I’ve been in the eCommerce world for over 25 years now, but the fundamentals of success remain as relevant today as ever. Having spent years working closely with businesses of all shapes and sizes, I’ve seen first-hand how clarity on the right eCommerce metrics can transform online results.
I wrote a blog a few years ago about the 5 simple rules of success in eCommerce – I’ve decided to revisit this topic – not just to highlight the key performance indicators (KPIs) that matter most, but to show how focusing on them can help you turn challenges into opportunities and deliver real growth.
As in all aspects of business, there are a number of important eCommerce metrics that drive your commercial success. And as always, keeping it simple makes managing the problems and opportunities possible.
For eCommerce businesses, there are 3 key performance indicators (KPIs) that really move the needle:
1. Visitors
The number of people landing on your website.
2. Average Order Value (AOV)
The average amount a customer spends per order.
3. Conversion Rate
The percentage of visitors who turn into paying customers.
Your revenue formula is simple:
Visitors X Conversion Rate X AOV = Revenue
Each of these KPIs acts as a multiplier. Increase your visitors AND your conversion rate, and you’re on your way to growth.
Let’s break it down with an example:
Imagine you have 10,000 visitors a month, each person who buys spends an average of £50, and 3% of your visitors convert…. That’s £15,000 a month
Revenue = 10,000 x 3% x £50 = £15,000 per month
Now, if you improve your marketing and increase traffic to 12,000 visitors while keeping the other metrics the same, your revenue jumps to £18,000.
But it gets even better.
If you also improve your website performance – by better imagery, product descriptions, or faster loading times – and increase your conversion rate from 3% to 4%, your revenue will jump to £24,000.
Small improvements can lead to big results.
Allocating Your Resources Wisely
Understanding these basics helps you then understand how you might commit your resources.
Think about it this way…
If the cost of acquiring extra visitors is less than the profit they generate, it’s a no-brainer to keep up your acquisition tactics. And, of course, vice versa.
This isn’t a recipe for turning your website into a lead generation machine (talk to us about SEO or Ads for that!), but it’s a great way to understand how one KPI gears another…
For a broader perspective on measuring digital marketing success across multiple channels, check out our blog on 7 Measures of Success for Your Digital Marketing.
What Does ‘Good’ Look Like?
To help you benchmark your success, here are the average UK eCommerce conversion rates by industry (2023):
- Retail/Fashion: 1.5%–2.5%
- Health & Beauty: 2.8%–3.5%
- Home & Garden: 1.8%–2.3%
- Food & Grocery: 3%–5%
- Luxury Goods: 0.8%–1.5%
- Electronics: 1.2%–2.0%
- Travel & Tourism: 2%–3%
If you want to know more about conversion rates, Shopify often publish useful data.
Common Mistakes
Incorrect balance between Brand and Performance Marketing
Brand Marketing is critical in creating awareness, and building “know, like and trust” – however, people who are getting to know you are much less likely to click than people who are asking a question with strong buying “intent”. Investing insufficient activity in harnessing commercial or transactional intents will drive more traffic to your site.
Find out more about Inbound Marketing
Not focusing on target Buyer Persona(s)
It’s easy to waste your precious marketing budget getting anybody and everybody to your website. If you are getting irrelevant traffic, your engagement statistics will drop, and so will your domain authority (so you’ll rank lower in Google). If you are spending money on Ads without refining your persona, you’ll be paying for clicks from people who’ll never convert. Well targeted personas will help you grow the relevancy of your site visitors to that your conversion rate doesn’t drop.
Find out how to create useful Buyer Personas
Creating offers that don’t drive volume
If you want to drive visitors and conversion, you need a killer offer, right? Absolutely! But too often we see offers that don’t increase the volume of sales sufficiently to cover the drop in margin. Run the maths for your offers so that you know the volume uplift you need to break even. Similarly, consider a threshold spend so that your AOV doesn’t drop.
Focus on Continuous Improvement
Focus on Continuous ImprovementOne tip I would give is… compare your current conversion rate against your industry average to give you a sense of what is available, BUT never stop striving for continuous improvement – the only true measure of improvement is against yourself..
Small changes in areas like checkout experience, product page optimisation, and abandoned cart recovery can yield significant results for your business.
Your best route to success?
Constantly analyse and review your shop and learn from the competition if they are beating you. We aren’t talking about huge changes – it’s all about making small, incremental improvements that have a meaningful impact on your eCommerce metrics.
What’s Next?
In future blogs, we’ll cover:
1 – How to affect your conversion rate
2 – How to determine how much you should be spending on PPC
Keep an eye out – we’ve got plenty more tips to share.
