Track These eCommerce Key Performance Indicators (KPIs) to Help You Measure Success
eCommerce success depends on the ability to track and optimize key business metrics. Understanding the right Key Performance Indicators (KPIs) is crucial to ensuring profitability, efficiency, and growth. Below are the essential KPIs every eCommerce company should monitor to drive strategic decisions and improve financial performance.
Revenue and sales KPIs
Gross Revenue
Gross Revenue measures the total income generated from sales before any deductions. It provides a high-level view of business performance and growth, allowing businesses to assess their sales volume without considering discounts, refunds, or costs.
Gross Revenue = Sum of all Sales Revenue
Net Revenue
Net Revenue accounts for refunds, discounts, and returns, offering a more accurate picture of actual earnings. This is crucial for understanding true profitability and ensuring accurate financial forecasting.
Net Revenue = Gross Revenue – (Discounts + Returns + Refunds)
Average Order Value (AOV)
The Average Order Value (AOV) helps businesses understand customer spending behavior and craft pricing strategies to increase the size of orders. By increasing AOV, companies can drive higher revenues without the additional cost of attracting new customers.
AOV = (Total Revenue) / (Number Total Orders)
Conversion Rate
The Conversion Rate measures the percentage of website visitors who complete a purchase. A higher conversion rate indicates an effective website experience, strong product-market fit, and well-executed marketing efforts.
Conversion Rate = [(Total Transactions) / (Total Visitors)] x 100%
Customer acquisition and retention KPIs
Customer Acquisition Cost (CAC)
The Customer Acquisition Cost (CAC) evaluates how much it costs to acquire a new customer. A lower CAC suggests more efficient marketing campaigns. A business should aim for a significantly lower CAC than the Customer Lifetime Value (CLV) to maintain profitability.
CAC = (Total Marketing and Sales Expenses) / (Number of New Customers)
Customer Lifetime Value (CLV)
The Customer Lifetime Value (CLV) estimates the total revenue a business can expect from a customer throughout their relationship. For CFOs, balancing CAC and CLV is key to maintaining profitability. A high CLV indicates strong customer retention and repeat purchases.
CLV = AOV x (Purchase Frequency) x (Customer Lifespan)
Churn Rate
The Churn Rate measures the percentage of customers who stop buying from a company over a specific period. A high churn rate means customers are leaving and not returning, suggesting potential issues with product quality, customer service, customer satisfaction, or engagement strategies.
Churn Rate = [(Lost Customers over the time period) / (Total Customers at the beginning of the time period)] x 100%
Operational and efficiency KPIs
Cart Abandonment Rate
The Cart Abandonment Rate (CAR) tracks the percentage of users who add products to their carts but don’t complete the purchase. A high cart abandonment rate may indicate friction in the checkout process, unexpected shipping or other costs, or a lack of trust in the payment process. Reducing the CAR can significantly boost sales.
CAR = [(# of Abandoned Carts) / (Total # of Shopping Carts)] x 100%
Inventory Turnover Ratio
The Inventory Turnover Ratio measures how efficiently a company sells and restocks inventory over a period of time. A high inventory turnover ratio suggests efficient inventory management and demand forecasting, whereas a low ratio may indicate overstocking or sluggish sales.
Inventory Turnover Ratio = (Cost of Goods Sold) / (Average Value of Inventory)
Fulfillment and Shipping Time
Tracking how long it takes from order placement to delivery can help identify potential problems in the order fulfillment process. Faster fulfillment times demonstrate more efficient processes and logistics, which leads to greater customer satisfaction.
Fulfillment and Shipping Time = (Time the Order Was Delivered) – (Time the Order Was Received)
Profitability and Financial Health KPIs
Gross Margin
Gross Margin is a fundamental measure of profitability. A high gross margin suggests strong pricing strategies and cost control and helps ensure the business remains financially viable.
Gross Margin = [(Revenue – Cost of Goods Sold) / (Revenue)] x 100%
Operating Income (EBIT)
The Operating Income, or Earnings Before Interest and Taxes (EBIT), calculates the company’s profit after subtracting its operating expenses, such as cost of goods sold, wages, depreciation, amortization, etc. Operating income reveals the company’s profitability.
Operating income = (Gross Income) – (Operating Expenses)
Operating Margin
Operating Margin shows how much revenue remains after covering operating expenses. This KPI helps CFOs assess operational efficiency and identify areas where cost savings can be made.
Operating Margin = [(Operating Income) / (Revenue)] x 100%
Return on Investment (ROI)
The Return on Investment (ROI) measures the profitability of marketing campaigns and business initiatives. A high ROI indicates efficient use of resources and justifies continued investment in growth initiatives.
ROI = [(Net Profit) / (Investment Cost)] x 100%
Customer experience and engagement KPIs
Customer Satisfaction Score (CSAT)
The Customer Satisfaction Score (CSAT) measures how satisfied customers are with their experience, usually via surveys. A high CSAT score reflects a strong customer experience and helps businesses gauge service quality.
CSAT = [(Number of Satisfied Responses) / (Total Number of Survey Responses)] x 100%
Net Promoter Score (NPS)
The Net Promoter Score (NPS) gauges customer loyalty by asking how likely they are to recommend the business to others. Responses that are strongly favorable are categorized as “Promoters,” those that are strongly negative are “Detractors,” and those in the middle are considered passive and discounted. A high NPS suggests strong customer relationships, brand loyalty, and potential organic growth through word-of-mouth marketing.
NPS = %Promoters – %Detractors
Return Rate
The Return Rate helps businesses optimize product quality and reduce refund costs. A high return rate may indicate potential issues with product descriptions, product quality, or fulfillment accuracy.
Return Rate = [(Total Returned Orders) / (Total Orders)] x 100%
Put your data to work for you
Tracking these KPIs helps eCommerce businesses make data-driven decisions, optimize performance, and enhance profitability. For company leadership teams, regularly analyzing these metrics ensures sustainable growth and operational efficiency. The key to success lies in selecting the right mix of KPIs that align with your business objectives.
Contact ArcherPoint to learn how we can help your eCommerce company leverage the data you already have to develop the best KPIs to track and measure your company’s success.