Ultimate List of KPIs for Retailers
Most of Website Magazine's regular readers are going to be familiar with the importance of analytics and establishing key performance indicators (KPIs), but what ultimately should they be tracking?
Key performance indicators are measurements that reveal the performance and progress of a digital enterprise, its campaigns and/or its processes. As mentioned in Website Magazine's upcoming November article "Smart KPIs for Internet Retailers," one of the most tangible benefits of working on the ‘Net is the ability to accurately, and in real-time, measure website (and operational) performance, using that data to then optimize business operations, user experience and conversion paths.
The article, which will appear in the E-Commerce Express column, provides a framework that Website Magazine readers can use to ensure that their own KPIs are appropriate, but in the end, it remains important to actually know what to measure.
In order to make this "ultimate list" of KPIs for Internet Retailers as useful as possible, we've broken down the list into three broader categories - all related to e-commerce, of course - including sales/operational, marketing/advertising and service/support. While it's impossible to list every single possible indicator of performance, let these serve as more than an introduction, and more of a guide to achieving digital success with a greater focus on analytics.
Consider these KPIs for your brand and you'll be one step closer to 'Net success.
Sales by Time
Those merchants with some record of their digital history (e.g. one that goes back 2-3 years) should consider analyzing sales by the hour, day, week, month, quarter and year. The sales by time unit KPI reveals both macro and micro trends in the market. For example, the KPI could reveal whether a partner relationship has expired, on a macro level if there is less interest in a particular product, or (on a micro-level) whether technical issues preventing orders from processing.
Average Order Value
Calculated from revenue divided by the number of transactions (and often assigned for each referrer), the average order value KPI helps brands determine whether customers are ordering more or less expensive products, influencing merchandising decisions greatly. Couple the average order size KPI with other data points including "sessions with on-site search" or "sessions with live chat" and keep track of how those digital initiatives impact gross revenue.
The most common KPI suggestion for Internet retailers is that of conversion rate and it will stay that way for the foreseeable future. Conversion rate is an important indicator of performance because it reveals so much about so many things, including the quality of referrers, user experience conditions, as well as pricing decisions. Conversion rate should always be compared closely to abandon rate and in the framework of total sessions (although it's obviously important to measure conversion rate by source as well).
There are of course myriad KPIs that can illustrate sales performance clearly to stakeholders, but as retailers may be aware or will soon discover, sales performance is greatly influenced by marketing performance.
Most e-commerce brands are going to fail because they don't have the traffic; the digital exposure on (and awareness with) the broader Web population - the audience they ultimately need to turn a profit. Retailers need to get people in the door and customers in their virtual seat (and ready to purchase).
This of course introduces channel-specific performance metrics. Merchants using email, for example, will need to be tracking open, read and click rates. Those investing in social media will need to track increases/decreases in followers, likes, retweets, +1s, pins and shares. Those e-commerce merchants that are tracking their performance in these ways, are those poised to make smart business decisions about their continuing (and increasing) investment in specific channels or tactics.
Marketing and advertising KPIs focus primarily on site traffic and the experience of consumers as they visit a website. In addition to tracking the volume of traffic (and by source), e-commerce brands should also analyze the quality, revealed in such KPIs as page views per sessions and time on site. Take it a step further and correlate these individual metrics to conversion rate (e.g. sessions with more than three pageviews without a conversion).
The savviest brands today are competing not just by price and design, but also the quality of the service and support they provide. The modern digital consumer demands (or at least appreciates) when companies go a step further and are willing to spend more when they receive an experience that meets or exceeds their expectations. Tracking support related KPIs including the volume of inbound email, phone calls, chats, etc., received by customer service teams (and measuring their impact on repeat buyers, average order value and social referrals) will provide your digital enterprise the edge it needs to compete successfully.