The ultimate goal of any business is to succeed by growing. You cannot improve on metrics until you don’t measure and track them. This is not a one-time activity, it is an ongoing process.
To gauge your e-commerce business's performance, you require quantifiable metrics known as Key Performance Indicators (KPIs). These KPIs empower you to proactively and efficiently improve your business. In this blog, discover the essence of e-commerce KPIs and the top KPIs to evaluate your e-commerce business performance.
Why should all e-commerce companies measure KPIs?
E-commerce is a game of numbers — more orders or a higher conversion rate translates to additional revenue. The success of a company that sells online is often directly tied to these specific metrics. KPIs allow you to accurately measure a company's e-commerce progress based on performance and make changes as necessary.
Measuring KPIs will help improve the insights you draw from the data, improve performance evaluation, align the goals across the company and solve problems proactively. E-commerce KPIs tend to fall into the following broad categories:
Inventory and Logistics
Customer Happiness
Marketing and Website Performance
Revenue
How to choose the right KPIs?
Businesses can track more data than ever but to create a KPI that is effective and can have a measurable impact on business performance, it must:
Impact bottom-line goals
Be something that can be tracked accurately
Be measured in real-time
Be actionable
1. Inventory and Logistics
1.1 Inventory Holding Costs
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Example
Inventory Holding Cost, also known as carrying cost, encompasses all expenses associated with storing and safeguarding unsold products within a specific period.
It's crucial to track Inventory Holding Costs as they directly impact the company's net margins. Lowering these costs impacts profitability and operational efficiency.
Notify the inventory management team or procurement team when the Inventory Holding Costs exceed a predefined threshold or percentage of the total revenue.
If the costs exceed 10% of the total revenue, trigger an alert to the inventory manager or procurement team to reevaluate inventory management strategies and cost reduction measures such as optimising storage, streamlining the workforce, or revising forecasting methods.
1.2 Inventory Turnover
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Inventory Turnover measures how frequently a company sells and replaces its inventory within a specific period, typically a year.
Tracking Inventory Turnover is crucial as it provides insights into inventory management efficiency. It indicates how quickly inventory is sold and replenished, highlighting potential deadstock or stockout risks.
Notify the inventory management team when the inventory turnover rate falls <2 or exceeds >4. If the rate is <2, it indicates excess deadstock, prompting the need to reevaluate inventory levels. If it is >4, it suggests a risk of stockouts, requiring immediate attention to avoid inventory shortages.
1.3 Backorder
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Example
Backorder Rate quantifies the number of orders a company cannot fulfil when customers attempt to make a purchase. It assesses a company's stocking efficiency, particularly for high-demand items.
Tracking the Backorder Rate is crucial as it indicates how effectively a company manages its inventory. A lower backorder rate implies better inventory management and customer satisfaction.
Send alerts to the procurement team to reorder goods that are selling fast or fall below the reorder point.
If the rate surpasses 5% or experiences a sudden surge, trigger an alert to the inventory manager or relevant stakeholders.
1.4 Rate of Return
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Rate of Return (ROR) is a KPI that measures the percentage of returned orders within a specific period. It evaluates customer satisfaction and product quality
Tracking the Rate of Return is essential to assess customer satisfaction and product performance. It helps identify trends, the product issues, and aids in refining inventory and marketing strategies.
Alert the customer success team when the Rate of Return exceeds the established threshold, say, 10% or experiences an unusual spike.
1.5 Estimated Delivery Date (EDD)
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Estimated Delivery Date (EDD) is a KPI that signifies the projected date for a customer to receive their ordered products. It measures the efficiency of order processing, logistics, and shipping.
Tracking the EDD is crucial as it directly impacts customer satisfaction and influences purchase decisions. Shorter delivery times enhance customer experience and boost loyalty.
The warehouse team and procurement teams get notified about orders and stock based on existing levels. They coordinate to make sure they have enough inventory to keep the estimated delivery date in check.
