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The number of people shopping online is expected to hit 3.6 billion by 2029. That means ecommerce – which simply refers to selling online – presents an enormous opportunity to reach buyers all around the world. To compete in this market, you must choose and track your Key Performance Indicators (KPI) carefully. This is the only way you’ll know whether you’re heading for success or need to change your strategy.
What are KPIs in ecommerce?
In every business, Key Performance Indicators (also known as “KPIs”) are metrics you can use to measure the performance and success of various aspects of your business. In ecommerce, the KPIs are strictly related to the way your business makes sales: conversion at checkout, the average transaction amount, the cost of maintaining your sales platforms, and related points.
There are two main types of ecommerce KPI:
- Lagging indicators – such as sales and revenue – measure past performance.
- Leading indicators – such as opening emails and downloading a digital guide – offer insights into future outcomes.
Why are ecommerce KPIs important?
KPIs provide vital insights into whether your ecommerce business is hitting its targets and satisfying its customers. These measurements help you to know what success looks like.
With the right KPIs, you can understand how well your store converts visitors into paying customers, and how much they spend per visit. You can calculate how much each customer is worth over the course of their entire relationship with your business and balance this against your costs. Ecommerce KPIs are essential to know whether you are making a profit.
What are the most important KPIs in ecommerce?
The most important KPIs in ecommerce are:
- Conversion rate
- Average order value (AOV) or average transaction value (ATV)
- Customer lifetime value (CLV)
- Transaction volume
- Traffic (unique visitors)
- Shopping cart abandonment rate
- Return on advertising spend (ROAS)
- Customer acquisition cost (CAC)
- Return rate
- Net Promoter Score (NPS)
Below, we’ll unpack each ecommerce KPI in more detail – and explain exactly how you can calculate them for your own ecommerce store.
1. Conversion rate
Your online store’s conversion rate (CR) is the percentage of visitors to your website who complete a desired action. Typically, that’s making a purchase – though for some websites, a conversion can be a visitor joining the business’s mailing list or filling out a lead capture form.
To calculate your site’s conversion rate, use the formula:
(Number of visitors/number of conversions) × 100
In ecommerce, the conversion rate is often the most important. If your goal is to make sales, then this is the main measurement of success. A high conversion rate indicates customers are finding the products or services they want to buy, seeing the payment methods they prefer, and trust your brand enough to enter their payment details.
That said, a high conversion rate doesn’t always translate into more revenue. It simply tells you the velocity of visitors to your brand who are taking the desired action. However, it doesn’t tell you how much your customers are spending. In theory, you could have a very high conversion rate, and your revenue could be falling over time because customers’ average basket size is smaller (i.e. they are spending lower amounts per transaction).
2. Average order value (AOV) or average transaction value (ATV)
Average order value measures the amount your customers are spending, on average, per order.
The AOV formula is:
Total revenue/number of orders
As an ecommerce KPI, AOV helps you gauge the value you’re extracting from each customer transaction, and is useful for understanding your business’s overall performance.
Your average transaction value (ATV) is the same as your average order value, as long as your customers submit payment for their order in one transaction. If your customers pay through buy now, pay later then you’ll receive multiple transactions per order. So it’s important to consider payment methods when calculating AOV.
The ATV formula is:
Total revenue/total number of transactions
Because AOV/ATV tend to be influenced by strategies like cross-selling and up-selling, monitoring any uptick or downtrend in this metric can help you evaluate how effective your sales and marketing efforts are – and refine your tactics in future.
3. Customer lifetime value (CLV)
Customer lifetime value represents the total revenue from a customer over their entire relationship with your ecommerce business. It can be a more useful metric than average order value because you can more accurately calculate the profitability of customer acquisition (which means the costs involved in getting a customer to make their first purchase). In a business model where customers make repeat purchases, the cost of obtaining a new customer is offset by multiple purchases over time.
The formula for calculating CLV is:
Average purchase value x purchase frequency x customer lifespan
Understanding your site’s CLV is vital for assessing long-term business growth and developing your customer retention strategies. It’ll help guide how much you invest in acquiring and retaining customers, and can even be used to segment your customer base according to how much value they represent to your business.
4. Transaction volume
Depending on your billing agreement with your payment services provider (PSP), you may pay a fee for every individual transaction. For that reason, you could benefit from measuring the rate at which payments come through your ecommerce store. You can monitor payment activity through your dashboard.
If you find that transaction volumes are high, yet average order value is low, then the cost of payment processing may weaken your business’s profitability. In this case, you may offer multibuy deals to your customers to encourage higher value purchases (and fewer individual transactions).
