With the advancement in the tech industry and AI, online retail is expected to reach new heights in a not-so-far future. E-commerce is forecast to grow at double-digit rates for the foreseeable future. Projections by industry experts and the growth of e-commerce over the last decade compel us to believe e-commerce is the future of retail.
If you own an e-commerce store, believe me, you are at the right place at the right time.
In this competitive market, you need to constantly adopt new approaches to boost your business and evaluate your store.
You need the verticals along which you will gauge your progress and monitor the performance and growth of your store. Instead of making decisions on your gut instinct or personal belief, your decisions should be informed and backed by facts.
I’ve gathered the following 11 key points that will provide you with actionable insights, help you assess your store’s performance, and enable you to devise strategies more accurately.
Average order value is typically the amount a customer spends on a single order. You can use the following formula to calculate average order value (AOV):
AOV = Total revenue / Number of orders
You have to keep in mind that AOV is the average value per order, not per customer. Even returning customers’ orders will be included in the formula separately.
Now the questions are,
This number does not represent gross profit or profit margins, it offers insight into your product pricing, and buying capabilities of your majority customers.
Obviously, AOV of your store should be as high as it could be.
If it’s low, then maybe the majority products on your store are low price, and you might want to add some expensive/luxury goods. Typically luxury items are sold on a higher price and offer better profit margins, hence increasing your AOV and revenue.
If you already have expensive products but no one is buying them, it means the majority of your customers do not possess high buying power. So you should revise your marketing strategy and target comparatively wealthy and mature audiences.
Conversion rate (CR) is the most known and widely used metric to evaluate performance of an e-commerce store. This percentage represents the rate at which visitors are converting into customers.
It is calculated by,
Conversion rate = Total visitors / Total customers
Conversion rate percentage can be determined of a single page, or multiple pages or a complete website, depending on the requirements.
CR is one of the most essential metrics to follow and requires constant improvement.
If your visitors do not convert to customers, it means they do not find what they desire on your store. So either you are marketing the wrong audience, or your store is not personalized.
Personalization is the key strategy to magnify your sales and conversion rate. Show customers what they want to see, and what you’ll see is a hike in your conversion rate.
According to a research by salesforce, 53% of consumers are ready to share their personal data in return of personalized shopping experiences.
Personide offers high tech AI based personalization for your website and guarantees an exponential growth in your revenue, conversion rate and customer loyalty. Majority of sales on e-commerce are now derived from product recommendations produced for every customer individually according to their intent.
One of the most frustrating problems you might face is shopping cart abandonment. Despite expert marketing strategy and multiple checkout plugins and offers, the cart abandonment rate of your store is still on the rise.
According to Statista, cart abandonment rate as of second quarter of 2018 was 75.4% combined in all the sectors.
Your store will have random visitors, window shoppers, and the ones who will never buy. But the ones who placed items in their cart are highly motivated, and all of your energy should be invested in getting those visitors to the end of your sales funnel and convert them from visitor to customer.
If your cart abandonment rate is above 75%, then you should pay serious attention towards lowering this figure.
The reason behind cart abandonment might be too much friction in your checkout procedure or lack of trust or maybe you are taking too long to deliver products compared to your competitors.
The most common of these is the hard and time-consuming checkout process. You should make it smooth, convenient, and highly personalized for every individual. You will certainly observe a dip in cart abandonment rate.
For more detailed strategies to reduce shopping cart abandonment rate, check out my other post on 5 effective ways to reduce shopping cart abandonment rate.
Revenue per visitor provides you an average amount that a unique visitor/customer spends on your store for a given period of time, say for a month.
RPV = Total revenue / Total unique visitors or customers
RPV leverages you with the insight that Conversion Rate (CR) and Average Order Value (AOV) alone don’t provide. RPV is a metric you can monitor daily to track day to day performance or for a specific time period.
If your store’s AOV and CR are hitting the higher slabs, generally this implies that your revenues are also higher. But, interestingly, lowering CR and AOV not necessarily means lower revenues. For example, during holidays discounted products coupled with a higher influx of traffic could drive down your AOV and CR, but total revenue follows a steady increase. This can give you wrong performance evaluation, resulting in wrong decisions. You might undervalue or overvalue a particular channel.
RPV provides a bigger picture in such scenarios, and avoid panic situations. Combine with a few other metrics, RPV provides a more accurate snapshot of your store’s performance.
Mathematically, Increase in RPV guarantees growth of both CR and AOV.
You can increase RPV by providing personalized in-store recommendations, Loyalty programs, personalized email recommendations, etc.
As there is an old saying, “Make new friends, but keep the old. One is silver, the other gold”. Similarly, long-term customers are more valuable than single-deal customers.
If you have more influx of returning customers than new customers, you're on the right track. To acquire new customers, you’ve to invest more in marketing and you’ll never know whether the new visitor will convert or not.
