Most Important KPIs in ECommerce
There’s no need for businesses in the e-commerce industry to track every single KPI available to them. However, it’s important for companies to figure out which KPIs are relevant to their businesses, and to keep track of them.
Every e-commerce business should be tracking its overall sales on a daily, weekly, monthly, and annual basis. This metric can be tracked in two different ways. The first way is to monitor the number of product units that the business sells, which is sensible for smaller e-commerce businesses that sell a handful of products at a time. However, companies that have hundreds of product units on their websites should track their overall sales in terms of gross revenue. Gross revenue is the total sales revenue of a business over a period of time. In some cases, it makes sense for a company to track both total sales and gross revenue together, such as when a company needs to hit a certain number of sales to qualify for specific discounts from fulfillment centers.
The average order value is the amount that customers spend when they make an order. This is calculated by dividing the company’s total revenue by the total number of orders. It’s best to track the average order value of a business monthly, quarterly, or annually. Generally, the average order value is one of the first metrics that businesses aim to track and increase. By increasing a company’s average order value, companies can increase their revenue while keeping all their sales figures the same or higher. However, businesses shouldn’t take into account the average order value across other industries, and should instead focus on their own average order value, because this number can vary dramatically by industry.
The overall profitability of a business is what net profit means. Essentially, it’s all of the revenue that a company has leftover once it accounts for expenses. Although the meaning of net profit is simple, calculating it can be a bit complicated. Net profit is a great way to measure the health of an e-commerce business. If a business is making a profit, it means it has excellent foundational growth, and that it has the means to invest in other marketing initiatives that will help the company grow more. Net profit metrics can also show companies whether their marketing strategies are generating a good return on investment (ROI). If certain marketing strategies aren’t generating the right results, and it turns out a business is losing money, it needs to readjust its strategies. Businesses should be keeping track of their net profits as frequently as every month.