Updated on May 21, 2021
KPI meaning in retail: An eCommerce marketing Key Performance Indicator (KPI) is a metric that marketing teams use to determine the success of their online retail marketing activities.
Say an athlete is training for a marathon race. To win the gold medal, what prime factors would he concentrate on? In my opinion, that would be stamina and record time for the track event.
And in the marketing world, these prime factors are what we call the Key Performance Indicators (KPI).
Now let’s draw an analogy to understand this better. Let’s assume that for online merchants, their marketing goals would be to generate highly qualified leads. And using these marketing and sales KPIs, they would be able to deduce whether they've reached or fallen short of their target.
It’s that simple. Let’s now look at the top eCommerce retail KPIs list in this post, excluding all vanity metrics, to help you garner actionable insights and make strategic decisions.
List of the 19 eCommerce Marketing Key Performance Indicators (KPIs)
1. eCommerce Site Traffic
What is eCommerce site traffic?
One of the best KPIs, your eCommerce website traffic refers to the total number of people who land on your site.
Why is eCommerce site traffic an important marketing KPI?
This is an important marketing KPI because the more people see your site on search results, the more likely they’ll visit you. That, in turn, translates into opportunities for your online business.
What is good eCommerce site traffic?
It differs depending on your niche. But if you are getting anything above 1000, that’s a good website traffic number.
How to measure eCommerce site traffic?
Set up Google Analytics for your eCommerce site to track the site traffic.
2. Average Session on eCommerce Website
What is the average session duration on an eCommerce website?
Another of the retail key performance indicators examples - the average session time refers to the average period of time that an average visitor spends on your eCommerce site during a single visit.
Why is eCommerce site traffic an important marketing KPI?
The average time spent on your site tells you how helpful the content was to your website visitor and helps you understand if the customer experience was good or meh.
If the session duration is low, it means something is amiss with your eCommerce website. Either it does not show relevant content, or renders a poor user experience, or has other factors that cause your visitors to jump to an alternate search result.
So, by tracking this eCommerce marketing KPI, you would know what changes to implement on your site to better engage your visitor.
What is a good average session time?
The industry standard for a good average session rate is two to three minutes.
How to measure the average session time?
Average session time = Total session duration / Total number of sessions
3. Page Views per Session
What is the page view per session on an eCommerce website?
The page views per session denote the average number of eCommerce website pages that a visitor views in a visit.
Why is the page view per session an important marketing KPI?
A high number of page views per session could mean two things: Either your eCommerce site is valuable, or your visitors are having a hard time being unable to find what they’re looking for.
What is a good page view per session?
The benchmark would be anything above 4.4 page views per session. And the average number of page views per session is 2.8 (Littledata).
How to measure the page views per session?
Pageviews per session = Total no. of pageviews / Total no. of visitors
4. Bounce Rate
What is the bounce rate on an eCommerce website?
The bounce rate is an eCommerce marketing KPI that tells you the number of visitors who left your site after viewing only one page.
Why is the bounce rate an important marketing KPI?
The bounce rate is a tell-tale sign of how relevant you are to your visitors’ search intent. For instance, let’s say that a user searches for cheap raincoats. And let’s say that your website pops up on the search results so that the user also clicks. But after landing on the page, if he does not find what he wants, he would abandon it and look into an alternate search result. And if this happens with most of your website visitors, then your bounce rate will be high. You would then need to take serious steps to lower the bounce rate.
What is a good bounce rate?
Always try to keep the bounce rate as low as possible. A general and ideal approach is to keep the bounce rate below 40%.
How to measure the bounce rate?
Bounce rate = Total no. of single-page visits / Total no. of website entries
5. Average CTR
What is the average CTR on an eCommerce website?
The average click-through rate (CTR) is a KPI that illustrates how well your title tags and/or meta descriptions are generating clicks to drive traffic to your eCommerce site.
Why is the average CTR an important marketing KPI?
A high number of page views per session could mean two things: Either your eCommerce site is valuable, or your visitors are having a hard time being unable to find what they’re looking for.
What is a good CTR?
On average, a search result on the number one position yields a CTR of 31.7%. Since it’s the highest rankings that get the maximum CTR, you can hold this as your benchmark.
How to measure the average CTR?
Click-through-rate = Total no. of clicks that an ad receives / Total no. of impressions
6. Pay-Per-Click (PPC)
What is PPC?
The pay-per-click (PPC) is a marketing KPI that shows how much you're spending every time a user clicks on your ads. Note that the PPC can also be referred to as the cost-per-click (CPC). And you can use it to measure the investments that go into both Google ads and social media ads.
Why is PPC an important marketing KPI?
Measuring your PPC can render you extreme levels of control. With this insight, you can boost the ad spend for queries, geographies, and demographics that work and reduce the advertising spend on those that don’t work. This will help you get a better return-on-ad-spend (ROAS).
How much is the average PPC?
To advertise on the Google search network, you might have to pay about $1 to $2 per click.
