Today’s article on A Quick & Easy Guide to Ecommerce Analytics is brought to you by Ramon Pedrollo Bez – Content Marketing Manger at Compass.
Let’s welcome Ramon in our blog, and learn from her/his invaluable experience!
A regular online store generates hundreds of daily data points in their Ecommerce Analytics, complicating decision making instead of facilitating it. Even seasoned entrepreneurs often struggle to make sense of Google Analytics.
This guide, designed for busy online store managers and entrepreneurs, will identify the terms you need to know, define the key metrics you should be looking at, and let you know when you should be looking at them.
We’ve divided the most important metrics into three categories, each matching a stage in your store’s development. Simply identify which stage your company is in and measure accordingly.
Whenever possible, each metric is accompanied by an industry benchmark. This will help you make analytics actionable: simply compare your number with the benchmark to identify how your store is doing and start making improvements.
Why Benchmarks are Important
Before we get to the metrics, it’s important to understand the importance of business benchmarks. Fortune 500 companies rely on benchmark reports that are worth thousands of dollars to compare their numbers with their competition and learn about their strengths and weaknesses.
Small and medium-sized online stores, however, rarely have access to such data. This makes survival more difficult since they have to rely on intuition and luck to successfully manage their companies. Compass is on a mission to level the playing field by providing SMEs with personalized, automated benchmarks, helping them make better financial decisions based on data.
Let’s start at the beginning:
1. Validation Metrics
A store is in Validation Stage if it’s new and still looking for the right market for their product(s), or the right product(s) for their target market.
Typically, if you’re struggling to make your first sales, you’re still in the Validation Phase. In this stage, there are four metrics you need to look at:
- Returning Visitors: The percentage of users who return to your site after their first visit. It’s a clear indication that people liked what they saw.
– Benchmark: According to Compass’ studies, a good ratio of returning visitors to new visitors is above 20%.
– How to measure: Google Analytics shows a chart of New vs. Returning visitors in its Audience Overview report. Compass’s Benchmark Report also tracks it and benchmarks it against the best stores in your segment.
Screenshot of Compass’s Benchmark Report
- Time on site: The average amount of time users spend on your site per visit. It depends on the product, but in general, spending some time on a website shows that people are having a good experience.
– Benchmark: According to our analysis, a good average time on site is above 120 seconds.
- Pages per visit: The average number of pages that users navigate on your site in a single visit.
– Benchmark: A number of pages per visit higher than 2.7 indicates that people are interested in what you are selling.
- Bounce rate: The percentage of users who visit a single page on your website and then leave before taking any action.
– Benchmark: A high bounce rate (usually above 57%) means that your site is not giving a good first impression.
Screenshot of Google Analytics’ Audience Overview report
2. Efficiency Metrics
If your store is above average in all Validation Metrics, it’s time to move on to the Efficiency Phase. It’s where you start optimizing your website for sales growth.
During the Efficiency Phase, your goal is to make sure that your website is clear, easy to navigate, and gives visitors the best possible shopping experience.
In this stage, there are four metrics you need to look at:
- Conversion Rate: The percentage of people that visited your website and either signed up or made a purchase is your Conversion Rate. This is important because the lower your conversion rate is, the more expensive and time consuming it will be to make a sale.
- Benchmark: The average conversion rate in ecommerce is 1.33%. Top performers have a 3.6% average conversion rate.
- How to measure: First, set up your Ecommerce Tracking. Then view your Conversion Rate in Google Analytics’ Goals and benchmark it against similar stores in Compass’s Benchmark report.
- Page Load Time: Every second counts when it comes to the time it takes for a page to load and if your visitors can’t find what they’re looking for, it will have a direct negative effect on business results.
- Benchmark: An average Page Load time above 6 seconds is a reason for concern.
- How to measure: In Google Analytics’ Site Speed report.
- CAC / LTV: If you’re spending more money than you’re making, your business won’t be profitable. So the metric that matters most to you is the ratio between Customer Lifetime Value (LTV) and Customer Acquisition Cost (CAC).
- Benchmark: Every store is different. To be profitable, always keep CAC lower than LTV.
- How to measure: Compass’s LTV / CAC report calculates your LTV / CAC ratio automatically.
3. Scaling Metrics
In ecommerce, scaling means growing sales. There’s nothing wrong with having a slow-growing company that simply helps pay the bills. But if you have a popular product and a lot of people want it, why not try to sell as much as possible?
As you’re scaling growth, the main business metrics you need to watch are:
- Transactions: Make sure growth is steady by improving your number of transactions weekly or even daily.
– Benchmark: The average number of transactions in ecommerce varies according to seasonality. See more below.
– How to measure: The Compass Forecast report takes your product type into consideration to forecast how much your industry will grow in the coming period.
- Average Transaction Value (ATV): Selling more items or higher-priced products within a transaction will help you improve your overall business performance.
– Benchmark: ATV varies greatly, depending on the type of product you’re selling.
– How to measure: Compass’s Executive report calculates your ATV automatically and compares it against companies that are similar to yours.
Screenshot of Compass’s Acquisition Report
- Revenue: Make sure that your monthly revenue numbers are going up.
– Benchmark: The average revenue in ecommerce varies according to company size and seasonality. See more below.
– How to measure: The Compass Forecast report takes your product type into consideration to forecast how much your industry will grow in revenue in the coming period.
- Unique Visitors: If all your other metrics are trending up, then your unique number of visitors will naturally reflect more sales and revenue. Just be careful not to pay too much attention to this metric before the above numbers are also positive.
– Benchmark: The average number of unique visitors in ecommerce varies according to company size and seasonality.
Apply Analytics to Your Company’s Routine
Successful companies regularly use data to unlock bottlenecks and find insights to grow their businesses using a simple three-step strategy to generate sustainable growth:
- They look at the above metrics weekly
- They act on their problematic metrics by brainstorming and testing solutions
- They compare their metrics against their previous numbers and the market to see if there’s been improvement
Questions? Join Compass’s Ecommerce Analytics community on Facebook.
We feel honoured to have Ramon’s insights featured in our blog, and we are incredibly thankful for the knowledge he has shared with us.
About the author: Ramon is a Content Marketing Manager at Compass. He has ten years of experience using data to find opportunities for sustainable and profitable growth. He’s worked for online companies of various sizes, from startups to multi-million dollar businesses. In his last company, TourRadar, he helped raise revenues from $500k to $1.2M in under a year.