Ecommerce analytics: How to use data to scale your business

In the fast-paced world of ecommerce, data is your superpower. But with so much information at your fingertips, it's easy to feel overwhelmed. This article is your lifeline! We'll show you how to harness the power of ecommerce analytics, transforming raw numbers into actionable insights that fuel explosive growth.

• Ecommerce metrics are mandatory to monitor an online store’s performance of an online business and recognize immediate areas of improvement.

• Ecommerce analytics involves collecting, analyzing, and interpreting data from online marketing channels to influence decision-making and enhance business performance.

• Understanding and interpreting ecommerce metrics is necessary to calculate business profitability and improve your profit margin.

• The most important ecommerce metrics include but are not limited to profit margin, sales conversion rate, and shopping cart abandonment rate. 

• Strategies for implementing and leveraging ecommerce analytics include setting clear objectives, utilizing the right tools, testing and adjusting based on analytics, acting on insights, and investing in staff training.

• Challenges in using ecommerce analytics include difficulty in data collection, lack of expertise, data silos, and data security. Solutions involve aligning KPIs with business goals, staff training, adopting comprehensive analytics platforms, and implementing robust security measures.

• Ecommerce metrics enable online businesses to gain valuable customer insights that optimize pricing and business objectives.

Ecommerce analytics is the practice of collecting, analyzing, and interpreting data from your online store to make informed business decisions. It involves digging into metrics like sales, customer behavior, and website performance to understand what's working and what's not. This knowledge lets you optimize your marketing, improve customer experience, and ultimately increase your bottom line.

There's no ‘one size fits all’ approach concerning sales metrics and key performance indicators (KPIs). It all depends on your ability to understand, interpret, and use ecommerce metrics and KPIs to your advantage. To give you the best chances at success, the following are some of the most critical ecommerce metrics to track and assess your online store’s performance over time:

Average order value (AOV) is the average amount of money spent each time by a customer in your store. It is calculated by dividing the total revenue by the number of orders in a definite period. AOV helps you gauge your customer's typical purchasing habits, which allows you to measure and predict revenue more effectively. It also helps develop specific goals for each customer transaction.

To improve AOV, try implementing tactics that drive traffic to your ecommerce site and entice customers to boost their spending. Upselling, cross-selling, discounts, and coupons are savings opportunities that capture customer attention and increase average order size. Loyalty programs can also enhance AOV by rewarding repeat customers for spending more with your brand.

Revenue refers to the sum a business earns before deducting operating expenses and overhead costs like inventory management and shipping fees. This practical ecommerce KPI helps you understand how much money you are bringing in to accurately calculate your business profit (more on this soon!) and better gauge overall ecommerce success.

By understanding your business's month-to-month revenue, you can better decide what measures to take to improve it. These revenue-boosting measures can include raising product prices, improving AOV through upselling and discount offers, and even enhancing social media engagement and other marketing initiatives to help increase the number of customers and transactions.

Not to be confused with revenue, profit is the amount of money you get in hand. Business profit can be calculated by deducting expenses and costs from total revenue. With this ecommerce metric, you can see what's eating into your revenue — and your business's profitability — for a more informed understanding of how to boost the cash your business brings in. 

You may need to consider cutting production costs and reducing expenses or selling higher-margin products to improve profits.  You can even increase overall revenue by upping the price of your products and offering additional services. It’s important to try a variety of profit-boosting initiatives to understand better which areas of operations impact profitability the most.

Profit margin is a business metric that indicates the portion of the revenue your ecommerce business keeps after costs are deducted, expressed as a percentage.  To learn how much of your revenue is converted into profit (and determine if you can improve your margins), the profit margin is calculated by dividing profit by revenue and converting it into a percentage.

To improve profit margins, ecommerce businesses must first comprehend their overall performance and how it impacts their current profit margin. To do this yourself, track the efficiency of your business by assessing your sales, production, and inventory data, then develop stronger sales tactics and business management strategies that collectively work to improve your profit margin.

Total cost is the total amount of money (direct or indirect) spent to achieve the current revenue.  You can calculate your total costs monthly by adding your monthly fixed costs (like payroll) with your variable costs (like shipping fees). By comparing these numbers, you can see how much your costs are and where to cut corners to boost profits.

