The aim of this blog is to offer retailers a chance to think out of the box and know about the set of metrics that will show you performance of your site.
Here we go:
What does KPIs mean for retailers?
Large amount of retailers are now trying to make their presence across multiple marketplaces, in an effort to stay competitive and increase sales for their business.
Many retailers overlook the importance of tracking performance of each channel and in the end are forced to shut down stores, one-by-one.
Therefore, tracking each store’s important metrics becomes important to gain insights from your own data and perform better year-after-year.
KPIs an abbreviation of “Key Performance Indicator” has already become a popular practice among many e-commerce sellers. Doing so, helps them track and measure key activities of the business.
For instance, considering cart abandonment- if the result shows an increase in rates, they you immediately get to know there is something wrong there. This way, it makes it quick to take immediate measures and fix the problem before they lead to worst nightmares.
Why is it important to track KPIs?
All e-commerce business owners should regularly monitor important metrics of their normal cycle. For instance, having an inventory management system in place you can gain real-time insights of your products across all your selling channels. This way, depending on their performance you can forecast demand and fulfill customer’s orders in time.
Having an ability to capture important data in a fast and consistent way can help you reduce losses in your online business too.
How to set a KPI?
1- Know your goals
KPI defers from store-to-store- metrics that are of high importance to one may not be the same for the other. Therefore,understanding your e-commerce business requirements, identify the areas that are most important for your business.
For instance, if content is your business, then it becomes important to adopt a tool that will help you track the shares and on what platforms they work well. This way, having an ability to know what content is doing well, where, will help you hit the right target always.
2-Identify a unique purpose for each KPIs
Running multiple KPIs for your e-commerce store and having the same goal for each makes no sense. Therefore, while determining KPIs for your business make sure you have a unique target for each that is practical and affordable, both.
For instance, if you adopt a tool to track your social media channels. Instead of keeping the KPI on sales conversion, knowing the engagement level will be of a greater value. Focusing on the browsing pattern and action on your social media channels will allow you always provide content and information that is informative and can be shared by social networkers, online.
How can you know when is the right time to start?
There is no such thing as the “right time” when it comes to measuring KPIs for your e-commerce business.
Ideally it is always good to start the practice from the very first day, however, this does not mean you try all the KPIs. Instead, start with the most required ones to kick-start your e-commerce business.
So, what are the basic KPI’s for a start-up?
1- Traffic rates
2- Website browsing pattern
Focusing only on sales at the initial stage should not be your main aim, as it will take time for your stores to start receiving orders. However, concentrating on KPIs that will help you increase traffic for your store is a better option for any e-commerce start-ups.
It is suggested to track KPIs on a regular basis, but, you can always measure performance at the end of every year. This will offer more detailed insights and helps you to understand your growth pattern.
Few important KPIs for growing retailers
1- Conversion rate
Second most important metric to measure, is your conversion rates. Following the first point you will be able to offer products and content as per modern customer’s demands, but, what the sense if you don’t track results.
Monitoring this key performance indicator for your e-commerce business will help understand what source brings you the most traffic and what drives them in? Having such data you can improve your offerings, which will automatically increase sales for your business.
So how can calculate the conversion rate?
Formula: Total number of actions considered conversion/ by total number of visits.
2- Customer retention rate
Third, you need to understand repeat purchases holds a large part of your overall sales, compared to new customers. Yet, many e-commerce business owners overlook the importance of this measuring customer retention rates.
Spending money in retaining customers is an ideal option for e-commerce startups, rather than identifying new customers needs and then attracting them with offers to visit your site. And, not all customers who visit your site will make a purchase.
However, targeting your existing customers with reasonable offers(no necessary high discounts), chances are high of them being convinced for taking action on-the-go and make purchases from your e-commerce store.
So how can calculate the customer retention rate?
Formula: (Total number of customer- new customers for that period)/Total number of customers in the previous period.
3- Stock Turnover rate
Stock is a major factor for ecommerce business owners, and practicing a smooth inventory management flow will help retailers to meet or exceed customer’s need for product availability, increasing net profits or minimizing cost.
Having a system to track your stock movements in real-time is helping retailers, to not only ensure stock is always available for customers, but also, allows them to analyze, measure and forecast stock requirement as per the customer’s shopping behavior.
So how can calculate the Stock Turnover rate?
Formula: Net sales/ Average $ Inventory
4- Revenue Turnover rate
Lastly, retailers always start a business to see an incline growth rate year-after-year. You obviously might be maintaining accounts for your ecommerce business that helps you calculate profits end of every year. But, do you have a tool to measure the areas that diverts those revenues for your business?
This KPI becomes crucial for retailers to understand each source that is getting revenue for your ecommerce business. Such data then becomes helpful to enhance customer service and increase profit margins for each source, rapidly.
So how can you calculate the Turnover?
Formula: Total $ sales for season/ Average $ inventory for the season
KPI methods that you can adopt
Monitoring KPIs means you’ll have to gather data at one place, therefore the major challenge for retailers, is to how do they do it?
There are two ways to do so:
1- For retailers with low-budget maintaining spreadsheets can be an ideal option by designing KPI columns, however, consumption of more time and errors can be it’s downsides.
2- Alternate, retailers can adopt a 3rd party KPI solution provider that automatically pulls data, stores them and create reports for you.
Examples of some analytic apps targeting major metrics for ecommerce business
This app allows retailers an ability to record web sessions, making it easy and visually appealing to measure KPIs for your ecommerce business. Lately, this app has announced a recent update for mobile seller app users, allowing them to eliminate frictions that occur in the engagement level and customer’s purchase transactions.
This app helps retailers to monitor their website audience behavior in real-time, which makes it easy to enhance customer service by offering them a more personalized shopping experience.
You can also browse alternatives for the above mentioned by clicking here.
This will help you understand that a certain page of your website has the most engagement level. Immediately track it’s behavior and what make the customers take action, which you can then experiment on other pages and improve engagement level throughout your website. This will keep you up in search engines, too.
E-commerce is now more of a numbers game for retailers!
The trick is to focus on the right numbers, so that you can make accurate decisions about how to improve your key performance areas that matters the most for a steady growth.