10 Critical E-Commerce KPIs to Track Performance (Explained)

For every online business owner, the only desirable trajectory is upward. However, not every entrepreneur understands what drives an e-commerce business to success.

While many factors affect how a business performs, understanding e-commerce KPIs can mean the difference between going big and going bust.

What are e-commerce KPIs? How do you pinpoint which ones are essential for your business? How do you use them to ensure growth?

We’ll discuss all of that in this article.

TL;DR -Top 10 E-Commerce KPIs

You can look at countless KPIs to monitor and manage your store’s performance, but you don’t need them all.

Here are the top 10 e-commerce KPIs to help you assess your business:

1. Gross Profit Margin
2. Net Profit Margin
3. Average Order Value (AOV)
4. Conversion Rate
5. Customer Lifetime Value
6. Retention Rate
7. Customer Acquisition Cost (CAC)
8. Traffic Volume and Sources
9. Return on Ad Spend (ROAS)
10. Cost of Goods Sold (COGS)

These are some of the most widely used KPIs for e-commerce, but not all are suited for your store. Wondering which ones are appropriate for your business? Head on to the full article, where we explain each of these KPIs in detail.

Note that accurate bookkeeping is essential for data collection. This data is important for KPIs, such as profit margin and sales. However, if you do your books manually, you may end up with many errors and inconsistencies. It’s also time-consuming.

But you don’t have to worry about all that.

Sign up for a free trial with Link My Books for hassle-free, automated accounting. You can connect your e-commerce accounting software with Link My Books, automatically generate all your accounting reports, and do more within minutes!

What Are E-Commerce KPIs?

E-commerce KPIs are specific metrics that measure an online business’s performance based on its objectives and goals.

Why are KPIs Important?

KPIs are actionable and measurable metrics that provide insights into the health of a business.

They are crucial if you want to grow because they help you set the course of your business, track your progress, and determine the areas where you need to improve.

Moreover, because KPIs are quantifiable and objective, they eliminate the guesswork from your strategies and help ensure they are data-driven.

What is the Difference Between Metrics and KPIs?

• Metrics are quantifiable indicators of the performance of specific aspects of a business. 
• KPIs are metrics that have been identified as indicators of a business's performance in light of its objectives and goals.

When assessing your online store, you’ll want to choose critical KPIs that give insight into how key business areas are performing, depending on your campaign goals.

What is KPI Tracking?

KPI tracking is the process of monitoring KPIs that are aligned with your objectives. It involves capturing data and analyzing results to determine the health of your business or drive it in a specific direction.

Types of Key Performance Indicators

There are five key types of KPIs:

• Profit margin
  ‍
• Sales-related
  ‍
• Customer-centric
  ‍
• Marketing and acquisition
  ‍
• Pricing

While all of these KPI categories help assess an e-commerce store, you don’t have to look at all of them. In fact, you shouldn’t, or you’ll waste time and resources.

The most effective way to use KPIs is to select categories that align with your objectives and analyze only those.

Doing so ensures that your data targets a specific result and provides insights into your business's trajectory.

Top 10 KPIs For E-Commerce Companies Across Categories

Let’s discuss the top 10 KPIs for e-commerce business below:

Profit Margin KPIs

These KPIs provide important insights into how financially sound your company is based on its revenue and profit. 

These KPIs are usually a mainstay when assessing online stores because e-commerce businesses are highly concerned with improving profit.

Note that you’ll need to analyze your accounting books when examining these KPIs. Ensure your e-commerce accounting records are organized and up-to-date to obtain accurate data.

Book a free demo with Link My Books to see how you can shift to a fully automated bookkeeping system today.

1. Gross Profit Margin

The gross profit margin KPI measures how much income your company generates, less the cost of goods sold.

Formula:

Gross Profit Margin = (Revenue - Cost of goods sold) / Revenue X 100

2. Net Profit Margin

The net profit margin measures your total profit after subtracting the cost of goods sold, all expenses, and taxes.

This should give you an accurate picture of profitability and cash flow, and determine whether the cost of operating an online store is under control.

Formula:

Net Profit Margin = Net profit / Total revenue X 100

Sales KPIs

The following KPIs provide a sneak peek into your sales figures for online stores on platforms like TikTok and Walmart.

Typically evaluated with profit-related KPIs, these metrics are helpful for businesses that want to determine how their campaigns impact their bottom line.

3. Average Order Value (AOV)

The average order value (AOV) is the average amount each customer purchases from your store. Besides helping track sales movements, this metric is also useful for making sales forecasts, evaluating customer behavior, and managing your inventory.

Formula:

AOV = Total revenue / Total number of orders x 100

4. Conversion Rate

Conversion rate measures the number of visitors who turn into actual customers. It can also tell you how effective your marketing efforts are at converting your audience.

Formula:

Conversion Rate = Total number of conversions / Total visitors x 100

Customer-Centric KPIs

For insights into your existing customer base, you should look at the following KPIs:

5. Customer Lifetime Value (CLV)

Customer lifetime value measures the total value you gain from each customer for the entire duration of their relationship with your business.

A high CLV indicates that you’re effective at retaining your customers and have gained their trust and loyalty.

Formula:

CLV = Customer value x Customer lifespan

6. Retention Rate

Closely related to CLV, retention rate looks at how much of your customer base remains loyal to your company over a specific period.

The higher your retention rate, the better your customer relationships will be, and the higher the potential value you can get from each customer.