On the contrary, customers return because you satisfied them with your product and service. Satisfied customers spread a good word in the market for you, refer your store to others, and inspire other potential customers as well. So returning and loyal customers are the ones who give you business and markets you as well. Isn’t it ideal?
I’m not saying that you shouldn’t go out and acquire new customers. But if you maintain a larger percentage of long-term customers, your business can get more profitable and predictable.
So if you have a good customer retention rate, then you can easily state that your store is providing reliable service to its customers.
If a majority of your customers are one-timers, then there is something wrong with either your products or in-store user experience.
Make sure the products are delivering on time, and the buyer exactly knows what he/she is buying. Most of the times, customers misunderstand the product and its quality by display pictures on the store. So you’ve to make sure there are well-explained descriptions and product photography is accurate enough to give actual look and feel of products.
Personalize your store for every user. Show relevant advertisements and personalized recommendations. Every user should see your store as if it is designed for him/her only.
As the name suggests, this metric shows how much time visitors are spending on your store. More time visitors spend, deeper is their engagement with your store. Greater the time spent, greater the chance of a visitor to convert to a customer.
You want visitors to spend maximum time on the home page, landing page, product pages, but minimum time spent on checkout pages. So your goal should be to make the checkout process smooth and extremely convenient.
You can increase time on your site, by personalizing your store, making it quick and easy to navigate, aesthetically appealing, using high-quality media (images and videos), and making it fast and responsive for all available devices.
As a result of your marketing campaign, a lot of people land on your store but a vast number of these visitors bounces off within seconds of their visit. Such visitors contribute to the bounce rate of your store.
Higher bounce rate means either you didn’t market to the right audience, or you didn’t welcome your visitors.
You might be wondering how you can welcome a visitor?
Well for starters you can popup a welcome message. Make your homepage/landing page more appealing by placing product advertisement banners along vertical corners. Display top trending and featured products.
Your goal is to minimize bounce rate and maximize user engagement by encouraging them to explore your store.
One of the most effective ways to minimize bounce rate is personalization. Now a question arises, how can you personalize your store for a visitor whom you don’t know, for whom you don’t have any activity or personal information in records.
For first timers, you can personalize your store according to their demographics by analyzing their locality, weather of the place of access, the culture of the place, the device (mobile or a computer) they are visiting from, etc.
Personide offer personalized recommendations for such infant customers. Leveraging advance AI techniques, Personide personalizes your store even for new visitors.
Page-views per visit give you insight that how many pages a visitor views in a single visit. Again the greater pageviews per visit mean deeper engagement with your store.
But you don’t want this number to be really high because if it is taking too many page-views or clicks to find the desired product, then it means the design of your store is not easy to use.
Page-views per visit need to be in a normalized range. Not too much, not too low.
Bounce rate and page-views per visit help you measure the health of your website. For a healthy and well-performing store, bounce rate should be minimum and page-views per visit should be in a controlled range.
Email click-through rate is an important metric to calculate off the store engagement of your users. Email is a personal and effective way to communicate with your customers.
High email CTR means your customers are responding to your emails, and you and your audience are now in a relationship, this what you want.
To increase email CTR you need to,
Among all, personalization is the most important. According to a research by Dynamic Yield, 71% of consumers believe personalized experiences would influence their decision to interact with emails.
Best way to evaluate your business is through customer feedback. If your customers are satisfied with your service then your business is advancing on the right track.
You can get customer feedback by contacting them personally, and hear out what they want to say.
But you don’t want to keep it a secret that how people feel about your service. You should put it out that you are providing unmatched value.
Product reviews provide social proof of your valuable service and broadcast it to every visitor.
Most of the customers don’t leave product reviews, so you have to encourage them to write how they feel about your product. You should first segment your customers and find out the ones who frequently bought from you, frequent buying complements that they are satisfied.
Now you can either request them to give a review on your store or send it via email. Manually enter reviews received on email on the product page or maybe automate this process.
Another approach that you can adopt is to provide incentives upon reviewing products like store credit, or loyalty program points, etc. But make sure only customers who have bought the product can review or rate the product to avoid any exploitation of incentives.
The number of active issues represents the quality you are providing. If there are always a large number of active issues, then you might revise your products or service quality.
You can compare the number of active issues with the number of total orders over a period. For instance, take the number of orders in the last 3 or 6 months and see how many issues were reported in that period.
Use this formula to calculate the percentage (for maybe the last 6 months),
Issues = Total issues / Total orders
It will help you evaluate what percentage of orders end up in problems and identify your weak areas.
You just need to focus on a few things to improve your business,
With my experience, I am certain if you get all the above metrics placed in the right range, your revenue and customer loyalty will grow exponentially. You can easily outperform your competition.