E-commerce success: 10 KPIs that matter
In the increasingly fast-paced e-commerce landscape, success is not just about breaking new ground and innovative concepts. The figures are there to remind you where you stand and how you can improve. For anyone with the ambition of launching an e-commerce business, the range of key performance indicators at their disposal is a double-edged sword. It's easy to get lost in the maze and fail to track the indicator that reflects your growth curve. Choosing the right indicators to monitor is therefore the key to streamlining your operations and supporting your development.
So as not to get lost in the dozens of indicators available, let's start by looking at the top 10 that ScaleX Invest recommends.
Casting your nets: attracting future customers
1. The price of a click: Customer acquisition cost (CAC)
For any e-commerce player, understanding the financial investment required to attract new customers is a cornerstone of their strategy. The customer acquisition cost represents the investment - across all marketing channels - required to attract a new customer.
Why it matters
The balance between CAC and CLV is crucial to the solvency of your business. It determines the longevity of your relationship with new customers and defines the maximum cost your business can afford to acquire a new customer while remaining profitable. With the multi-channel nature of modern marketing, tracking and optimising CAC is more complex, but no less critical.
2. Beyond the cart: Customer Lifetime Value (CLV or LTV)
As we have seen in the 10 KPIs you need to track regarding SaaS, LTV has its place among the indicators to follow. Perhaps the most forward-looking of the e-commerce KPIs, LTV projects the total revenue a customer is expected to generate over their lifetime. It is an exploration of the depth and scope of a customer's buying potential, extending well beyond the initial transaction.
Why it matters
By estimating the future value of a customer, you can refine your marketing efforts to attract and retain the customers who are likely to bring you the most value. Understanding LTV empowers your brand to make long-term investment choices that promise substantial ROI, from customer service provisions to loyalty programmes.
3. Long term viability : LTV to CAC ratio
The LTV to CAC ratio compares the value a customer brings over their lifetime (LTV) to the cost of acquiring that customer (CAC). The ideal scenario is to have an LTV to CAC ratio greater than 1. This indicates that the value generated by a customer exceeds the cost of acquiring them.
According to the ScaleX Invest methodology applied to e-commerce, an LTV:CAC ratio in excess of 3.5 is healthy and highly recommended. From 3, the ratio is good. It means that for every euro spent on marketing to attract a customer, you get 3 back.
Why it matters
This ratio helps businesses assess the efficiency of their customer acquisition efforts. To improve this KPI, you need to focus on converting more prospects into paying customers, but also refine your targeting to concentrate your efforts.
For example, ensure that new customers quickly understand your product/service and recommend relevant improvements or complementary offers.
4. Average order value (AOV): the revenue barometer
In the quest for profitability, AOV is a driving force that should not be neglected. It represents the average amount spent by a customer on a transaction. For the informed e-merchant, this is the indicator that exerts a considerable influence on sales, offering insights into effective up-selling and cross-selling strategies.
What encourages customers to buy more? Here are just a few of the things that can boost sales:
- bundled offers
- discount thresholds
- easy access to related products.
In addition, analysing seasonal trends and the effects of promotional campaigns on average order value provides decision-makers with powerful tools to manipulate and manage their revenue streams.
Why it matters
The quest to increase AOV must be constant, as it directly increases your bottom line and boosts profitability. By encouraging customers to buy more products or higher value items in a single transaction, your business increases its sales without proportionately increasing acquisition costs.
A smooth, user-friendly shopping experience
5. Conversion rate: turning undecideds into loyal customers
Every digital entrepreneur is on a quest for conversion. It is the metric that highlights the effectiveness of your site's sales funnel. The conversion rate is the percentage of visitors who complete a desired action, usually a purchase. It's not just about catching people's eye; it's also about creating an experiential journey that leads to consumption.
Why it matters
A high conversion rate is a sign of a well-tuned user experience, a convincing product presentation and an efficient payment process. Conversely, a stagnant or falling rate can reveal friction in the sales pipeline, whether it's inconsistent messaging, poor site performance or uncompetitive pricing strategies. This KPI helps you to pinpoint critical aspects of your site and build customer confidence and satisfaction.
6. This close to the goal: shopping cart abandonment rate
At the crossroads between intention and action, the shopping cart abandonment rate is an indicator of the effectiveness of your checkout process. It indicates the percentage of potential customers who add items to their online shopping basket but leave the site without completing the purchase.
Why it matters
A high abandonment rate can be the sign of a number of pitfalls: unexpected costs at the time of payment (taxes, delivery charges, etc.), a complex payment process or even the absence of payment options. Furthermore, a transparent and fair shipping policy can not only reduce shopping cart abandonment rates, it can also be a powerful competitive advantage. Companies need to tailor their shipping strategies (several options, more or less expensive and faster or slower) to balance costs and customer expectations, ensuring that shipping costs do not become an obstacle to sales conversion.
