who visit your website. It’s the lifeblood of every online business, for no sales will occur without first getting traffic to your store.
This section explains 6 traffic-related metrics which you can track for your e-commerce store.
For maximal learning efficiency, we suggest that you sign in to your Google Analytics account (or create an account if you don’t already have one — it’s free) and analyze your website’s data alongside this article.
This will help you make sense of your data and better understand the behavior of your website visitors.
Google defines “session” as a group of user interactions with your website that take place within a given time frame.
If the definition sounds too complicated, you can think of the number of sessions as the number of times that people visit your website.
Number of sessions ≈ Number of times that people visit your website
Example: People visiting your website 1,000 times would make 1,000 sessions.
In each session, a user may make multiple interactions with your website, such as viewing pages (see green blocks below), making a purchase (red block), or other events (orange blocks).
Yet, as an Internet user yourself, you’d know that people rarely complete all of the above interactions in one visit.
Sometimes they may browse a website, leave for some time, and come back to view the site again.
How would the number of sessions be counted then?
By default, a session lasts until there's 30 minutes of inactivity.
It means that after 30 minutes of doing nothing on your site, a session ends. A new session begins when the same user comes back to your site after 30 minutes.
Session is an e-commerce metric commonly used to analyze landing pages (i.e. the first page of your website that visitors browse).
This way, you’ll know the amount of traffic that each page brings to your website, and can assess its importance to your e-commerce store as a whole.
A user can visit your website multiple times. To evaluate how well you’re doing in attracting new visitors, you should also track the percentage of new users (i.e. first-time visits).
Percentage of new users = Number of new users / Total number of users
A low percentage of new users means that only a small portion of your website visitors are new to your site, and that most of your website’s traffic comprises returning visitors.
To bring more new visitors to your e-commerce site, the following are good starting points:
For actionable tips on the topic, tutorials by Backlinko and HubSpot will let you know how you can grow your website traffic at scale.
Bounce rate, average page views per session, average session duration
Once visitors arrive at your website, you can start tracking their browsing behavior, such as how long they stay and how many pages they view.
A “bounce” is a single-page session on your site, according to Google’s Analytics Help page.
In simpler terms, a visitor bounces if he or she leaves right after viewing only one page of your website.
A bounce occurs when a visitor leaves after viewing only one page of your website.
Bounce rate, therefore, is the percentage of all sessions in which users view only one page.
For example, your website is visited 100 times. Among these 100 sessions, 7 visitors leave after viewing one page only. The bounce rate is 7 ÷ 100 x 100% = 7%.
Bounce rate = Number of single-page sessions / Total number of sessions x 100%
When analyzing your e-commerce store’s performance, you should pay attention to the bounce rate at your homepage, product section pages and any other pages that serve as primary entry points of your website.
Try to keep the bounce rate as low as possible — you don’t want visitors to enter your site and immediately leave without viewing the products you sell.
Average page views per session (also known as average page depth) is the average number of pages viewed during a session. When measuring this metric, repeated views of the same page are taken into account.
This e-commerce metric tells you how many pages — most often product pages — your visitors browse at your store in each visit.
Average page views per session is the average number of pages viewed during a session.
Example: The average page view per session of an online jewelry store is 7. It means that on average, visitors of this website view 7 pages in each session.
In general, a high average page views per session means visitors are interested in your store’s offerings. Consider an average of 5 pages views per session a benchmark across industries.
Note that the figure varies across industries, with grocery sites having the highest number of average page views, and B2B websites having the lowest:
In any event, if visitors leave without clicking more than a few pages, chances are that the first few pages they see aren’t showing what they’re looking for.
It’d be wise to review and improve your website’s navigation and content to deliver a better user experience on your site.
Average session duration measures the average amount of time spent in a session.
Simply put, it’s the length of stay on your website, which reflects the level of interest that visitors have in your products.
Average session duration measures the average amount of time spent in a session on your website.
Pro tip: It’s common practice to analyze average page views per session in conjunction with average session duration.
Acting on the two data points, you can improve landing pages with few average page views per session and short session durations. For instance, you can revise the copywriting or re-arrange product rankings on those pages.
This article by UXtweak is a useful guide for you to optimize your website’s landing pages.
Apart from knowing how many people visit your website, it’s essential to know where they come from.
To get this insight, source / medium is an e-commerce metric that you’d want to track on Google Analytics.
As its name suggests, the source / medium metric gives you information on two aspects: source and medium.
In the source / medium metric, source refers to the origin of traffic, whereas medium is the category that the source belongs to.
In the example above, the top source of traffic is “Google”, which belongs to the medium of “organic search”.
The second major traffic source is “direct”, which means users type in the web address and come to the site directly.
“Linkedin.com” is the third largest source of traffic, with the medium being “referral”.
Leveraging insights from the source / medium metric, you’ll get a grasp of which channels bring the most traffic to your website.
Nevertheless, it must be noted that source / medium merely gives you information about the sources of traffic.
This metric on its own doesn’t indicate the amount of sales that those sources bring to your store, and a major source of traffic doesn’t necessarily drive the most sales or revenue.
Pro tip: If you run campaigns to drive traffic to your website, you can add parameters to your URLs to track campaign performance more precisely.
Viewed from a business perspective, it could be said that website traffic is ‘worthless’ unless visitors buy from you.
Following, this section will explain three e-commerce metrics to help you understand how well you turn visitors into paying customers.
Shopping cart abandonment rate is the percentage of users who add products to their carts but do not complete the purchase.
