The most successful businesses use data as a basis for everything they do, from the decisions they make to the types of marketing campaigns they run. Ecommerce metrics are crucial for all ecommerce businesses as they are the basis on which their owners make decisions. These metrics paint a picture of how the business is doing and you should never run an ecommerce business without keeping an eye on your metrics. But, which metrics are the most important?

Conversion Rate

The conversion rate is the number of people who reach your website and convert into paying customers. A common problem for ecommerce websites is receiving a lot of traffic and having no sales from the people who reach the website. The process of improving the conversion rate is known as conversion rate optimization.

There are numerous places to look to see why your visitors are not converting, but you can start with the product pages to see if your copy is convincing enough. Also check your navigation to ensure it is easy to get around your website, the buttons which contain your call to action, and the exit pages (where people end up before deciding not to convert).

Average Order Value

The average order value is the total sales divided by the number of orders on the site. A high average order value means customers are purchasing more than one item or more expensive products for each visit to the website.

There are several strategies to improve this metric including sales, limited-time offers, and social proof.

Customer Acquisition Cost

This is the amount of money it takes to acquire a paying customer. A high customer acquisition cost means you are spending too much on advertising or other customer acquisition strategies and you are likely making a loss. Ecommerce business owners should be aiming for a customer acquisition cost of less than 30% of their total revenue.

Optimizing your acquisition channels and using highly-targeted marketing can both help lower your customer acquisition cost.

Customer Retention Rate

Ecommerce businesses rely on returning costumes to keep the revenue coming in. If you are losing lots of customers, something could be wrong with your products or retention strategies. The problem could also be your customer service or friction somewhere in the consumer journey.

Because the customer retention rate is directly tied to customer loyalty and satisfaction, it should not be underestimated and you should keep a close eye on it. To get this number, subtract the new customers in a given period from the total number of customers in that period. Divide this number by the customers you already had and multiply it by 100.

Average Profit Margin

This is what you earn, on average, from each product you sell. It is calculated by subtracting the selling price from the cost of the product, dividing the result by the selling price, and multiplying that number by 100.

You have to keep the average profit margin above the acquisition cost to remain profitable.

Conclusion

Keeping an eye on these essential metrics is important for a dynamic business like an ecommerce store. These metrics will tell you how you are doing and where to focus to keep your business profitable.