Best KPIs for Measuring the Performance of an Ecommerce Business
Why are scorecards and KPIs your best strategy for measuring performance of an eCommerce business?
Generating profits and increasing your bottom line is one way to measure your success as an eCommerce company. However, using these lagging indicators can't help you when you need to identify and improve your business's specific elements to promote growth.
To ultimately enhance your profits, it's essential to track and measure each activity-based event, whether it's associated with operations, finance, or sales and marketing. Using an eCommerce scorecard and KPI for each element can get this done effectively.
Having consistent processes in place for each department in your eCommerce business should help increase productivity and efficiency. Having everyone understand and follow each process makes it more straightforward to identify and ultimately solve any issues when they arise. No business runs smoothly all the time. However, removing any obstacles and tackling issues can help provide solutions quickly.
Being proactive and initiating actions to optimize your processes can increase value for your business and customers. It's an excellent way to implement measurements and allow you to track progress and document each success. Here are some of the best KPIs for measuring the performance of an eCommerce business in your operations, finance, sales and marketing departments:
Having a customer order a product and having it arrive late can hurt their impression of your company. To ensure this process is streamlined, it can help to implement and track these eCommerce KPI metrics:
- Inventory turnover: Examining the inventory turnover in your business and how it links to your supply chain is directly correlated to your ability to produce sales. Taking a deep dive into this KPI can be done by measuring each area of the process.
- Receiving: Making sure you've got enough inventory stocked on the shelves ensures products are always available. Tracking your incoming inventory from a supplier lets you know if there are any delays. It can also indicate if you've got too much product and stock.
- Storage and processing: How long does it take for an order to be picked and processed? Having your inventory organized and a method in place for packing each box can speed this up.
- Shipping: Getting your orders shipped quickly involves how they are delivered to a carrier, and the type of carrier you use. Tracking for this eCommerce KPI can be measured to determine if one carrier is better than another.
Sales and Marketing
Setting up eCommerce KPI metrics for factors in your marketing and sales department makes it possible to track a number of areas and improve regularly.
- Organic search rankings: Having your online store rank high in the search engine results pages of popular search engines can build brand awareness. It should also provide a better opportunity to match the products you sell with targeted customers. Measuring your success with specific keywords by keeping track of them with an eCommerce scorecard can significantly improve this area.
- Cart abandonment rate: Every time a customer abandons their cart, it's a lost sale. Having customers complete a transaction can be done by tweaking your sales page, layout, marketing, and promotions. Dividing your completed transactions by the total number of shopping carts created and multiplying this figure by 100 can give you this statistic. Knowing the stats in your industry can help you understand the average abandonment rate. If your numbers are too high, it may be due to 404 errors, payment processing problems, or high shipping costs.
- Conversion rate: This metric offers a big-picture look at your total conversion rate. Knowing the average rate for your industry will give you a target to beat. Looking at your data and examining the amount of traffic and click-throughs on each page may reveal elements that can be improved. This might include changing a call to action or writing better descriptions.
- Bounce rate: Measuring the percentage of visitors to your site who don't go to any other pages measures your bounce rate. Tracking where the traffic is originating, such as social media platforms, direct links, or newsletters, should be noted. It's also helpful to understand the average bounce rate for your industry.
- Customer refunds: Credit card chargebacks, exchanges, and refunds can take time to handle and reduce your bottom line. Tracking this eCommerce KPI and knowing the average for your industry can help you see if you're selling a substandard product.
- Customer satisfaction: Creating happy customers equals more sales. A satisfied customer is more likely to come back to your store and make another purchase. You can measure this KPI and create an eCommerce scorecard by asking each customer to review your customer service.
- Net profit: Ensuring your revenue is higher than your expenses should help show if you're staying on track with specific financial goals. Accounting basics play a key role in this element. Having access to current figures provides you with an eCommerce KPI you can track and monitor regularly.
- Customer lifetime value: This is one of the best KPIs for measuring the performance of an eCommerce business that's more established. It examines the average net profit that can possibly be generated by one customer. Understanding what each customer is worth to your business may help make it more straightforward for you to know how much you can spend on advertising per customer.
- Negotiate with suppliers: Paying full price upfront for supplies can hinder your cash flow. Negotiating for partial payments by discussing your terms of sale can make it more affordable to keep your products in stock. Contacting different suppliers that offer the same products may offer better terms or prices.
- Offer discounts: Incorporating eCommerce KPI metrics for discounts can help increase sales. Implementing discounts by taking off a specific percentage or dollar value should be measured to see if the strategy results in enough sales to offset any cuts given. You can also try incorporating a "buy one, get one free" discount, free gift, or free shipping.
- Average order value: Knowing how much money you're making on each order is critical to track. If you can get customers to buy another product, it can bump up this average and increase your revenue in the long-term. Exploring ways to cross-sell and upsell other products can help influence a customer to purchase a related product. Looking for trends and exploring cross-selling and upselling can help you find a sweet spot to increase sales.
Implementing and utilizing some of the best KPIs for measuring the performance of an eCommerce business should help make it easier to hone your strategies and create better results. Having transparent measurements should allow your team to focus on accomplishing your goals. Using the right scorecard metrics offers you a way to improve each process and make better decisions.
Here at Fusion CPA, we regularly work with these types of metrics.
We would be happy to assist you in exploring how they can be utilized in your company.
Contact us today to get started.