Understanding KPIs: What Are Key Performance Indicators?

Posted 6 years ago by Anastasia Prokofieva

Picture cruising down a highway, hands on the wheel. Speedometer reads 60 mph — perfect. Now, picture yourself as an ecommerce entrepreneur; your online store is the sleek car, with the Key Performance Indicator (KPI) dashboard as your guide toward business goals. Which KPIs should you watch to ensure you’re zooming smoothly to your targets?

Understanding and tracking the right KPIs is a non-negotiable for ecommerce success. Whether you’re just revving up your digital storefront or looking to fine-tune an established business, this deep-dive into KPIs is your roadmap to better decision-making and, ultimately, higher profits.

What Are Key Performance Indicators?

KPIs are quantifiable measures that reflect the performance of a specific aspect of your business. They can be used to track progress towards goals, identify areas for improvement, and make informed decisions based on data.

KPIs vary depending on the nature and goals of your business, but some common ones for ecommerce include:

Site Performance

Site performance includes everything that happens on your website: the amount of visitors, which pages lead to purchases in the cart, and why people leave.

With the help of analytics systems you can track:

the number of visitors (traffic) in a specific period. Pay attention to the dynamics (increase or decrease) and periods of activation visits. The indicator is useful for calculating the conversion.
traffic structure: how many visitors come to the site from different channels (social networks, mail, search engines, contextual advertising, direct referrals, etc.) in absolute numbers and percentages.
number of views per product. It is possible that visitors rarely browse the products you are betting on. In that case, it is necessary to make changes to the site: change navigation, add new product photos, reduce the price, etc.
the total number of orders in a specific period.
conversion: the ratio of orders to traffic as a percentage.
conversion for each channel: the number of orders by visitors from a certain channel compared to the number of visitors.
the proportion of new customers: the number of new customers during this period as a percentage.
pending orders (abandoned cart): the number of visitors that add a product to their cart, but do not complete the purchase.

Each KPI should be analyzed in order to understand in which areas you score high or low.

Sales Key Performance Indicators

Sales and everything connected to sales (shipping, returns, exchanges). This includes:

total orders: all orders received, not only through the website, but also through the comments in social media, offline, etc.
achieved orders: orders that have reached the destination.
the share of processed orders: the ratio of completed orders compared to the total number as a percentage.
causes of unfilled orders: this shows what problems need to be corrected first. The reasons are different: the buyer has not confirmed the order or decided not to buy, the product was not in stock, the transport company lost a parcel, etc.
delivery structure: the percentage of orders that are delivered by post or courier service. Here you can delve into the reasons for returns for each type of delivery.

Economic Indicators

This concerns the performance in terms of money and includes:

- annual sales.
- average order size: the amount of completed orders divided by the number of orders.
- profit: income minus consumption. It is useful in further calculations.
- the average profit per order: income divided by the number of completed orders.
- the cost of advertising: the percentage of income that you spend on advertising.
- the cost of attracting a buyer: the cost of advertising divided by each new customer over this period. Consider this for each advertising channel.

Ways to Use KPIs

Here are a few methods of working with performance indicators:

Regular Monitoring (Preventing Problems)

When you are receiving tons of orders and your profits are growing, you don’t think about statistics. Bad idea. KPI Monitoring helps you to notice the weaknesses and take actions. Make sure you act on time, before it’s too late.

Let’s look at an example:

When the number of orders increase, so do the number of returns. It seems logical. But when you collect the statistics and see that the percentage of returns increase as well, you have to understand the reasons. What products often return? Why? Are there more returns after a courier service? You may decide to change the shipping company, modify the product, or improve your customer service.

Solving a Problem

Any problem in the online store depends on several factors. Analyze them, find the weak spots, and correct them.

For example:

The effect of advertising fell down. You invest more money, but the number of customers no longer increases. It is necessary to analyze the KPI on advertising channels: advertising costs, orders, conversion, average check, etc.. Identify the most unprofitable channel, and either discard it or think about how to make it more effective. It may be better to target advertising messages, change the entry point to the site, or alter the advertising message.

But what about the external factors? They should also be taken into account. What if your competitor is taking all your customers? Here especially it is necessary to analyze the performance indicators. Identify your strengths and improve them. To influence external factors, you have to improve your company’s power. KPI will help you get there.

Achieving Your Goal

This is similar to the previous point. To determine the appropriate KPI goals, you have to work hard to improve each.

For example:

Your goal is to increase the conversion rates in the next quarter. Analyze the conversion rates for each sales channel and estimate an indicator of pending orders.

If people leave your website when they are asked to enter personal data, you should improve the relevant page. Maybe it is not clear where they should enter data. If they leave the payment page, maybe you should add more payment methods.

Tools to Measure KPIs

Now that you have a better understanding of the types of KPIs at play, it’s time to explore how to measure them. The simplest way is through your ecommerce platform’s analytics dashboard, which can provide real-time data on these indicators. You can also integrate third-party tools and software to track more specific KPIs (for example, to track your social media pages performance.)

Google Analytics

This popular tool offers a wide range of metrics to track, including site traffic, conversion rates, and site visitos behavior. By setting up specific goals and funnels within Google Analytics, you can gain deeper insights into your ecommerce performance.

Ecwid by Lightspeed

While Google Analytics can be used for any website, not necessarily an online store, the Ecwid by Lightspeed platform offers ecommerce-specific metrics and reports.

Ecwid is an ecommerce platform you can use to create an online store. It also provides you with in-depth analytics on sales, customers, products, and orders, so that you can easily track your store’s performance and make informed decisions.

With Ecwid, you can keep tabs on all your online store KPIs in one spot instead of juggling various tools to gather different data types. Ecwid’s reports automatically stay up-to-date and sync with your store’s info, making things easier for you.

Learn more about using Ecwid to track your online store performance in this article:

To Sum Up

It’s high time you took charge of your ecommerce fate. Start by identifying your ecommerce KPIs, familiarize yourself with the tools at your disposal, and adopt a mindset that embraces these data-driven insights. The finish line isn’t far — your KPI dashboard is waiting to show you the way.

About The Author

Anastasia Prokofieva is a content writer at Ecwid. She writes about online marketing and promotion to make entrepreneurs’ daily routine easier and more rewarding. She also has a soft spot for cats, chocolate, and making kombucha at home.