While running an online store can prove to be lucrative, it’s by no means passive income. It takes consistency, determination and perseverance. With all the tasks associated with building a retail business, there’s one resource that can make managing its success a lot easier.
Key Performance Indicators are tools used specifically as a growth metric by setting detailed goals throughout the various aspects of your business.
The most impactful key performance indicators fall into the customer service, marketing, sales and shipping categories and they’re all based on data. Data should be the major driver of every business-related decision, because well let’s face it-the numbers don’t lie. These insights should motivate you as a business owner to make informed decisions that lay out the next steps in growing your online store.
In particular, understanding how to set up Key Performance Indicators is critical as it gives you valuable insight into the way your company is running. Are there gaps or inefficiencies? Are you noticing a significant bounce rate?
Understanding KPIs allows you to effectively pivot when you need to achieve strategic goals, such as boosting conversion rates, effective marketing and customer service satisfaction, all which leads to increased revenue.
KPIs are one of the most valuable tools an ecommerce owner can use to keep the store’s team accountable, attentive and united. Below are examples of Key Performance Indicators and how to correctly implement them within your ecommerce store to increase business growth.
What are ecommerce KPIs?
Ecommerce KPIs are quantifiable measurements or data points that help gauge performance of your specific business goals. It’s basically a milestone that your business can use to determine progress on the path to retail success. KPIs typically support different goals of the company and are regularly monitored.
In essence, a successful KPI has a specific target and provides a timeline for an accomplished objective. Tracking KPIs encourage better-informed decisions surrounding your ecommerce brand and there’s a myriad of tracking metrics available to help your online store grow.
KPIs give ecommerce owners an accurate and comprehensive snapshot of overall performance. They provide a roadmap for where you want to go and how you’re going to get there, allowing you to shift along the way as it makes sense for your business.
In example, perhaps you notice that while you’ve got a loyal customer base your business is no longer converting new consumers. This data would inform you to consider an increase in ad spending. In contrast, if demand has outgrown your supply you’ll be able to stay ahead of projections and reorder more inventory sooner.
KPIs should relate to tracking and sales growth. In selecting KPIs consider your focus-such as increasing online sales through conversion rate, consumer retention and average order values.
Determining what makes the most sense for your business can successfully influence customer behavior. A conversion rate typically speaks to the percentage of visitors that “convert” to consumers by making a purchase.
Decrease bounce rates
The bounce rate is determined by the percentage of visitors that leave a webpage without taking an action, such as clicking a link or making a purchase. If you have a high bounce rate it could mean that the site itself or specific pages on your site may have user experience issues such as content, form fields, page layout or copywriting.
Inventory turnover rate
Inventory turnover rate measures how many times inventory is sold, then replaced within a certain timeframe. Understanding your average inventory turnover by SKU relates to warehousing costs and sales.
With inventory levels constantly fluctuating, real-time inventory tracking helps to ensure accuracy and therefore reveal whether or not your supply can meet the demand.
Decrease return rate
Implementing Key Performance Indicators in this area can help reduce the number of returns after purchase. This can be done by writing clear and concise product descriptions, conducting regular product testing and identifying commonalities with returned items so you can make improvements, discount or discontinue them.
Boost order picking accuracy
Order picking accuracy refers to the percentage of orders picked without error. Warehouse picking is a vital aspect of the ecommerce fulfillment process and highly dependent on warehouse picking efficiency. This directly impacts your brand’s credibility and consumer relationships.
A well-calculated and managed set of KPIs can teach you how to run your ecommerce business like a well-oiled machine. While certain key performance indicators will be different based on the goals of the business, all KPIs have the same objective to improve online store growth.
Taking time to develop specific goals for your online store is crucial and staying organized in the process is key. When you implement KPIs into your ecommerce business, you’re not just measuring goals, you’re creating a deeper understanding of your business and setting it up for greater success.
Partnering with an experienced 3PL provider like Fulex can help you determine the best KPIs for your business and better prepare you for what’s to come.