If cart abandonment rate isn’t a big concern to you, you may want to rethink your perception of this e-commerce metric, because almost 8 out of 10 users abandon their online shopping carts.
There are many possible reasons behind a high cart abandonment rate, such as complex checkout procedures, high shipping costs and compulsory account creation.
Many of these issues can be overcome by streamlining the checkout process, or by sending abandoned cart emails to your visitors.
Think about the revenue that you can gain from the 80% of abandoned carts . It’s certainly worth spending time to think about how to bring that rate down.
Our article on e-commerce best practices sheds light on this topic and provides practical tips on how to reduce your cart abandonment rate.
Conversion occurs when your users perform a desired action. There are many different types of conversions, such as:
For e-commerce stores that sell products, “making a purchase” is one of the commonest conversion goals.
Conversion occurs when your users perform a desired action. E-commerce stores often set “purchase” as a conversion goal.
It follows that conversion rate is the percentage of users who visit your e-commerce store and make a purchase.
Conversion rate = Number of sales / Number of users x 100%
Example: Your website has 100 visitors this month. Out of these 100 visitors, 8 people make a purchase. Your store’s conversion rate is 8 ÷ 100 x 100% = 8%.
As a higher conversion rate correlates with more sales (hence more revenue), you’d want your sales conversion rate to be as high as possible.
Our article on e-commerce conversion rate optimization gives you 6 killer strategies for turning visitors into customers. Check it out!
On top of acquiring new customers, increasing the average order value is another way to drive more revenue.
AOV measures the average dollar amount that customers spend when they make a purchase on your website.
To calculate the AOV at your e-commerce store, simply divide your total revenue by the number of orders.
Average order value (AOV) = Total sales revenue / Number of orders
Tracking the AOV at your site will give you insights into your customers’ purchasing power, enabling you to evaluate whether there are opportunities for growth.
Below are some proven ways to boost the AOV at your online store:
Last but not least, we’ve come to customer-related metrics.
By understanding how customers interact with your online store, you can make data-informed decisions on how to acquire new customers and retain existing ones for your business.
Customer acquisition cost is the amount of money spent to make a customer buy from you. It can be computed with the following formula:
Customer acquisition cost (CAC) = Cost of sales and marketing / Number of new customers acquired
Example: You spent $600 on a social media ad campaign, which led to 10 purchases on your website. For this particular campaign, the customer acquisition cost is $600 ÷ 10 = $60.
While customer acquisition costs vary greatly across industries and there’s no absolute rule on what’s a reasonable cost, it’s important to keep this figure at a level that will allow you to profit from sales.
To give an example, you wouldn’t want to spend $60 to acquire customers who only pay an average of $10 for your products.
In simple terms, customer lifetime value represents the total amount of money that a customer is expected to spend with your business during their lifespan.
Customer lifetime value (CLV) = Customer value x Average customer lifespan, where Customer value = Average purchase value x Average number of purchases
Example: On average, a customer makes 5 purchases with your businesses, the average value of which is $50. Customers usually stick to your brand for 3 years (they no longer need your products after that).
The customer lifetime value in this scenario would be:
= $50 x 5 x 3 years
= $750
It means you can get approximately $750 from each customer over his lifespan.
Pro tip: Assessing the CLV of your business is crucial for informing your marketing strategy.
It’s often evaluated and compared with the CAC, so that you’ll know whether the value that a customer brings to your business will justify the acquisition cost.
An effective loyalty program makes customers stick to your brand and encourages members to spend more at your store.
If your brand already has a loyalty program, it’s advisable to monitor the number of new member registrations on a regular basis. This will help you gauge the growth rate of your loyal customer base, hence informing future strategies for encouraging member sign-up.
Pro tip: Many people buy from online stores without signing up for loyalty programs. Look for ways to convert existing customers into members.
This group of customers (compared with non-shoppers) are much easier to convert as they’ve already expressed interest in your products.
With a loyalty program in place, the next crucial step is to evaluate its effectiveness. In this regard, repeat purchase rate is a metric you should track.
Repeat purchase rate represents the portion of customers who make more than one purchase at your store in a given timeframe (they’re called “repeat purchasers”).
This metric can be calculated with the formula below:
Repeat purchase rate = Number of customers who have shopped more than once / Total number of customers x 100%
Example: Your e-commerce store received 10,000 orders from 2,500 customers in the past year. The repeat purchase rate can be found by 2,500 ÷ 10,000 x 100% = 25%.
It means that a quarter of your customers made more than one purchase at your store last year.
These are likely to be loyal customers — think about how to make them spend more, and don’t forget to reward them for their loyalty!
→ Quick summary: This article delves into 13 key e-commerce metrics that would help inform the setting of key performance indicators for your online business. The checklist of e-commerce metrics includes:
Just like data is meaningless without context, e-commerce growth cannot be achieved without adequate financial backing.
If you’re looking for a funding and growth partner, you’ve found one right here — Choco Up can help.
As the leading revenue-based financing and growth platform in Asia, Choco Up offers funding ranging from US$10K to $10M to companies of all sizes. With our quick and flexible funding, we’ve helped hundreds of businesses fuel their growth and accomplish remarkable results.
To learn more about how Choco Up can help your business grow, check out our client success stories or claim your FREE preliminary offer now!
Grow your business with Choco Up
Master 4 essential financial metrics and KPIs for e-commerce success in Singapore with Choco Up’s guide to tracking business finances and optimising cash flow.
Learn 3 ways e-commerce analytics give you actionable insights to optimise website conversion rates and boost customer conversions.