2. Customer Satisfaction and Service Metrics
2.1 Customer Retention Rate (CRR)
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Customer Retention Rate (CRR) is a metric that measures the percentage of customers retained over a specified period. It calculates the rate of customer loyalty post the initial purchase.
Tracking the CRR is vital as it indicates how successful a company is in retaining customers over time. Higher retention rates signify customer satisfaction, loyalty, and sustained revenue streams.
Notify the customer success team when the CRR declines by a significant margin or falls below a predefined threshold, such as a 10% decrease from the previous period.
2.2 Customer Satisfaction Score
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Example
Customer Satisfaction Score (CSAT) measures the level of satisfaction customers experience with a company's products, services, or overall brand relationship. It typically involves customers rating their satisfaction based on a numerical scale or feedback.
Tracking Customer Satisfaction Score is vital as it directly reflects customer contentment and their perception of a brand. Higher CSAT scores often lead to increased customer loyalty, positive word-of-mouth, and repeat purchases.
Trigger alerts to the customer success team when the CSAT score falls below an acceptable threshold.
If the CSAT score drops below 70% or experiences a significant decline from the average benchmark, set up an alert to notify the customer service or quality control team.
2.3 Refund Rate
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Example
Refund Rate (RR) KPI measures the ratio of refunded or returned products to total products sold within a defined period, reflecting customer-initiated returns due to dissatisfaction or product issues.
Tracking the RR is vital for gauging customer satisfaction, the product quality, and identifying sales-related issues. High RR highlights potential problems demanding immediate action to preserve customer loyalty and business reputation.
Trigger alerts to the customer success team when the RR falls below an acceptable threshold.
If the refund rate increases by more than 20% from the previous period or surpasses 10% of total sales, generate an alert to the product management or customer service team.
2.4 Average Complaint Resolution Time
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Example
The Average Complaint Resolution Time KPI measures the average duration taken by a business to resolve customer complaints or support issues and is typically quantified in days, hours, or minutes.
Tracking resolution time is crucial to assess customer support efficiency. Shorter times often lead to higher satisfaction and retention rates. Prolonged resolution might hint at support process inefficiencies, risking customer dissatisfaction and harm to business reputation.
The customer support team lead gets notified of unanswered queries over the set time limit.
If the resolution time surpasses the company's set service level agreement (SLA) or significantly increases from the average time, generate an alert to the customer support management or relevant team.
2.5 Net Promoter Score
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
NPS is like the North Star metric used to measure a company’s customer loyalty and satisfaction.
NPS is valuable for assessing customer loyalty, encouraging word-of-mouth marketing, gathering feedback for improvement, and benchmarking against industry standards or competitors.
Alerts are triggered when the NPS score crosses a specific threshold or when customers leave specific comments or feedback along with their NPS responses.
3. Marketing and Website Performance Metrics
3.1. Customer Acquisition Cost
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Example
CAC is a metric used to evaluate the cost a business incurs to acquire new customers.
Tracking CAC is essential for evaluating the effectiveness and efficiency of marketing and sales strategies. It helps businesses understand the resources invested in acquiring customers against the revenue generated from those customers.
An alert is sent to the marketing team when the CAC exceeds the predefined acceptable threshold or significantly deviates from the average.
If the CAC exceeds the set budget or if there's a sudden increase in acquisition costs that might affect the profitability of customer acquisition efforts, trigger an alert to the marketing team.
3.2 Sell-Through Rate
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Example
The sell-through rate (STR) is a metric used to assess the efficiency of inventory management.
Monitoring the sell-through rate is vital for inventory and sales analysis. It shows how fast products sell compared to the inventory received. A high STR signals effective sales and good turnover, while a low STR might suggest overstocking or slow-moving inventory.
Alerts can be triggered when the STR falls below an acceptable threshold or deviates significantly from the usual range.