How to measure the PPC?
Pay-per-click = Total advertising cost / Total no. of ads clicked
7. Cost Per Conversion (CPC)
What is CPC?
The cost-per-conversion (CPC) is a marketing KPI that shows the investment you need to make in turning an eCommerce website visitor into a customer.
Why is the CPC an important marketing KPI?
Just like PPC, the KPI conversion also gives you the measure of expenditure in online marketing. So if you are paying too much on a single ad but aren’t generating enough benefits, you have to either improve your ad's quality or revamp your marketing strategy.
How much is the average CPC?
Research shows that retailers and general store businesses invest $44.38 for Google Ad search CPC.
How to measure the CPC?
Cost per click = Total cost of generating the traffic / Total no. of conversions
8. Conversion Rate
What is the conversion rate?
The conversion rate is one of the important eCommerce metrics which is defined as the percentage of visitors who convert for a specific pre-defined goal.
Why is the conversion rate an important marketing KPI?
The conversion rate tells marketers how effective the marketing campaign is, so don't take conversion rate optimization lightly. For instance, an eCommerce business might run a campaign to boost the purchase. Then, measuring the conversion rate can help the retailer understand how many people converted, that is, executed the advertising campaign goal, which is a purchase here.
What is the average conversion rate?
Anything above 10% is a good conversion rate, and some businesses can even earn up to an average of 11.45% conversions (Wordstream).
How to measure the conversion rate?
Conversion rate = (conversions / total visitors) * 100%
9. Customer Lifetime Value (CLTV)
What is a customer lifetime value?
The customer lifetime value is referred to as the money that a customer brings to your eCommerce business throughout their entire business cycle as a paying customer.
Why is CLTV an important marketing KPI?
The CLTV is a vital metric in eCommerce marketing since it captures the overall health of an eCommerce business. The average order value, conversion rates, and return customer rates are all reflected in CLTV. (Unofficial Shopify Podcast)
What is a good CLTV?
Ideally, a CLTV to customer acquisition cost ratio of three or higher is considered healthy.
How to measure the CLTV?
CLTV = Purchase Frequency x Average Order Value x Average Customer Lifespan
This is the simplest formula to measure the customer lifetime value. You can learn more on how to calculate the customer lifetime value here.
10. Customer Retention Rate (CRR)
What is the customer retention rate?
The customer retention rate is the measure of the number of customers an eCommerce business retains over a given timeframe.
Why is the customer retention rate an important marketing KPI?
Since the customer retention rate directly impacts the recurring revenue, customer satisfaction levels, and the growth of the business, you must measure the customer retention rate. Read this checklist to increase your customer retention rate.
What is a good customer retention rate?
The average retention rate in the retail industry is 63% (Statista).
How to measure customer retention rate?
Customer retention rate = [(No. of customers at the end of the period - No. of customers acquired during the period)/No. of customers at the start of the period] x 100
11. Average Order Value (AOV)
What is an average order value?
The average order value gives the average amount spent each time a customer places an order on the eCommerce store.
Why is the average order value an important marketing KPI?
Since the AOV is directly linked to business growth, eCommerce businesses must measure the AOV. This can help retailers tweak their marketing strategy to thereby increase the average order value.
What is a good average order value?
A combined study from ten different research, suggests that the average order value is $128.
How to measure the average order value?
Average order value = Total revenue / Total no. of orders
12. Organic Search Rankings
What is the organic search ranking?
The organic search ranking refers to your eCommerce website's position on search engines like Google, Bing, Yahoo.
Why is the organic search ranking an important marketing KPI?
The organic search ranking directly correlates with Search Engine Optimization (SEO) success. The higher the ranking, the better the traffic, leads, and conversions in any channel.
What is a good organic search ranking?
Getting to the top three positions on the search engine result pages is great. However, other positions on the first page are also fine. Should you be buried on the second page and beyond, it’s a tell-tale that you need to enhance your SEO activities. So, optimize your product listings for SEO. This can help in on-page SEO.
As far as off-page SEO is concerned, you'd have to monitor your product reviews. These customer reviews serve as social proof of your product quality - whether they are good or bad. Since poor product reviews can indirectly impact your rankings, it's best to take hold of the responses from your current customers and turn their bitter shopping experience into a better one.
How to measure the organic search rankings?
Set up Google Analytics and Search Console for your eCommerce website to track your position and traffic source. For further understanding do read this documentation from Google.
13. Net Profit
What is the net profit?
Your eCommerce business’s net profit, also called net income, gives an insight into the financial standing of your business after you have paid all the expenses from the total revenue.
Why is net profit an important marketing KPI?
The net profit KPI shows you how effective your business is at generating profit on each dollar of revenue you bag. Measuring this KPI can help you in making tangible long- and short-term financial decisions.
What is a good net profit?
As far as the retail industry is concerned, a good net profit margin for retail can be anywhere between 0.5% to 4.5% (Investopedia).
