To maximize earnings, it's essential to improve reporting procedures and interpretation of your company's performance metrics. eCommerce reporting best practices require making the shortest work possible of the most foundational data analyses to gauge where your business is, what your goals should be, and which aspects of your business require novel funding methods to achieve those goals.
You're only guessing and putting your business at risk without numbers and actual data. If all you're measuring is the basic ROI of your business's efforts, your reporting practices have some room to improve. Tracking your company's Key Performance Indicators (KPIs) helps align your business decisions with your goals more tightly – and by funding advanced KPI-reporting programs, it will be easy, too.
eCommerce Reporting Best Practices Explained
Determining the best eCommerce reporting practices can be overwhelming, partly because of the sheer volume of data to sift through. Without a good sense of direction, it can quickly seem like an aimless exercise in crunching numbers. Beginning with the right KPIs to measure is how you ensure your reporting practices align with your company's goals and needs.
A good reporting plan depends on knowing where you're at, but for those just getting started, it can be a catch-22. Knowing where to begin requires knowing where you intend to go with your business, but directing your aim requires knowing how well each aspect of the company is performing.
The best place to start is with essential metrics that matter to any business. It will immediately narrow your focus while allowing room to develop and aim that focus better as you learn more. KPIs are the foundation upon which you can accurately gauge where you're at and form realistic goals for the future – all without the guesswork.
With a streamlined KPI-measurement process, you can take more effective steps at securing long-term growth. Your eCommerce reporting best practices for business management will become more apparent. The KPIs thatKPIs, that matter most to you, will change over time, but to begin, every eCommerce business owner should focus on the ten most essential KPI metrics listed below.
Top Ten Best Practices for eCommerce Reporting
Using KPI data can be exciting as you spontaneously start to see ways to begin leveraging more advanced knowledge of your business immediately. As it becomes more streamlined and automatic, you'll spend less time poring through data. The best eCommerce reporting tools will further improve the contextual relevancy of the data, and you'll see increasingly obvious ways to boost revenue and performance.
We'll summarize the most common KPIs and how you can use them to improve performance for maximum impact in your market.
Note that with any of these measurements, if you don't have actual data for your site(s) yet, you can use industry benchmarks to begin with as you gradually acquire your custom data.
KPI #1 – Net Profit
Net profit is a simple calculation:
Total revenue – Total expenses
The actual bottom line for any business, you must know your net profit at any given moment. Applying your net profit figure is as simple as the equation: increase revenue while reducing costs. However, how easy that actually is will vary widely according to how well you use the other metrics.
Practically every other KPI should be framed concerning how it might do one of two things:
- Increase revenue
- Reduce costs
Increasing revenue is most effectively achieved by attracting customers, boosting sales, and raising prices. You can maximize cost reduction by lowering operating costs, reducing business expenditures, and improving production efficiency. You should view any other eCommerce reporting best practices through the lens of how it affects either of these factors.
KPI #2 – Website Visitors
eCommerce businesses must know how much interest they are receiving. Set a routine to monitor web activity daily, weekly, and monthly, and note the highs and lows. This allows you to set a realistic target in your marketing strategies – and in conjunction with the more nuanced web-activity KPIs below, you'll be able to target your marketing and web design to a more significant effect.
KPI #3 – Conversion Rate
The percentage of visitors who purchase from you is essential to determine how well aligned your brand and buyer persona is with each other. Calculate it as follows:
# of buyers / Total visitors
In addition to the overall rate, you can check the conversion rate from each source (using KPI #8 below) individually.
This is a pivotal figure to reference after any changes to factors such as:
- Website development
- Marketing Campaigns
For online retailers in America, a conversion rate of 1% is considered decent, while 10% is not unheard of. On average, it's about 3%.
KPI #4 – Average Order Value (AOV)
The AOV reveals how effective each conversion is towards your net profits. Calculate it as follows:
Generated revenue/number of orders (within a period)
Check this metric every time you adjust your free delivery threshold and cross-selling practices (i.e., showing similar items to those in your customers' shopping carts), and see how much higher you can nudge the AOV. The AOV varies significantly across different industries.