You can also compare your transaction volume to your ecommerce store traffic for a better understanding of the connection between the two. If you have many visitors and a low number of transactions, then perhaps your marketing efforts are not targeted enough, or there is a usability problem with the store itself. This could be for technological reasons, such as website navigation issues or a payment service provider with a low acceptance rate.
5. Traffic
Traffic refers to the number of visitors who access your website or app in a given period. It’s an important ecommerce KPI because it tells you how many people visit your online store. You can monitor the flow of visitors to your store over time using your ecommerce platform, marketplace dashboard, or a third-party tool such as Google Analytics.
You may wish to deduplicate unique visitors versus sessions. This simply means that each visitor to your website is only counted once in the time period you’ve specified. That would give you a more accurate picture of the size of your customer base, and enable you to more accurately measure CLV. To set this up you can use cookies which track unique users based on their browser and IP address, for instance.
It’s often useful to look at the breakdown of your traffic sources to find out where your customers are coming from. Then you can figure out the proportion of your ecommerce store visitors who found you through social media posts, search engines, email sends or other places.
6. Shopping cart abandonment rate
Cart abandonment occurs when a visitor to your website or app adds one or more items to their shopping cart, but does not finalize the transaction.
To calculate it, use the formula:
(Number of carts abandoned / number of carts created) x 100
A high cart abandonment rate tends to suggest that unnecessary friction – such as an overly complicated checkout process, unexpected shipping costs, or the need to create an account to complete a purchase – exists in your ecommerce site’s payment flow.
Fortunately, there’s plenty you can do to combat a high abandoned cart rate: including offering guest checkout, being transparent about your shipping rates, and minimizing the number of steps – and information required – for the customer to complete their purchase.
A low abandoned cart rate is ideal, because it goes hand in hand with a high conversion rate. So explore our guide to how to increase checkout conversion rates to learn how to optimize your payment flow to keep friction low and sales high.
If all else fails, you can also try remarketing: inviting customers back in with ads or emails tailored to the items they selected for their cart.
7. Return on advertising spend (ROAS)
Return on advertising spend is a crucial ecommerce KPI that indicates whether your marketing investment generated a profit. It weighs the financial return on paid advertising campaigns versus the cost of running the ads.
Calculate ROAS with the following formula:
Revenue gained from advertising / cost of advertising
If the result is a positive number, then you know you’re making a return on investment. If the number is negative, then you’ve spent more on ads than you made from customers who saw them. Recent research found 52% of both online and in-person retailers plan to increase spend on search advertising in 2024, while just 18% will reduce it. Analysts predict this will boost the bid price for certain valuable online search terms. That means choosing the right search terms to invest in is even more critical, as expense increases.
The difficulty is accurately attributing revenue to your advertising costs. To achieve this, you need programs which track your users from clicking on paid adverts (such as paid social media posts or paid search engine marketing) through to submitting payment.
The limitations of this metric include the fact that not all of your marketing campaigns are going to generate profit because they are intended to build brand awareness. ROAS also needs to be looked at in the broader context of marketing costs over time, which can include fees paid to agencies, creative design work, distribution, software fees, and in-house staff. That’s why the next key metric matters, too.
8. Customer acquisition cost (CAC)
Customer acquisition cost refers to how much it will cost your ecommerce business, on average, to obtain each new customer. These costs include everything your business pays across all marketing and sales efforts. It could include ad spend, marketing software subscriptions, the cost of promotional materials, and your sales team’s salaries.
To calculate CAC, use the formula:
Spend on gaining new customers / number of new customers
CAC is fundamental for understanding how much your business spends just to get more eyes on your store. After all, new customers are vital for offsetting the impact of churn and ensuring your business remains profitable and grows. CAC can also inform where you allocate your marketing spend for the most impact.
It’s also important to understand CAC in relation to the other ecommerce KPIs we’ve discussed here – particularly CLV. Comparing these metrics helps you evaluate whether you’re acquiring customers at a cost that is justifiable – and sustainable – based on the revenue you can expect from those customers over the duration of their journey with your business. Striking this balance is crucial.
9. Return rate
Return rate refers to the percentage of products returned by customers out of the total number of products you ship. Calculate your online store’s return rate with this formula:
(Number of returned products/number of products shipped) x 100%
Returns ultimately increase your operational costs (due to warehouse storage, packaging, processing, staff time, and so on). Understanding how many of your orders end up being sent back can help you manage these costs.