To effectively reduce your total costs, it's important to keep track of your spending habits and simplify operational areas, such as product production, wherever possible. For example, replacing costly production processes with high-quality print on demand (POD) services can drastically minimize the cost of order fulfillment while also streamlining day-to-day operations.

Sales conversion rate refers to the percentage of individuals who purchased from your store versus the total number of users who viewed your online store. This sales metric can be calculated by dividing the number of purchases by the number of recorded website sessions in a fixed period. This total is then multiplied by 100 to receive your percentage. 

If your sales conversion rate is decreasing from month to month or has suddenly dropped, you'll need to assess each stage of your sales funnel to locate and address the cause. Many factors could negatively impact your sales conversion rate, including difficult checkout processes, poor website functionality, and improperly targeted marketing efforts.

The shopping cart abandonment rate is a percentage used to identify the number of users who add items to their cart but do not finalize the purchase. This important ecommerce metric can be calculated by dividing the number of successful checkouts by the total number of filled carts in a set period and multiplying the sum by 100. 

Shopping cart abandonment is an important metric to monitor as it can help you identify and correct issues in your current customer experience that may prevent visitors from completing sales. Some common causes for shopping car abandonment include payment security concerns, lengthy checkout processes, and unanticipated payment fees and shipping costs.

Customer lifetime value (CLV) is the average amount of revenue you can expect to gain from a single customer over the lifetime of their relationship with your business. Customer lifetime value supports more effective budgeting regarding customer acquisition spending and helps you understand the level of customer loyalty your business has earned. 

To increase your CLV, you must take the time to build long-term customer relationships. Requesting customer feedback and adjusting your operations to fit their needs better is a great way of demonstrating customer appreciation and encouraging recurring purchases. Likewise, incentives such as customer loyalty program discounts can help retain customers long-term and boost CLV over time.

Customer acquisition cost (CAC) is the average amount of money you must spend to obtain a new customer. CAC is determined by dividing your total marketing and sales costs by the number of new customers gained in a fixed period. Determining the cost per acquisition helps you understand the performance of current acquisition efforts — and how much you can afford to spend on them. 

To reduce your cost per acquisition, focus on methods to bring in customers but at a smaller price point continuously. Referral programs are a cost-effective way of drawing in new customers through general word of mouth. Be sure to fully understand your customer base to help develop better-targeted marketing efforts that convert successfully.

Website traffic defines the number of daily visitors to your ecommerce site alongside the various traffic sources they originated from. These website traffic sources include search engine searches, social media platforms, email campaigns, and direct traffic from visitors who type your website URL directly into an internet browser. 

Understanding the amount of ecommerce website traffic you earn from each source allows you to better gauge which marketing channels work best for your brand and which areas could use improvement. For example, if your social media traffic is lacking, you may need to optimize and tweak any existing social campaigns to better target paying customers.

While you should keep an eye on many key performance indicators (KPIs), bounce rate is especially important. An ecommerce website’s bounce rate refers to the number of users that land on the website but exit from the store without taking action. A high bounce rate could signal specific website concerns impacting customer acquisition. 

Factors contributing to a high bounce rate include an unattractive website design, website navigation issues, and a site not properly optimized for mobile use. To encourage viewers to browse your website and find what they need to make a purchase, you must present them with an attractive, easy-to-navigate design that supports accessibility across any device.

Repeat customer rate is the percentage of customers who have made more than one purchase from your ecommerce store. The repeat customer rate can be easily calculated by dividing the number of return customers by the total number of customers and multiplying this sum by 100. 

Considering how many customers have returned to your ecommerce site for additional purchases helps you gauge the level of customer satisfaction and loyalty your brand currently boasts. If your repeat customer rate is a bit low, consider the use of retargeting ads through social media and email blasts that push previous customers or website visitors back to your site with discount incentives.

Click-through rate (CTR) is an ecommerce metric used to determine the rate at which users click on a link in your marketing materials and are successfully directed to your ecommerce site. CTR is an especially important metric, as it provides insight into the performance of your various marketing efforts, including social media ad campaigns, email marketing, and Google search engine ads. 