How to measure the net profit?
Net profit = Total revenue in a time period - Total expenses in a time period
14. Cost Per Acquisition (CPA)
What is the cost per acquisition?
The cost per acquisition is a metric that lays out the aggregate cost to acquire one paying customer to your eCommerce store.
Why is the cost per acquisition an important marketing KPI?
No other metric tells you the success of your return on investment like that of CPA.
What is a good cost per acquisition?
The CPA benchmarks vary greatly by industry. However, across search, it is $59.18 and may even go up to $60.76.
How to measure the cost per acquisition?
Cost per acquisition = Total cost in running a customer acquisition campaign / No. of new customers acquired through the same campaign
15. Add to Cart Rate
What is the add-to-cart rate?
The add-to-cart rate is a crucial eCommerce marketing KPI and it gives the percentage of visitors who place at least one product in their cart during a session.
Why is the add-to-cart rate an important marketing KPI?
Tracking the add-to-cart rate can tell you about the success of your site selection, product selection, and marketing efforts.
What is a good add-to-cart rate?
According to Databox, the average add-to-cart rate is 3% to 4%.
How to measure the add-to-cart rate?
Add to cart rate = No. of sessions with an add to cart event / Total no of sessions
16. Cart Abandonment Rate
What is the cart abandonment rate?
The cart abandonment rate depicts the percentage of online shoppers who add items to their cart and then abandon it before purchasing.
Why is the shopping cart abandonment rate an important marketing KPI?
Measuring the shopping cart abandonment rate can help you understand how many customers are poised to buy your products and are interested in them but unfortunately fail to convert,
What is the average cart abandonment rate?
According to the Baymard Institute, the average cart abandonment rate is just under 70%.
How to measure the abandonment rate percentage?
Cart abandonment rate = Total no. of completed transactions / Number of initiated sales
17. Churn Rate
What is the churn rate?
The churn rate, one of the retail KPI metrics, defines the event when customers stop doing business with an entity completely. It is also referred to as the rate of attrition.
Why is the churn rate an important marketing KPI?
Churn is an important KPI to measure for it tells you the percentage of customers you have lost from your customer base. The greater the numbers are, the greater would be your customer acquisition costs.
What is an acceptable churn rate?
Annually, the acceptable churn rate is between 5% to 7%. And the involuntary churn rate is about 1.8% which is approximately 20% to 40% of the average 5% to 7% churn rate.
How to measure the churn rate?
Churn Rate = Customers Lost During the Period / Customers at the start of the Period
18. Cost of Goods Sold
What is the cost of goods sold?
The cost of goods sold points to the direct costs incurred in the production of goods sold by an eCommerce shop. This amount includes both the labor cost as well as the material cost used to create the goods. However, it excludes indirect expenses such as the sales force costs and the distribution costs.
Why is the cost of goods sold an important marketing KPI?
The cost of goods sold is one of the KPIs for eCommerce that tracks the actual profit margin on your eCommerce products. By deducing it, you can figure out the markup percentage for your products. This will help you win the pricing war with your competition.
What is the industry average cost of goods sold?
The cost of goods sold can lie anywhere between 28% to 32% of revenue. This mainly differs by the size of your eCommerce business and the value of the items sold.
How to measure the cost of goods sold?
Cost of goods sold = Beginning Inventory + Received Inventory - Ending Inventory
19. Cost Per Impression (CPM)
What is the cost per impression?
The cost per impression is used to calculate the cost that you have to pay when your ad is shown per one thousand impressions.
Why is the cost per impression an important marketing KPI?
The CPM is an important metric for identifying other calculations for search advertising such as cost per click and click-through rate.
How much is the average cost per impression?
On Facebook Ads, the typical CPM is around $10 while for Instagram, it is closer to $5 (Wordstream).
How to measure the cost per impression?
Cost per impression = Total marketing spend / No. of impressions
Create Your eCommerce Marketing KPIs and Act Upon Your Insights!
Through this post, I have relayed the importance of KPIs. To select your customer KPIs for eCommerce, you need to first clearly state your goals and understand which areas of your eCommerce business are impacted by them. Note that the key eCommerce metrics would differ for each of your goals - depending on whether they are related to marketing, sales, or customer service.
So, let me give you an example to help you create your eCommerce marketing KPIs. Let’s say that you want to grow your eCommerce site traffic by 30% in the next quarter. Then, here are the key metrics you’ll want to track and measure.
- eCommerce site traffic
- Average CTR
- Bounce rate
For eCommerce companies in need of a CRM to track all these metrics and streamline this process in a central platform, they could try Ingage. That is an AI-driven CRM meant exclusively for online retailers and brick-and-mortar retailers.
As an eCommerce marketer, I hope you garnered valuable insights into the eCommerce performance metrics. If you were wondering what is the best way to measure a company's e-business success, I'm sure you'd wonder no more. Do work this business KPI list out for running a successful eCommerce business!
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