By analysing these friction points and remedying them, a company can save a significant proportion of the sales it would otherwise have lost.
7. Bounce rate: no trampoline please
When a visitor arrives on your site and immediately leaves without taking any action, this is known as a bounce. The bounce rate indicates the percentage of single-page visits to your site, which gives an idea of the effectiveness of your landing pages and the design of your website in attracting and retaining visitors.
Why it matters
A high bounce rate is often linked to a poor user experience, irrelevant content or slow loading times, all of which point to potential conversion leakage. By looking to reduce the bounce rate, you can create a more attractive and navigable site that encourages deeper engagement and, ultimately, higher conversions.
8. In a snap: click to delivery speed
The notion of speed in e-commerce is crucial for the customer, and one of the most expected timescales is that of click to delivery speed. It measures the time that elapses between the moment of purchase and the arrival of the goods at the customer's door. This indicator is a booster of customer satisfaction and therefore of the competitive positioning of an e-commerce business.
Why it matters
For many customers, the time taken for goods to arrive can significantly impact their purchasing decisions. By utilising this KPI, you can work to enhance shipping and delivery processes to align with customer expectations, potentially leveraging it as a marketing driver for differentiation. E-commerce customers who are used to immediacy will value fast, local delivery.
Build loyalty: whoever is satisfied, comes back
9. Repeat Rate: a measure of retention
At the heart of any e-commerce business, the quest for new customers goes hand in hand with the quest to retain existing customers. The rate of repeat purchases certifies the effectiveness of your retention strategies and highlights the loyalty of your customers. Some e-commerce businesses, such as furniture manufacturers, for example, will have naturally lower repeat purchase rates due to the nature of their products.
Why it matters
An increase in the repeat purchase rate means that the quality of your products, your customer service and your post-purchase engagement efforts are resonating with consumers. A rise in this metric is synonymous with an increase in CLV (Customer Lifetime Value) and consolidates the foundations for continuous growth.
10. Bringing emotion to the brand: Net Promoter Score (NPS)
Want to take the emotional pulse of your customers? The Net Promoter Score is your key test. It's derived from the question "How likely are you to recommend our company to a friend or colleague?" and shows the emotional capital your brand has with its customers.
E-commerce companies evaluate customer satisfaction in order to define the quality of their services and improve. In most cases, they seek to obtain opinions on the purchasing experience, satisfaction with a product or service, after-sales service, intention to repeat the purchase...
With a single question, the NPS classifies respondents into two categories: detractors and promoters. Responses 6 and 7 are considered neutral. To calculate it, exclude the responses from the neutral category and then convert the number of respondents from the other two segments into a percentage. The percentage of detractors is then subtracted from the percentage of promoters. The final number is the NPS score. An NPS greater than 0 means that you have more promoters than detractors.
Let's say you conduct a survey of 132 respondents. 53 are promoters, i.e. 40%.
38 gave a score of 7 to 8, so they are ignored.
42 were detractors, i.e. 31%.
40-31 = 9%.
The NPS is 9, which is positive but still leaves room for improvement. Indeed, if we look at benchmarks by sector, we see that the e-commerce sector has an average NPS of 50.
Why it matters
These answers enable you to detect and remedy dissatisfaction and malfunctions, but also to demonstrate a certain level of customer care. Your overall NPS score underlines your company's ability to generate support and word-of-mouth. An NPS of over 30 means that your company is appreciated by its consumers, and at 70 your brand image will spread by itself thanks to your ambassadors.
You'll also need to take your geography into account, as studies (often American) can be biased because Americans eagerly respond and encourage brands. Whereas in France, people already think they're giving a good mark from 7/10, a habit inherited from school where 10/10 is a rare treat!
11. Bonus KPIs: seasonality impact on revenue
Let's finish this overview with the seasonality of consumer behaviour. This is a powerful e-commerce KPI that has a direct impact on a company's revenue streams. It requires astute analysis, as revenue fluctuations can reflect consumer preferences and buying habits at different times of the year.
Why it matters
Understanding the nuances of seasonality can mean the difference between capitalising on peak full stops and being caught out by a sudden drop in sales. E-commerce businesses that meticulously monitor and adapt to these trends can guard against potential revenue shortfalls and maximise profitability through strategic planning and stock management.
You are now ready to track your performance on an e-commerce site. At ScaleX Invest, we help financial institutions to identify the most promising tech companies using a range of criteria and KPIs. Thanks to the score delivered by ScaleX Invest, e-commerce businesses can be financed with greater confidence. In fact, over the last 10 years, only 5% of the e-commerce companies scored in the top 20% went out of business in the three years following the assessment, while 54% of the bottom 20% went bankrupt.
To find out more about our valuation methods and backtesting work, contact us!