Most click-through rates can be found in the reporting dashboard of your marketing platform, such as Google Analytics for Google search ads. While click-through rates are typically not all that high, a low CTR may signal that your marketing campaigns are not properly reaching your target audience. You may need to adjust your campaign settings and demographics in this case.

For any ecommerce operation, one of the most dreaded KPIs we must keep an eye on is the refund and return rate. Your refund and return rate is a percentage used to determine the number of products returned versus the total amount sold in a set period. To calculate your refund and return rate percent, simply divide the units returned by the units sold and multiply this total by 100. 

Even with high sales, you may still be burdened by a high refund and return rate for various reasons. To improve refund and return rates (and secure profits), you must identify what's impacting this rate and find a solution. Such negative factors include specific product quality issues, shipping complications, and slightly too flexible return policies.

A net promoter score (NPS) is a crucial ecommerce metric for customer satisfaction and loyalty. NPS is usually calculated using a post-purchase survey that asks customers if they would recommend your brand to others ‘on a scale of 1–10.’ Answers of 9 or 10 are considered promoters, 7 or 8 would be considered neutral, and anything under 7 is viewed as a detractor.

To receive your net promoter score, deduct the total percentage of detractors from the total percentage of promoters. If you hold a negative net promoter score, you have more detractors than promoters and may need adjustments. Following up with detractors to understand their specific concerns and gain opinions on how you can improve can be helpful.

Here are five effective strategies for implementing and leveraging ecommerce analytics.

Before diving into analytics, it's essential to set measurable objectives. What are you hoping to achieve with your data? Growth? Increased customer satisfaction? Better sales conversion? By setting clear goals, you can focus your data analysis efforts towards achieving these objectives. 

Your choice of ecommerce analytics tools can significantly impact your ability to draw meaningful conclusions from your data. Choose tools that align with your ecommerce goals and strategies. Considering tools like Google Analytics and built-in platform reporting can help your business pull key metrics accurately. 

Use your analytics data to run hypothesis-based tests on your ecommerce store. This may include tweaking your product offer, adjusting pricing strategies, or altering your website design. Keep learning from these tests, and don't be afraid to pivot based on your findings. 

Analyzing data is one half of the equation; the other is acting upon the insights gained. Plan strategic actions based on your findings. This might involve improving product placement on your site, refining your marketing campaign, or launching a customer loyalty program. 

Ensure your team knows how to utilize analytics tools and understand ecommerce metrics. This knowledge will empower them to make data-driven decisions, creating a culture of accountability and progress within the organization.

As crucial as ecommerce analytics are to growth, businesses often encounter several barriers to its efficient application. Here, we'll explore some of these challenges and suggest solutions to them. 

1. Difficulty in data collection 

One of the most common challenges businesses face is the effective collection of relevant data. The enormous volume of data available through digital channels can be overwhelming, making it difficult to decide what to collect and analyze for business decisions. 

Solution: Having a precise understanding of your business objectives can help you identify the right metrics to follow. Work towards aligning your key performance indicators (KPIs) with these goals to streamline your data collection process. 

2. Lack of expertise 

Interpreting and acting upon data requires a foundation in analytical skills. The lack of in-house expertise in data analytics can pose a huge challenge for businesses that want to maximize their use of ecommerce data. 

Solution: Invest in training for your staff to augment their data handling and analytical skills. You can also consider outsourcing to specialists or companies with profound experience in ecommerce analytics, such as Gelato. 

3. Data silos 

Data silos, where information is isolated in different departments or parts of a business, can be a major obstacle to effective ecommerce analytics. This hitch can make it hard to extract, analyze, and act upon data in a timely manner. 

Solution: Creating a data integration system or adopting a comprehensive analytics platform like Gelato can help break down data silos and facilitate a smoother flow of information. 

4. Data security 

Data security is a top priority in ecommerce analytics. The risk of data breaches can prevent businesses from fully leveraging their data. 

Solution: Implement robust security measures and regularly audit your data handling processes. Choosing a reliable and secure platform like Gelato will ensure that your data is protected and that privacy regulations are adhered to.

Business metrics report the areas that matter most and help you identify challenges and potential solutions. However, that’s not the only benefit of tracking relevant ecommerce metrics. Check out these advantages!