Formula:

Retention Rate = Ending number of customers / Starting number of customers x 100

Marketing and Acquisition KPIs

If you’re trying to evaluate your marketing efforts to gain new customers, the following KPIs will help:

7. Customer Acquisition Cost (CAC)

CAC measures the total amount you spend to acquire new customers. 

This is a good KPI to evaluate if you need to justify your marketing spend or evaluate whether the number of new customers gained is worth your marketing budget.

Formula:

CAC = Total number of new customers / Total marketing spend

8. Traffic Volume and Sources

The amount of traffic driven to your website is an important KPI for an e-commerce business. Your website is your storefront, and you need people to visit it to make a sale.

Traffic volume looks at the number of website visits over a specific period. The higher the volume, the greater the potential for conversion. However, you shouldn’t stop there.

Where those visits come from matters, too. Evaluating traffic sources helps you identify which audience segments you have effectively reached and which need more work.

It also shows how platforms like social media drive visits to your site.

Pricing KPIs

When you want to assess whether your pricing is competitive enough or if it’s worth your overhead costs, the following KPIs should be on top of your list of metrics:

9. Return on Ad Spend (ROAS)

Marketing campaigns don’t come cheap, and you’ll want to squeeze as much profit as possible from every dollar spent. 

Return on ad spend will help you evaluate your marketing spending, explicitly focusing on paid ads.

Formula:

ROAS = Income attributable to ads / Total cost of ads x 100

10. Cost of Goods Sold (COGS)

The total amount spent on goods sold is one of the most basic KPIs for evaluating profitability. Still, it can also be used to assess pricing.

It will help you determine whether your current prices match your overhead costs so you generate a reasonable profit.

Formula:

COGS = (Starting inventory + Purchases made at the start of the year) - Ending inventory

How Often Should I Check My E-Commerce Metrics?

How often you check and analyze your metrics depends on your goals and the KPIs you’re looking at. Some metrics need weekly checking, while others would be inappropriate to monitor so often.

Here are some guidelines on what KPIs to check and when:

1. Weekly

Metrics prone to frequent rises and dips require more regular checking. These are KPIs related to engagement, conversion, and traffic.

Checking these daily might be too much work. Also, since the numbers change so often, you may not get a clear picture of your store’s performance if you monitor them too often.

Checking these KPIs weekly will help you make adjustments as soon as you notice areas you can optimize.

2. Bi-weekly

KPIs that need more time to reveal helpful insights benefit from bi-weekly checks.

These are metrics like average order value and customer acquisition cost.

3. Monthly

You should monitor customer-related KPIs (such as buyer behavior, customer acquisition and retention, and feedback) monthly. 

These metrics tend to be erratic, so analyzing them weekly or bi-weekly may not give you the whole picture. 

By the end of a month, you’ll have gained a better perspective, allowing you to draw better insights.

4. Quarterly

Quarterly monitoring is best done to assess the overall performance of your campaigns.

You should be able to gather enough data to determine whether your marketing efforts and budget (among other things) produce the intended results.

By this time, you will see patterns emerge, which you can use to identify your business’s strengths, weaknesses, and opportunities.

What Are E-Commerce KPI Benchmarks?

KPI benchmarking is the process of comparing performance results with averages gathered from similar businesses.

E-commerce KPI benchmarks are standard performance indicators that relate specifically to the e-commerce industry.

For example, a standard conversion rate benchmark for e-commerce websites is approximately 2-3%.

How to Choose Which E-Commerce KPIs to Track

Not all KPIs are created equal. While all may provide insights into your business, not all are critical to managing your store’s performance or are worth the time and resources.

To choose which metrics are critical, go back to your pre-established goals. Pick KPIs relevant to your objectives or those that give insight into areas of business you want to evaluate.

For instance, if you want to assess the effectiveness of your store’s profitability, crucial KPIs include:

• Net profit margin
  ‍
• Average order value
  ‍
• Conversion rate

Frequently Asked Questions (FAQs)

Learn more about e-commerce KPIs in the commonly asked questions below:

​What is the Best Tool for Tracking E-commerce KPIs?

The leading tool for e-commerce KPI tracking is Google Analytics. It monitors various metrics, including sales figures, average order value, and web traffic volume and sources.

E-commerce platforms like Shopify also come with reporting dashboards that enable you to track metrics like sales.

If you’re using Shopify, we can help you automate your bookkeeping system and instantly generate reports. Try syncing Shopify with Xero or Quickbooks to see it in action.

What is the Difference Between Leading and Lagging Indicators?

• Leading indicators are metrics that help you forecast trends. These allow you to be proactive in finding ways to improve business performance.
  ‍
• Lagging indicators are metrics that look at historical performance. They are useful for benchmarking results and implementing data-driven strategies.

Both are helpful and important for providing a complete picture of an e-commerce business’s health and performance. 

Conclusion

E-commerce KPIs ensure you can monitor your store’s performance, drive more sales, and promote growth.

Also, while all KPIs are helpful, you must look at only a few to evaluate your business effectively. Understanding which ones to monitor is already half the battle.

Ready to scale your business? We hope our guide has helped you identify critical KPIs and track your progress!

But wait. Make sure your bookkeeping system is streamlined and up-to-date to gather accurate KPI data. Remember that precise bookkeeping is crucial for data collection.

Register now for a free trial with Link My Books. We provide fully automated, no-fuss bookkeeping at your fingertips!