If the STR drops below the expected level, triggering an alert can prompt immediate action to investigate the reasons behind slow sales or potential inventory issues.
3.3 Website Traffic
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Website Traffic refers to the volume of visitors or users who access a website within a specific period. It encompasses various sources and channels through which users find and visit the site, providing insights into audience behaviour, engagement, and potential conversion opportunities.
Tracking Website Traffic is essential for understanding user behaviour, content performance, and marketing effectiveness. It helps in evaluating the success of marketing campaigns, identifying popular or underperforming pages, analysing visitor trends and improving conversion rates. A 5% conversion rate from 1,000 visitors versus 1,000,000 visitors varies significantly
Alert the marketing team when website traffic significantly deviates from the normal range or when there's a sudden drop in traffic volume. For instance, a significant decrease in traffic could signal technical issues like website downtime, broken links, or problems with search engine visibility.
3.4 Bounce Rate
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Example
Bounce Rate measures the percentage of visitors who land on a website and leave without interacting further or navigating to other pages within the site during their session. It calculates the proportion of single-page sessions in comparison to the total number.
This metric is vital as it provides insights into the effectiveness of a website's landing pages and overall user experience. A high bounce rate could indicate several issues such as irrelevant content, slow loading times, poor design, or misleading marketing campaigns. Monitoring this metric to improve the website's performance, retain visitors and improve engagement.
Alert the marketing team when the bounce rate exceeds a predetermined threshold or experiences a sudden significant increase.
If the bounce rate rises by 20% from the average rate, trigger an alert to the product or marketing team. This alert will prompt a review of the website's performance, and investigate potential issues.
3.5 Average Sessions Duration
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Example
Average Session Duration quantifies the average amount of time users spend on a website during a single browsing session. It calculates the total duration of all sessions divided by the number of sessions.
Average Session Duration tracks user engagement with website content. Longer durations indicate valuable content, potentially boosting conversions. However, overly long sessions may hint at confusion or navigation issues, impacting conversions.
Alert if the Average Session Duration deviates significantly from the usual range or falls below a specific threshold.
If the Average Session Duration drops by 30% from the standard rate or falls below 20 seconds, trigger an alert to the analytics teams. This alert will prompt a thorough examination of the website's content, user journey, and potential technical issues to enhance engagement and user experience.
3.6 Cost per Conversion
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Example
Cost per Conversion (CPC) calculates the total expenditure on marketing campaigns divided by the number of conversions (purchases or desired actions). It reveals the average cost incurred to achieve a single conversion from a specific marketing effort.
CPC tracking assesses campaign cost-effectiveness by measuring the cost per desired action. It helps allocate resources efficiently and identify high-performing campaigns for better ROI.
An alert is sent to the marketing team when the CPC exceeds the predefined acceptable threshold or significantly deviates from the average.
If the CPC surpasses the estimated budget by 20% or set threshold trigger an alert to the marketing team. This alert prompts a review of the campaign's performance, allowing swift adjustments to mitigate unnecessary expenses and optimise campaigns for better conversion.
3.7 Traffic-to-Lead Ratio
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
The traffic-to-lead ratio is a key performance indicator that measures the effectiveness of converting website traffic into leads. It shows the proportion of website visitors who take action to become potential leads.
Track conversion rate to gauge website efficiency in converting visitors into leads. Analyse various traffic sources' effectiveness (organic, paid, referrals) in generating leads and identify areas for improvement, like optimising landing pages and call-to-action strategies.
Set alerts for the marketing team when the traffic-to-lead ratio falls below a predefined threshold or when there's a significant decrease in this ratio.
3.8 Churn Rate
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
The churn rate KPI measures the percentage of customers or subscribers who discontinue their relationship with your product or service within a given period.
This metric is a composite indicator of customer satisfaction (CSAT), service quality, revenue and different metrics. This will help you dive deeper and fix issues across the board.
