Dear ecommerce manager, if you find yourself limited to monitoring only a few daily indicators such as ROAS, average order value (AOV), CPC, and conversion rate, know that you’re missing out on a significant amount of valuable information, which can negatively impact the performance and profitability of your business in the short, medium, and long term.
In today’s highly competitive market, every click, conversion, and interaction are key pieces that primarily reveal consumer behavior, their preferences for your products, and their purchasing trends. As an ecommerce manager, your main goal is to ensure an effective connection between your customer’s specific demand to your products. That’s “market product fit”!
If you’re new here, we’ve published an even more in-depth and detailed article on Ecommerce Analytics with our methodology 100% translated to KPIs and metrics that are easy to interpret. I suggest that after this reading, you delve deeper into the subject in our article.
For digital entrepreneurs, understanding the driving factors of success goes beyond a simple competitive advantage, it’s a vital necessity for business survival. Therefore, delving deeply into the right KPIs is essential to optimize all aspects of your online store and lead it to success consistently and predictably. And saving a lot of your time to other daily tasks.
In this article, we will explore the 21 essential Key Performance Indicators (KPIs) that every ecommerce manager should monitor today. We’ll uncover the meaning behind these metrics, discuss how to interpret them correctly, and, most importantly, explore how to apply them to boost the growth of your ecommerce business.
What’s The Meaning Of Metrics And Kpis For Ecommerce Managers?
Have you ever wondered what the true foundations of success in ecommerce are?
Imagine having at your fingertips a detailed map that reveals the secrets of sustainable growth for an online store, with all the shortcuts, dangers, and alerts highlighted.
That’s exactly what metrics and KPIs are for: to guide you along the path toward success.
Get ready to unravel the mysteries behind the 21 most important metrics that shape the destiny of any online businesses today. If you’re ready to reach new heights of success, this journey is for you.
How Do You Analyze An Ecommerce Business?
As mentioned in our latest content, an ecommerce, like any other venture, is influenced by a series of variables. To start an effective analysis process, it’s crucial to divide the KPIs into different “pillars” or groups, as we always emphasize.
We usually divide ecommerce performance KPIs into four main groups (or pillars):
- Profitability and Financial KPIs.
- Inventory KPIs.
- Customer Cohorts KPIs.
- Sales and Marketing Channels KPIs.
Financial KPIs for Ecommerce
To define our financial KPIs for an ecommerce, it’s crucial to first determine what we need them to tell us, what information we require. From there, we can begin collecting the data.
Among the financial KPIs that we consider essential for any ecommerce manager, we highlight:
- Variable Costs and Fixed Expenses: Keeping a close eye on variable costs and fixed expenses is fundamental to maintaining cash flow control and understanding their impact on your store’s results. It’s also important to calculate the proportion these expenses and costs represent in total gross revenue.
- Contribution Margin: The contribution margin is responsible for covering all of your business expenses, so monitoring this indicator and constantly seeking ways to increase it without raising costs is crucial. Gradually increasing the gross margin of key products and reducing production costs are highly effective strategies.
- Contribution Margin to Fixed Expenses Ratio: Tracking the difference between the contribution margin and fixed expenses provides a clear view of the business’s ability to cover operational costs. Monitoring this over time, helps identify positive and negative trends.
- Fixed Expenses Grouping: Grouping fixed expenses facilitates the analysis of this essential KPI, allowing you to identify areas for cuts and improvements. Comparing the percentage that each expense group represents in the overall gross revenue further enhances the analysis.
- Investment Efficiency: Although it may seem like a marketing metric, minimum ROI (or ROAS) gives you the goals of marketing and sales efforts to generate positive returns. Each sales or marketing channel that requires investment should present a minimum ROI for the operation.
- Net Profit: Ultimately, the goal of the business is to generate profit for owners and shareholders. Keeping a close eye on net profit is crucial as it demonstrates the efficiency of the business in generating returns for stakeholders. Reinvesting profits is cheaper for growth than using loans or investors money.
The Impact of Financial KPIs On Your Ecommerce
Financial KPIs should demonstrate your ecommerce’s ability to meet its financial obligations and generate satisfactory returns for the owners. Additionally, the longer the time frame of past data analysis, the more clearly future steps can be predicted.
How often to analyze financial KPIs for ecommerce?
Ideally, financial KPIs should be analyzed once to twice a month for results closing and planning the next month.
Inventory KPIs for ecommerces
Inventory KPIs are often tracked by the financial sector of companies, but it’s helpful to analyze them separately from financial KPIs. This allows for a deeper analysis, combining financial interest in higher returns and efficiency with marketing intelligence focused on real demand and consumption trends.
Among the inventory KPIs for ecommerce, we highlight:
- Revenue by Category or Product Groups: Calculates the total revenue generated by each category or groups of similar products to gain a macro view and identify demand. Compare these data with previous periods in the same year and the previous year to more clearly identify trends.
- Revenue by Product: Calculates the total revenue generated by each individual product and compares it with previous periods to identify growth or decline in results. Always use monthly, quarterly, six-month-period analysis windows to mitigate any short-term trends.
- Share of Total Ecommerce Revenue: Identifies the proportion of revenue that each product contributes to your ecommerce overall results, allowing you to know which products are most important and which are irrelevant to your results. Having lean and efficient inventory should be your main objective.
- Profit Margin per Product: Analyzes the profit margin generated by each product, considering production/manufacturing and variable costs. This allows you to identify the most profitable products and potentially adjust pricing strategies.
