March 7, 2021

A review and analysis of Ecommerce KPIs

Dr Peter Mowforth

Whatever you do, it’s always good to have goals, targets, objectives. It’s the basis for measuring both your own performance as well as knowing how well your efforts stack up against the competition.Having these targets is never more necessary than when running an ecommerce business. So …. What should they be?I typed “ecommerce KPIs” into Google and hundreds of articles appeared. Here are the top seven results in the Google:

To see if there was a consensus, I pooled results from these seven articles. The following KPI list has been ordered in terms of which KPIs are mentioned most often:

Order size, Conversion rate, Abandonment Rate and Customer Lifetime Value were the most frequently agreed KPIs .Cost of Goods Sold, Return On Ad Spend, Gross Profit, Customer Acquisition Cost and Total Traffic were each mentioned 3 times within the top seven documents.The remaining 42 KPIs showed little overlap within the group.The first conclusion is that there was not one KPI that everyone agreed on. Interestingly, there were a large number around which there was no consensus. This lack of consensus is surprising. Many articles involve research while even more simply plagiarise content from other sources. Looking at these top seven suggests that neither have taken place.Many of the KPI’s in these top seven ranked articles are only mentioned once. Many of these KPIs are not easily actionable. Even if they were, I seriously doubt that much business improvement would take place. For example, the number of page views per visit or the time taken to purchase an item can result from a wide range of extraneous factors. These may well have little to do with how well the website converts sales. This really does seem like a case of measuring things simply because they can be measured.The key word in KPI is the word ‘Key’. Measuring things for the sake of measuring things has no value.The only purpose of having a KPI is that the information it reveals should quickly, clearly and effectively direct you to an action that will improve the business.In my experience, business owners or their equivalent tend to focus on sales ahead of everything else. It’s all about the amount of money in the till. If sales increase then everyone is happy, if sales go down then there is an increase in pressure  on those expected to be delivering sales success.While sales performance alone may initially appear to be the best focus, I’m reminded of an ald business adage about sales being vanity while profit is sanity.Of all the businesses we work with at INDEZ, it’s the ones that focus on maximising profit above all else are the ones that are most successful in the long run. An interesting exercise is to look through the list of KPIs in the table and interpret each in terms of simple, quick and effective ways to improve profit. Doing this can bring a much sharper focus to the business. From my perspective, if the correlation with profit is not strong and immediate then that’s a KPI best ignored.Secondary KPIs such as Return on Ad Spend, Order Size or Customer Lifetime Value certainly help focus corrective actions onto particular parts of the business. However, unless the actionable tasks that result from following these KPIs are profit-led then they are unlikely to be optimal for the business.Back to the original question, what’s the most important KPI for ecommerce? It’s profit, pure and simple.

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