5 Need-to-Measure Ecommerce Metrics to Scale Like the Big Box Retailers

The internet has an infinite amount of benefits, but one in particular that has wholly disrupted business operations. See, the world wide web allows for equal and fair access to websites, which means that startups and small businesses are essentially on an equal playing field with their big box competitors when it comes to ecommerce.

This makes for a monumental advantage when it comes to smaller ecommerce shops. Through an easy checkout process, excellent customer service and a smooth delivery experience, startups and small businesses can oust competitors who have long been household names.

This is exactly what Warby Parker did, ousting Luxottica, or what Rent the Runway did, ousting David’s Bridal, among others.

Of course, as legacy brands become more and more educated to the power of ecommerce, their large budgets follow. And, more often than not, those budgets are going toward analytics platforms that help these brands optimize for repeat customers and quickly notify them to what is working on their sites and what is just sitting in inventory.

In other words, legacy brands do have a leg up on smaller retailers when it comes to ecommerce and it’s in the amount of intelligence they are using to drive conversions and increase revenue.

That said, data and analytics should be democratized throughout the ecommerce space, and no, Google Analytics isn’t enough. Your big box competitors aren’t simply monitoring new and repeat visitors, or from where their web traffic comes. No, they are using enhanced ecommerce analytics to push visitors down a purchase funnel from the moment they land on the site.

Below, the top metrics these retailers are using and how you should be using them, too.

Cost of Acquiring a Customer (CAC)

Before customers can begin purchasing on your site, you need to get them there first. Big box brands have an advantage here in that they have marketplace name recognition. In other words, people will simply type their name into Google and land on their page.

For smaller retailers, you’ll likely need to spend some cash to get your target customers to your site. The cost of acquiring a customer metrics, or CAC, reveals how much money you spend throughout the acquisition funnel, from creating an ebook or promoting a post on Facebook, to having a visitor come to your site because of the ebook or promotion, all the way through to their finding a product they like and finally checking out.

The cost of customer acquisition is the amount of money you have to spend to get one customer. The lower the cost of acquisition, the better: i.e., you always want your cost of acquisition to go down. As a quick example, your CAC is $40 if you need to spend $200 to get five visitors to buy on your store.

You may employ different techniques to bring in those visitors — SEO, paid ad campaigns, high-quality content, social media — but all of them cost you either in terms of money or time.

There are a lot of factors that affect your cost of customer acquisition, but it is important to get an accurate number here. As a best practice, you should always try to find marketing outlets that lower your CAC valuation.

Conversion Rate

Once your store gets traffic, you need to see how many visitors are buying. Conversion rate reveals just that.

Conversion rate is defined as the percentage of visitors who end up buying from your store. The higher the conversion rate, the better. When it comes to conversion rate, you always want it to be going up. As a quick example, your conversion rate is 2% if 2 out of 100 visitors buy from your store. According to this recent Marketing Land article, one way to improve conversion rate is to add video to a majority of your product pages; retailers adding video reported conversion rates close to 9%.

There are hundreds of articles out there on how to improve conversion rates –– because it is just that important. There’s so much emphasis on conversion rate because it directly affects your business’s bottom line. Regardless of how much effort you spend on driving traffic to your store, if most visitors don’t end up buying, it’s all wasted. That said, it’s really important to make sure you know what your conversion rate is at all times and keep tabs on whether it’s improving and if you should stay the course or not.

Shopping Cart Abandonment

When your conversion rate is low, you need to understand how many visitors had an inclination to buy. To do this, you’ll want to examine your store’s cart abandonment. 

This metric indicates the percentage of visitors who added products to their shopping cart but did not complete the checkout process. The lower your cart abandonment rate, the better. As a quick example, your shopping cart abandonment is 75% if 75 out of 100 visitors with a cart leave without buying.

Cart abandonment is the closest you come to earning real customers before they leave your site. Adding to the cart typically indicates an intent to purchase. The fact that they leave without buying means you lost potential customers. It gets especially bad if you paid a lot of money to get these visitors to your store. Making sure your cart abandonment is low is key to improving your conversion rate.

Average Order Value

You should monitor how much money each order brings in to see how much revenue you can generate. That’s what AOV tells you.

This is the average size of an order on your store. The higher the average order value, the better. For example, your AOV is $35 per order if you made $140 from 4 orders.

By monitoring AOV, you can figure out how much revenue you can generate from your current traffic and conversion rate. Being able to predict revenue is a big deal for any business. If most of your orders are really small, that means you have to get a lot more people to buy in order to achieve your target. It’s important to have at least a few high value orders so that your overall average is on the higher side.

Churn

If your LTV is low, it could be that many of your customers buy once and never return. This is measured by what is referred to as “churn.”

Churn is the percentage of your customers who do not come back to your site. The lower the churn, the better. For example, a churn rate of 80% means 80 out of 100 customers do not come back to buy from your store.

As we have seen, to ensure a high profit, it’s important to influence your customers to keep coming back to purchase. That means you want your churn to be low so that once you acquire a customer, they continue to come back and purchase again and again. Lower churn means higher LTV and a healthier business overall.

Once you start measuring your ecommerce store performance and using data to drive your business decisions and strategies, you’ll be well on the way to enterprise-level success! No big box retailer takes action without measuring the impact and neither should you. Monitor your metrics, pivot when and where necessary and make the most of your both your time and money in order to build a successful brand.