Trigger alerts to the customer success manager when the churn rate exceeds a predefined threshold. This can signal the need for immediate attention to customer satisfaction, product improvement, or targeted retention strategies to mitigate further churn.
4. Revenue Metrics
4.1 Average Order Value
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
The Average Order Value (AOV) KPI represents the average monetary value of orders placed by customers over a specific period. It measures the average revenue generated from each transaction.
Provides valuable insights into customer behaviour and purchasing habits. Also helps in identifying cross-selling and upselling opportunities, thus maximising revenue per order.
Set alerts to monitor significant fluctuations or deviations in AOV, such as a 10% increase or decrease, indicating potential shifts in customer purchasing behaviour or issues affecting order values. These alerts can prompt further analysis to understand the causes behind the fluctuations and adjust strategies accordingly.
4.2 Profit Margin
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
The Profit Margin KPI calculates the percentage of revenue that exceeds the costs of goods sold (COGS) and other indirect costs. It evaluates the profitability of the products or services a company sells.
Indicates the efficiency of the business in generating profits from its sales. Assists in pricing strategies and cost management decisions.
Implement alerts for substantial decreases in profit margins beyond a certain threshold (e.g., 10% reduction) compared to the standard margins. These alerts can signal issues such as increased production costs, pricing inconsistencies, or inefficiencies in the sales process, prompting immediate investigation and corrective actions.
4.3 Conversion Rate
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
The Conversion Rate KPI measures the percentage of website visitors who complete a desired action, typically making a purchase, filling out a form, or subscribing to a service. It quantifies the effectiveness of a website in converting visitors into customers.
Evaluate the efficiency of your website or landing pages in driving desired actions. Identifies areas for improvement to enhance user experience and engagement.
Set up alerts for the marketing team when the conversion rate falls below a predefined threshold (e.g., 2% lower than the average rate) or experiences a sudden significant drop. These alerts signal potential issues in the conversion funnel, enabling prompt investigation and optimisation efforts to enhance website performance and user engagement.
4.4 Shopping Cart Abandoned Rate (SCAR)
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
The Shopping Cart Abandonment Rate KPI represents the percentage of online shoppers who add items to their shopping cart but do not complete the purchase, abandoning the cart before finalising the transaction.
Provides insights into customer behaviour during the purchase process. Evaluate the efficiency and user-friendliness of the checkout process.
Set up alerts when the shopping cart abandonment rate surpasses a predefined threshold (e.g., a sudden increase by 10% compared to the average rate). These alerts indicate potential issues in the checkout process or other barriers hindering conversions, prompting businesses to investigate and optimise the checkout experience to minimise abandonment rates.
4.5 Shopping Cart Conversion Rate (SCCR)
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
The Shopping Cart Conversion Rate KPI measures the percentage of website visitors who successfully complete a purchase after adding items to their shopping cart.
Determines the effectiveness of turning website visitors into customers. Assesses the ease and effectiveness of the checkout process.
Set alerts when the shopping cart conversion rate significantly drops or remains below a predetermined threshold. This triggers an investigation into potential issues within the checkout process or website usability, aiming to enhance the conversion rate and improve the overall shopping experience.
4.6 Cost of Goods Sold
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Cost of Goods Sold (COGS) refers to the direct costs incurred in producing goods or services sold by a company. It includes expenses directly tied to the creation of the product.
Crucial in determining the actual expenses incurred in product creation relative to the revenue generated. Affects pricing decisions by influencing profit margins.
Set alerts for significant fluctuations or irregularities in COGS that deviate from the expected or budgeted amounts. Trigger alerts when the COGS surpasses predetermined thresholds or if there are unexpected increases, prompting an investigation into cost variations or potential errors in calculations.
4.7 Customer Lifetime Value (CLTV)
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Cost of Goods Sold (COGS) refers to the direct costs incurred in producing goods or services sold by a company. It includes expenses directly tied to the creation of the product.