- Inventory Turnover: Evaluates how quickly products are sold and replaced in inventory, providing insights into demand and areas of inventory management efficiency.
- Excess or Obsolete Products: Identifies products that take up space in inventory and do not significantly contribute to the overall revenue. Liquidating these products can generate cash and optimize inventory space.
- Days Remaining in Stock: Assesses the number of days the current inventory will last, allowing for more efficient replenishment management. This KPI is particularly essential for “hit products” that already have consolidated demand.
- Average Order Value (AOV) per SKU: Analyzes the average amount spent by customers on each individual product, helping you to identify complementary products and opportunities to increase AOV through bundling, upselling, and cross-selling strategies.
The Impact of Inventory KPIs On Your Ecommerce
The inventory KPIs aim to demonstrate the demand for your products, as well as provide a strategic view of resource management in purchasing goods. They help identify which products deserve more attention and efforts to maximize operational efficiency.
How often to analyze inventory KPIs for ecommerce?
Except for daily or weekly inventory turnover control, the remaining KPIs should be analyzed monthly and quarterly to identify trends and make strategic decisions.
Customer Cohorts KPIs For Ecommerces
One of the most popular marketing strategies is to create your “persona” or ideal customer profile. For businesses in the launching phase, this makes sense, but if your ecommerce has been in the market for at least a year, you already know who your ICP is. It’s in your data.
Among the KPIs we analyze to understand the ecommerce target audience are:
- New Customer Acquisition Rate: Indicates the effectiveness of your strategies for acquiring new customers.
- Customer Retention Rate: Identifies the percentage of customers who return to make new purchases.
- Geographic Distribution of Customers: Identifies the proportion of customers in different geographical regions, providing insights into expansion opportunities and market segmentation.
- Total Revenue by Region: Analyzes the revenue generated in each geographical region to identify areas with the highest growth potential, allowing you to adapt marketing and distribution strategies as needed.
- ROAS (Return on Advertising Spend) by Region: Evaluates the return on advertising investment by region, helping to identify the most profitable and effective areas to direct marketing efforts.
- Average Order Value of New and Recurring Customers: Calculates the average amount spent by customers in each transaction, differentiating between new and recurring customers helps you to understand purchasing patterns and customer behavior over time.
- Acquisition Channel Segmentation: Assesses the effectiveness of different marketing channels in acquiring new customers, allowing adjustments to acquisition strategies and investments based on the performance of each channel.
The Impact of Customer Cohort KPIs On Your Ecommerce
The KPIs for customer cohort analysis provide you essential information to understand who your ideal customers are, where they are located, and what they prefer to buy. This allows for adjustments to marketing and sales strategies to meet the needs and preferences of customers, thereby maximizing the success of your business.
How Often To Analyze Customer Cohorts Kpis
These data can be analyzed once or twice a year, especially during strategic planning, as they directly influence the ecommerce’s offerings, marketing, and sales strategies.
Sales and Marketing Channels KPIs For Ecommerce
If you’re an experienced ecommerce manager, you probably already have a customized KPI dashboard to track sales and marketing channels. However, it’s always useful to review and adjust these indicators as needed.
- Revenue by Channel: Calculates the revenue generated by each individual sales channel, allowing you to identify the most profitable and effective channels for further investments.
- Customer Acquisition Cost per Channel: Evaluates the average cost of acquiring a new customer in each sales channel, helping you to optimize investments in marketing and advertising.
- Net Return per Channel: Calculates the net financial return of each sales channel, subtracting customer acquisition costs from the revenue generated by the channel.
- Channel’s Share in Total Business Revenue: Identifies the contribution of each sales channel to the total revenue of the business, allowing prioritization of the most profitable and strategic channels.
- Return on Investment per Marketing Channel: Analyzes the financial return in relation to the investment made in each marketing channel, helping you to evaluate the effectiveness of marketing and advertising strategies.
- Net Revenue per Marketing Channel: Calculates the net revenue of each marketing channel, taking into account variable costs and customer acquisition costs, providing insights into the real profitability of each channel.
The Impact of Marketing and Sales Channels KPIs On Your Ecommerce
Your main goal as an ecommerce manager is to grow your business efficiently, meaning, maximizing returns on your investments and reducing unnecessary expenses and costs. As we know, marketing and sales are one of the main profitability drains for ecommerces, so these KPIs are of great importance.
These indicators help you optimize marketing and sales strategies to achieve better results.
How Often To Analyze Marketing And Sales Channels Kpis
Ideally, this data should be analyzed on a weekly and monthly basis to identify trends and make quick decisions in case adjustments are needed in marketing and sales strategies.
Final Takeaway On Metrics And KPIs For ECommerces In 2024 And Beyond
In today’s dynamic and ever-growing market, making assertive and quick decisions is what sets your online business apart from the competition. It’s the ultimate competitive advantage.
For this reason, your ecommerce analytics dashboard should not only give you a snapshot of your current business status, but also tell the story of who your ideal customers are, what they want, what your strengths and weaknesses are, and what your roadmap is to achieve your ultimate goal.
Therefore, there’s no more time to focus on superficial KPIs. Your operational efficiency is your superpower.
If you’re looking for a way to automate all of this, check out our SmartSeller app. You connect your Shopify store, provide basic information, and voila! We do the rest for you, and you’ll have a real-time updated dashboard to make faster and better decisions.
See you next time!