1. Stay ahead of trends

Many ecommerce brands' success was built on staying ahead of consumer trends. Ecommerce metrics provide extensive insight into which of your products have generated the most interest. You can return to the drawing board with these details to develop new products that complement your top sellers and continuously drive interest (and profit) for your brand.

2. Make data-backed decisions

Running a business always seems like a race against limited resources. The ones that win are owners who know how to strategize and devote resources only where necessary. By tracking key ecommerce metrics, you can quickly see what's working, what's not, and what needs more effort. With this information, you can easily make better decisions to help grow your business. 

3. Gain valuable customer insights

Thousands may visit your store daily, but how do you know what products they are most interested in? With ecommerce analytics, it is possible. From repeat customer rate and customer lifetime value to return rate and net promoter score, numerous ecommerce metrics can be used to understand customer opinions, desires, and restraints. 

With this knowledge, devising a sound marketing and advertising strategy becomes easy because you know what and who to target. 

4. Optimize pricing

You don't need us to tell you how important pricing is. It could make or break your profitability. Metrics such as profit margin, total costs, and customer acquisition costs allow for easier pricing optimization by helping you understand the necessary expenses to capture customer orders and how you can properly price your products to secure the profit you want. 

5. Offer enticing deals and discounts

Most online businesses already know that offering enticing deals and discounts is a great method to attract customers and drive ecommerce sales. However, many fail to use ecommerce metrics like customer lifetime value and shopping cart abandonment rates to help determine their best options. 

Assessing ecommerce sales and revenue data allows you to see what you can afford to offer as a discount and understand which promotions perform best over time.

To benefit from ecommerce metrics, you must know how to track and monitor them properly. Fortunately, depending on the ecommerce platform you use, there are a variety of digital tools you can use to assess, track, and break down your ecommerce metrics, including: 

Google Analytics

Google Analytics is a robust data collection tool that pulls metrics from your ecommerce website and organizes insights based on how your business is performing. Connecting your ecommerce site with Google Analytics allows you to access a vast collection of customizable reports across sales funnel analysis, website traffic and conversion, and new and returning visitor insights. 

Built-in ecommerce platform reporting

For those who run their online business through an ecommerce platform, you may already have instant access to built-in ecommerce platform reporting. For example, Shopify offers its ecommerce users an extensive collection of analytics and reporting capabilities that cover a wide range of metric data. This data includes conversion rates, average order value, and website sessions by traffic source to provide users with complete visibility into each stage of their sales funnel.

Gelato App

The Gelato App is a powerful and user-friendly print on demand app that can help you manage your business and its performance and keep track of key metrics. You can also easily create and sell custom-printed products and make informed decisions to grow your business right on the app!

Gain insight into the following key metrics with the Gelato App:

• Ecommerce metrics like top-selling products, gross revenue (retail price you charge your customers, including taxes), and net profit (revenue - total cost) 

• The average order value for a definite period (gross revenue/total number of orders)

• Total costs (the amount you pay to Gelato for fulfillment and delivery of POD orders)

• Comparison between two time periods to identify recurring spikes in sales or seasonal demands

• Region-based figures to determine which regions are the most profitable and which can use more resources for improvement

You set your business apart from competitors when you smartly use all the available tools. Download and visit the Gelato App to check how you are faring and what your customers love!

Whether you sell apparel like women’s clothing or accessories like phone cases, ecommerce metrics are integral to continuously monitoring your online business's performance. The above 15 ecommerce metrics are a must-have to gauge the profitability of your online store, assess which products drive the most revenue, and identify critical areas of improvement across operations.

As you seek areas of improvement, remember that print on demand services like Gelato can help minimize production costs and create more of the products your customers love to encourage repeat purchases and drive up your average order value. And with the convenient Gelato App, you can even track the ecommerce metrics for your new products anywhere, at any time. 

Elevate your ecommerce store when you create and sell custom products with Gelato

Metrics in ecommerce are quantifiable data that can be used to measure the performance and strength of a business and its accompanying website. Metric examples include customer retention rate, return and refund rate, customer acquisition costs, and sales conversion rate. 

To accurately calculate ecommerce metrics, business owners must either follow an exact calculation method or use business management software that can do it for them. Google Analytics, built-in ecommerce platform reporting, and the Gelato App offer metric reporting capabilities that provide pre-calculated insight into these various metrics.