Crucial in determining the actual expenses incurred in product creation relative to the revenue generated. Affects pricing decisions by influencing profit margins.
Set alerts for significant fluctuations or irregularities in COGS that deviate from the expected or budgeted amounts. Trigger alerts when the COGS surpasses predetermined thresholds or if there are unexpected increases, prompting an investigation into cost variations or potential errors in calculations.
4.8 Repeat Purchase Rate (RPR)
Definition
Why is it important to track?
Alerts & Triggers to manage this problem
Repeat Purchase Rate (RPR) refers to the percentage of customers who return to make another purchase from your business after their initial transaction. It measures customer loyalty and the ability to retain customers for subsequent purchases.
Indicates how satisfied customers are with your products/services. Guides strategies in marketing, retargeting, and loyalty programs for retaining customers.
Set alerts for significant changes in the RPR, especially if it falls below a predetermined threshold or shows unexpected fluctuations. Triggers can alert the marketing or customer service teams to focus on engagement strategies or address potential issues in customer satisfaction and retention.
Locale.ai is your one-stop solution to set up triggers and automation on your KPIs!
Locale is an operations automation and issue-tracking solution, mainly focusing on two important steps in the operations process:
Automating monitoring dashboards and reports and creating a list of actionable tasks to avoid manual monitoring of data, eliminating redundant work in the process.
Create new incidents every time a new problem occurs and alert the right stakeholders on the operations team.
Using Locale, teams need to set up an alert once to ensure that their averages are constantly monitored and any deviation can be quickly notified to the right stakeholders, to take corrective measures and resolve problems within the desired and agreed-upon timelines.
How to set up an alert on Locale.ai in under 5 minutes?
Step 1: Connect a Data Source [Database, Google Sheets or SaaS Tools]
1.1 Connecting a Database: Locale helps connect with the major databases and data warehouses present today, and integrations are as easy as filling out a few fields and whitelisting Locale’s IP!
1.2 Connecting a Google Sheet: A recently launched feature is the ability to integrate with Google Sheets. GSheets are a major source of data in any organization and all it takes to connect is to specify the GSheet URL.
1.3 Connecting to a SaaS tool via API Integration: Locale also connects with SaaS applications supporting an Open API and this helps assimilate data from the various tools that businesses use on a daily basis.
Step 2: Set up Alert Configurations
In this step, we set rules to monitor the data. This starts with a SQL query or adding filters. Once you do this, you’ll be able to receive the results of the query or filter at a set frequency.
Playbooks can be set to ensure faster resolution, and automatic resolution can be enabled to ensure incidents on Locale are resolved with zero manual intervention, once they move out of the queue on your data source!
Dynamic stakeholder assignments are possible for larger teams. Incidents can be configured to have labels, escalations, and playbooks to ensure adherence.
Step 3: Notify Stakeholders
Connect with your preferred notification streams to ensure that your stakeholders receive all updates on time! Group your notifications to ensure end users don’t get spammed and yet receive all the incidents that they need to prioritise and work on.
You’re good to go! Once the alert is set, incidents will start flowing in when there are new rows identified in your datasource! Ready to transform your sales process and close deals faster? Try Locale.ai today and experience the easiest way to set up sales alerts and stay ahead in the game!
Conclusion
Operating a successful e-commerce store requires your attention in many ways — from building your store to defining your brand to creating your product to offering high-quality customer service. Familiarity with the e-commerce metrics mentioned above will help you identify how well you’re performing those activities and highlight those areas in which you can fine-tune your strategies and tactics to improve your store’s performance and bottom line.
With so many options to boost efficiency, performance and profitability, KPI alerts are an invaluable asset for e-commerce merchants of any size. Implementing a well-planned alert strategy can help your business scale new heights. Embracing alerts is a smart move for any team looking to boost their productivity and results. And with Locale.ai, it’s never been easier to harness the full power of these alerts to grow your bottom line multifold.
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