We recently wrote about how to avoid data overwhelm when working with web analytics. In that article, we recommended that you focus your data collection and analysis on a small set of highly targeted metrics. If you are new to web analytics, though, deciding which of these many metrics are the important KPIs.

In this article, we’ll take a beginner’s approach to web analytics, and show you how to collect, analyze and improve three key metrics. The Key Performance Indicators (KPIs) we have chosen are those that are the most important for almost all new eCommerce businesses, and working with them offers you a great way to start your journey with web analytics.

1. Gross Revenue

Gross Revenue is an important KPI for a number of reasons. Not only does it give you a snapshot of how busy your eCommerce business is, but it also combines a number of other key measures into one number.

Gross revenue can be calculated in this way:

Number of Visitors x Conversion Rate x Average Order Value = Gross Revenue

As you can see, this one measure combines a number of other values, all of which are important for your business, into one KPI that can be used to track the overall health of your site.

Tracking this KPI on an ongoing basis is also a useful way to identify where you can improve sales. If you see a sudden drop in your number of visitors, for instance, you can increase outreach or consider influencer marketing. Improving your average order value is a little more difficult since it typically requires that you up-sell existing customers, which can be a challenge for new eCommerce businesses with limited product ranges.

In fact, when it comes to improving your gross revenue, the easiest gains are most often made by improving your conversion rate, which is the reason why that’s the next KPI we look at.

2. Conversion Rate

Your conversion can be calculated simply enough: it is the percentage of your website visitors who make a purchase. Improving this percentage by even a few points can make a huge difference to the revenue (and profit) you generate, so it is critical that you track it.

Within this KPI, you can also include a number of sub-KPIs that provide more detail as to why customers are (or aren’t) making a purchase. Here are the most important:

  • You should look carefully at the journey of each visitor to your site, and the pages they visit before they make a purchase. A common mistake that new eCommerce businesses make is to distract customers too much by bombarding them with offers: instead, you should provide a clear and simple route to checkout for all your visitors.
  • Second, look carefully at where your sales are coming from. If you are making a lot of sales from a particular place, it’s time to consider marketing specifically to this audience. Keep in mind that, nowadays, plenty of people use a VPN to watch streaming services, which means a quick look at the IPs of your visitors is often enough to get a large-scale picture of your geographical reach. For example, Kodi users in Canada may choose to use a VPN which hides their location and allows them to stream various media. So while you want to track the location of your sales, be sure to use this data carefully.
  • Thirdly, focus on customers who abandon their carts without making a purchase. After all, these visitors were ready to make a purchase, and it might not take much to lure them back. Abandoning a cart can happen for a variety of reasons. It could be that the shipping costs came as a nasty surprise, which you can fix by providing information on this throughout the checkout process. Similarly, it could be that you need to provide a wider range of payment methods to make purchases as easy and as quick as possible.
  • Finally, conversion rates are dramatically affected by the speed of your website. A delay of even a few seconds can be enough for customers to get frustrated and go somewhere else, so make sure that your website is fast across all the areas you are selling to.

3. Gross Profit

Gross profit is not a KPI that can be measured merely through your web analytics software, but it is arguably the most important measure of how well your eCommerce business is doing.

Your profit margin depends on a lot of factors. Your supplier costs play a large part in how much profit you make on each sale, of course, but in this KPI you should also pay attention to the total spending for your business.

This includes your budget for digital marketing, as well as staff costs. Tracking each of these costs, and subtracting them from your gross revenue (see above) allows you to see if you are overspending on a particular budget line. On the other hand, it also allows you to see if you have the resources to expand your marketing activities or start expanding your product lines.

Web analytics data are not the only data that feed into the measurement of your gross profit, but they are an important one. As an eCommerce business, the way that your customers use your website is one of the most important measures of how well you are serving their needs. Monitoring your website performance on a daily, weekly, or monthly basis provides you with the earliest possible warning of changes in your market, and allow you to respond to them.

Final Thoughts

The three KPIs above should be the first metrics that you measure for any eCommerce business and remains important for every stage of your business development. If you get these KPIs in place at an early stage and draw on the power of web analytics to automate the collection and analysis of these data, you are putting in place processes that serve you well during your first few months, but also well into the future.

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