You can compare return rate data alongside product launch dates to learn about customer preferences and product performance. A high return rate, for example, might indicate issues with the quality of your products, or with the descriptions or images of them.
10. Net Promoter Score (NPS)
Net Promoter Score is an industry-agnostic metric used to quantify levels of customer satisfaction and loyalty. It involves asking your customers – via a single survey question – how likely they are to recommend a product or service on a scale of 0 to 10:
"On a scale of 0 to 10, how likely are you to recommend our products/services to a friend or colleague?"
Based on what they say, respondents are grouped into one of three categories:
- Promoters (9 to 10): highly satisfied customers likely to recommend you to their network. They’re considered loyal enthusiasts of your brand.
- Passives (7 to 8): customers that aren’t enthusiastic, but are satisfied. They’re only moderately likely to recommend you, but are seen as open to competitive offerings.
- Detractors (0 to 6): customers who are dissatisfied, and unlikely to recommend your ecommerce business’s products or services. In fact, they may even share negative feedback, which can harm your brand’s reputation.
Once you’ve gathered the data, you can use the following formula to calculate your ecommerce brand’s NPS Score:
Percentage of promoters - percentage of detractors
The resulting score can be anything from -100 to +100. If you’re in the positive, your brand is seen as generally favorable by customers; conversely, negative numbers are cause for concern.
NPS is an important ecommerce KPI because it helps you understand how your brand is perceived by those you sell to. However, the score in itself doesn’t tell you where to begin making improvements. For that, we recommend adding a comments box to any NPS survey you send out and encouraging customers to add a few words about their experience.
This can help you pinpoint those pesky problems and pain points with greater accuracy. You may find, for example, that your customers want easier ways to pay – such as payment links sent on social media, SMS or email.
How to choose the best ecommerce KPIs for your business
Let’s take a quick look at how to choose the most important metrics to measure the success of your online outlet. To ensure your ecommerce KPIs have a direct impact on your profitability, you need to define what “success” means to your business. This depends heavily on your industry, business model, customer base, and more. That means the right ecommerce KPIs are not universal – you need to choose the right ones for your unique business.
Here’s the process of choosing the best benchmarks for success:
1. Define your business’s objectives: Map out your online store’s key focus points and goals. You should aim to drive users to a specific goal: this could be to sign up to a subscription, make a one-off purchase, or return to make repeat purchases (weekly or annually).
2. Consider your industry: If your buyers make small yet frequent transactions, then you can feel comfortable with a low average order transaction value (AOTV). If you’re selling high ticket items such as luxury goods, then you may need to keep the AOTV higher.
3. Understand your customer: Consider whether your customers visit your store just once, come back every month, or more frequently. This will guide you on whether to focus on customer loyalty metrics versus one-off conversion, for instance.
4. Study the user experience of your online platform: Map out your ecommerce website’s customer journey to identify key touchpoints – from their initial touchdown on your store, to their purchase decision, to each of their potential post-purchase interactions. This will help you identify the critical stages where KPIs can provide important insights.
5. Prioritize the most actionable metrics: Don’t gather data for data’s sake; choose KPIs that provide insights into whether or not you're meeting your critical business goals.
How to avoid choosing the wrong metrics for success
You should be careful to avoid “vanity” metrics. Sometimes social media likes, a high number of website visitors, and a long list of email subscribers can be confused with signs of success. Just because you can measure it, does not make it a useful data point. If a metric does not contribute to revenue or long-term business growth, then it’s not a KPI. Indeed, vanity metrics are the opposite of ecommerce KPIs. Unless you can prove a direct connection between your number of social media followers and the amount of revenue in your sales channels, then it’s not a KPI for your business – it's simply a vanity metric.
That said, if your customer buying journey involves making sales from social media platforms, then you need more followers to make it grow. However, buying more followers would not actually boost your sales. Therefore, you need followers from your relevant target market who are interested in buying your products or services. This is why it’s important to focus on revenue and profitability. The right KPIs are useful in the wider context of your business strategy and long-term plan for success.
Accelerate your ecommerce performance with Checkout.com
Your ecommerce payment processing strategy needs careful attention. If you aren’t enabling customers to pay in their local currency, for instance – or in the payment methods they prefer – your conversion rate will suffer. And, if you’re not partnering with a payment processor able to keep authorization rates high and fraud incidence low, revenue will take a big hit.
At Checkout.com, we specialize in payment performance. That means reducing false declines, fighting payment fraud, and ensuring you can offer your customers the right range of payment methods. Take a look at our guide on boosting payments performance to help your ecommerce business scale and thrive.