KPI #5 – Cart Abandonment
Cart abandonment contributes to low conversion rates. It is the percentage of users who add items to their cart but then choose not to purchase.
Incomplete checkouts / completed checkouts
Determining when prospective customers abandon their carts can help determine why they are doing so. Then, you are better equipped to adjust your site. Common reasons for cart abandonment include:
- Lengthy registration process
- Lengthy check-out process
- Lack of trust seals or security badges
- User unfriendly website
- Region blocking
- Bloated website scripts
- Resource-intensive web design
Analytics software can tell you at exactly which point in the buyer's journey a customer chooses to abandon their cart. The average abandonment rate is 69%, higher on mobile devices.
KPI #6 – Cost per Acquisition (CPA)
The CPA tells you the average cost of acquiring each new customer.
Marketing costs / Conversions
This can be applied to your overall marketing budget and to measure the performance of individual campaigns. When compared with the AOV (Average Order Value), this helps you determine the return on investment of each customer and how much net profit you earn per acquisition, as follows:
AOV (revenue) – CPA (expense)
Use the CPA to zero in on marketing campaigns that do not have a high sales rate, which is more meaningful to your bottom line than your click-through rate. If the CPA is too high, it's a call to improve your buyer persona and marketing efforts – both of which will require more labor hours, new business tools or relationships, and strategic financing methods.
Average CPA costs are about $45–66 in eCommerce, which varies widely by the method.
KPI #7 – Bounce Rate
The bounce rate is helpful to see how many customers attempt to explore your online store but then leave.
Visitors who immediately leave / Total visitors
This helps you identify your site's problems and determine what those problems are. It can also help you zero in on more general problems outside the site, such as when out-of-stock products or other inventory issues are driving customers away.
As for web development, focus primarily on the landing page and any other page your marketing efforts direct customers to. In eCommerce, the average bounce rate is 47%, which is higher on mobile devices.
KPI #8 – Sources of Traffic and Revenue
Web analytics tools can quickly help you determine where your customers or prospective customers are coming from (e.g., search pages, email or ad click-throughs, and direct URL entries). Determining which channels drive the most traffic and revenue is essential to focus your marketing efforts more wisely.
KPI #9 – Time Spent on Site
There are two aspects to this KPI, and they are significant for eCommerce reporting best practices:
- Average page views
- Amount of time spent onsite.
Attracting not just visitors but the right visitors for your brand (as opposed to unqualified leads) is essential. Poorly used focus keywords, low site speed, and unattractive or clunky sites are common reasons customers leave sites quickly.
When correlated with your bounce rate, these figures can help you determine which site elements are not engaging or outright discouraging to your audience. It will also help you more effectively determine how to attract an audience that is a better match for your brand while also helping you find ways to keep your audience best engaged and reducing cart abandonment.
GTmetrix is a great free tool to measure your site's performance. It also provides suggestions for speeding up that performance.
KPI #10 – Ratio between New and Returning Customers
This KPI is enormously important as the cost of acquiring new customers can be up to 7 times higher than retaining existing customers (depending on the industry). The calculation is simply:
New customers / Repeat customers
Shifts in this measurement could reflect issues in your customer service or marketing and branding messages.
Funding Your Way to Better eCommerce Reporting Practices
However much effort tracking these metrics might seem, remember that there are more automated analytics tools than ever. Some are integrated platforms that automatically compile your web activity, finances, inventory, and other metrics – while other software is specific to one narrow niche. There are also free web-based tools that require more manual effort and labor costs to analyze and interpret the data.
We recommend beginning with the most streamlined suite of analytics tools so you can get started leveraging these KPIs with the most minimal learning curve. Securing the extra funding needed for advanced KPI-tracking tools will save time and translate directly to faster and more consistent revenue growth.
Onramp enables eCommerce entrepreneurs to obtain the fastest access to cash possible to expand their businesses. If you're interested in making key upgrades to your eCommerce business without tightening your margins, schedule a call today – and secure the working capital you need to grow.