During a pandemic is a difficult time to be an eCommerce startup. In normal circumstances, a new business can assess its viability by looking at the bottom line, but with the economy currently on the rocks, it is particularly important to look at broader metrics to measure a website’s performance.
Put simply, a metric is just a quantifiable and consistently defined measurement. They help businesses make decisions to ultimately maximise their profitability. They can include everything from conversion rate to the average order value to cart abandonment rate to reach.
This week we are looking at three top metrics for eCommerce startups.
Checkout Abandonment Rate
Last month we looked at What checkout practices are you using? because staggeringly 68% of people abandon their shopping cart online. This number must be reduced and converted to sales. Factors that lead to abandonment are hidden costs, such as unexpected shipping expenses, followed by unnecessarily cumbersome registration requirements, a lack of trust in the website, and insufficient payment or delivery options.
By tracking the checkout abandonment rate you can see if this is a problem, and take action. Considerations for reducing this rate are: displaying full shipping costs as early as possible and even offering free shipping; allowing guest login purchases; displaying your site’s security credentials to build trust; making the checkout experience with a clean design and idiot proof; and including product reviews and upsell recommendations.
If we hadn’t just written a blog about checkouts, this would have been the first metric listed. This is what really matters: how many of your visitors are you able to convert into customers. This is the metric site managers and owners want to know.
The Adobe Digital Index 2020 report gives an indication of the conversion rates that can be expected by different sectors. The overall average is 3%, while gifts (4.9%), health & pharmacy (4.6%), apparel & footwear (4.2%) lead the charge. The laggards are consumer electronics (1.4%), DIY & tools (1.7%) and automotive (2.2%).
Last November Episerver provided insight on conversion rates by traffic source. Unsurprisingly conversion rates were higher where customers had higher intent. The conversion rates it found were: paid search (2.9%), organic search (2.8%), referral (2.6%), email (2.3%), direct (2.0%), social (1.0%) and display (0.7%).
To achieve Conversion Rate Optimisation it is important to consider your sales funnel, the visitor behaviour on site, page views and exit pages. Think about the journey your customer goes on from first becoming aware of your product until reaching the checkout. Are there obstacles to remove? Could this process be made smoother?
Cost per Acquisition
One of the key challenges facing a startup is figuring out which approach to online marketing will be most successful. As a result, most try a little bit of everything. With your resources already likely stretched thin by just getting your business running, it is crucial to quickly and efficiently access your campaigns to decide which are the best to pursue further. This is where the cost per acquisition is so valuable.
As the name suggests, this metric is simply the campaign cost divided by the number of acquisitions as a result of it. It is important to monitor your CPA data over time so that you can first separate the performing campaigns from those that are best discontinued, and then also so you can track improvements in campaigns you are continuing with.
Often small changes to an ad can have a significant impact on its success, so consider A/B testing with tweaks to the copy, imagining or the call to action, then compare the CPA to refine ongoing efforts. Additionally, the CPA can be improved by segmenting campaigns to target specific groups of potential customers rather than blanket campaigns.
Assessing CPA must also give some consideration to the average order value. A CPA of $25 is fine if your AOV is $100 – not so much if it’s $30.
There are many more metrics that you can consider, such as retention rate, reach, refund and return rate, best-performing products and categories, and average profit margin. We’ve suggested these few as key considerations for startups, but even if you’re an established eCommerce business it’s worth taking a moment to consider which metrics you should focus on to help your business develop.
Get in touch with our team and we can talk to you about this or any eCommerce questions you may have.