6 Key Performance Indicators to use to track your ecommerce businesses

In today’s digital era, more businesses owners have resorted to transacting online as opposed to securing physical premises and the challenges that may arise therein.

Technological advancement has made the operation of e-commerce businesses fast, simple and convenient, thus making online transactions a viable to many entrepreneurs worldwide.

E-commerce (electronic commerce) is the activity of electronically buying or selling of products on online services or over the internet

The day to day operations of an e-commerce business depend on the available technology such as electronic funds transfers, bookkeeping software, virtual inventory management, internet marketing and automated data collection systems.

There are four major e-commerce business models and these are: business to consumer, business to business, consumer to business, and consumer to consumer.

As any e-commerce business expands and grows, it is vital for the relevant stakeholders to keep track of its performance in order to make evidence-based investment, operational and financial decisions necessary to keep the online shop running smoothly.

What is a key performance indicator?

A key performance indicator is a type of performance measurement used to evaluate the success of a business, organisation or a particular activity. 

Key performance indicators (KPIs) are the critical signs of progress towards an intended result, providing a focus for strategic and operational improvement, while simultaneously creating an analytical basis for decision making. 

Key performance indicators are the non-financial measures of an online company’s performance, that do not have a monetary value but contribute to the company’s profitability by focusing attention on what matters most. 

KPIs are a useful way to prove that an ecommerce business strategy yields positive results.

The Key Performance Indicators necessary to track the progress and ensure the sustenance of a  successful e-commerce business include: operational measures, strategic measures, project measures, risk measures and employee measures.

Managing with the use of Key Performance Indicators includes setting targets (the desired level of performance) and tracking progress against that target. This means working to improve leading indicators that will later drive lagging benefits.

Leading indicators are precursors of future success; lagging indicators show how successful the organization was at achieving results in the past. 

Why the need to track key performance indicators?

KPIs for e-commerce business management involve benefits including: motivation to surpass specified performance levels, increase in the communication of performance issues, and focus on key result areas such as cost reduction and quality improvement. 

Good KPIs also provide objective evidence of progress towards achieving a desired result, through tracking efficiency, effectiveness, timeliness, governance, compliance, behaviours, economics, project performance, personnel performance and resource utilization.

As many e-commerce businesses continue to grow, business owners are tasked with having to manage the daily operations, making payments, keeping up to date financial records and keeping track of the performance of their business venture. 

These entrepreneurs have opted to use analytic software and hiring professional KPI analysts to relieve them of the extra work and provide expert advice on the status quo of the company. 

Below are 6 KPIs relevant to tracking performance for ecommerce businesses;

Website traffic /sessions

Website traffic refers to the users that visit a website. It is an efficient way to measure an ecommerce business’ effectiveness at attracting an audience. Website traffic is measured in visits, which are sometimes referred to as “sessions”.

Most entrepreneurs often seek out professional KPI analysts since measuring the performance and traffic of a website can be difficult in the event that they don’t know what to quantify.

It is important therefore to understand what to measure, why it is measured and how to use those measurements can to increase website traffic.

Knowing how to track website traffic means knowing who visits your website, where do visitors come from, and their behaviours when they come to the website.

Some of the factors to consider when tracking website traffic include: number of visitors, number of page views per visitor, average time that the visitor spends on the website, time that visitor spends on each page, most popular viewing time and sources of traffic referrals.

High quality traffic is essential for an e-commerce business to have high rate of conversions.

Conversion rate

Ecommerce conversion rate is the percentage of visitors to your ecommerce website or landing page that convert, or complete a desired action. 

Tracking the conversion rate is an effective way for an entrepreneur to measure the success of their digital marketing plan, in attracting more clients to purchase their goods and services. 

E-commerce businesses employ conversion marketing as a strategy with the intention of increasing website visitors that double as paying customers.

Conversion actions of an e-commerce business audience can be monitored in numerous ways: newsletter signups, clicking a link on the website, buying a product, completing a form of survey, adding products to an online shopping cart, downloading an e-book and so on. 

To calculate a conversion rate, you need to know what you’re trying to measure.

Most e-commerce business owners, having clearly established business goals, outsource professional KPI analysts to translate those into quantifiable website metrics and advise them.

Average order value

Average Order Value is an e-commerce metric that measures the average total of every order placed with a merchant over a defined period of time. It is the average amount customers spend when they make a purchase from the website.

This key performance indicator gives online retailers or business owners an insight on the customers’ spending behaviour. The formula for calculating average order value of an e-commerce business is revenue divided by number the of orders. 


Average Order Value =            ___________________

                               Number of Orders


In order for e-commerce business owners to be aware of key business decisions such as pricing and advertising budget, it is essential to track the average order value every month. 

Tracking average order value aids goal setting and strategy enhancement which help e-commerce businesses evaluate the performance of their business strategies. 

E-commerce businesses that track average order value are also offered a window into shopper behaviours and how much they are spending on their products and services.

When an entrepreneur understands what the customers are spending per order, plans regarding pricing and marketing strategies to improve the value of each order can be made.

Add to cart rate

The add to cart rate is the percentage of visitors who place at least one item in their cart during a session. When running an e-commerce business, the higher the add to cart rate the better, since about 30-40% of the users who add an item to their cart complete a purchase.  

Improving the add to cart rate of any online shop could mean a significant increase in revenue for your e-commerce business, as a result of buying the goods and services offered.

Monitoring an online shops add to cart rate can help the business owner identify problems with the sales process and improve the conversion rate.

A higher conversion rate means increased revenue and profit.

Tracking add to cart rate as a key performance indicator for e-commerce businesses, provides entrepreneurs online with relevant knowledge to make better decisions for the: product pricing, marketing campaigns and the checkout process. 

Bounce rate

Bounce rate is a term used in web traffic analysis to represent the percentage of visitors who enter a site and then leave rather than continuing to view other pages within the website. 

A site’s bounce rate is important because it tells the online entrepreneur how well the audience is, or more importantly, isn’t engaging with a webpage’s content or user experience.

Monitoring the bounce rate helps e-commerce stakeholders to identify how effective their website content and design are at attracting further interest in what your site has to offer.

As a result, relevant changes can be made to ensure that the information shared on the website is captivating to the target market.

In keeping track of bounce rate of an e-commerce business, different stakeholders identify any problems leading to high bounce rates on a given website and find solutions to eliminate them, which in turn increases the conversion rate and revenue.

Some of the measures put in place to improve the bounce rate and audience engagement include: fast browsing speeds, optimizing of product pages, finding and fixing usability issues.

Return customer rate

Return customer rate refers to the proportion of customers who have made at least two or more  purchases from an e-commerce business during a certain time period. In almost all scenarios, there is no time limit on what is considered a return customer.

This is a key performance indicator, for it is relevant in evaluating the overall customer experience and understanding how much value the clients find in the e-commerce business.

Tracking the return customer rate is useful since most returning customers are more likely to convert than new clients overtime if they find a given service or product desirable.

Returning customers also increase the revenue of ecommerce business through valuable marketing opportunities like word of mouth advertising by recommending the products.

Furthermore, monitoring the return customer rates aids the business owner take the necessary steps to maintain and improve their customer retention. 

Some measures to execute this include: publishing and distributing newsletters, providing incentives like vouchers, identifying bestselling products and so on.

Closing Summary

E-commerce businesses require consistent monitoring to ensure top performance plus high revenue and profitability. Employing key performance indicators to track the progress is an assured way to have valuable insights to running and sustaining a successful online business.