Top 8 Metrics and KPIs Important for Ecommerce Store Owners

This is a guest post by Natalie Pavlovskaya of MageWorx, a Magento Ecommerce development company.

Data! Data! Data! I can’t make bricks without clay!” – Sir Arthur Conan Doyle

Like Sherlock Holmes who couldn’t build any theory or draw any conclusion without the sufficient amount of data, an ecommerce store owner also needs to have a solid foundation of data to better understand and successfully manage her business.

However, while data is important, the right data is essential. With so much information available from a wide array of sources: your ecommerce platform, Google Analytics and other analytical services – it’s so easy to get buried under an avalanche of reports, stats and numbers and lose track of what is really important.

In this post I’ll define 8 most important metrics and KPIs every ecommerce store owner should keep an eye on to have better results in sales, marketing and customer service.

Average Order Value (AOV)

AOV is considered a key metric by many online retailers, because the higher you can encourage AOV to be, the more income your store will get.

The basic calculation is: (Sum of Revenue Generated)/(# of Orders) = Average Order Value

So, let’s say you have 285 orders combined total $11.575; divide 11.575 by 285 and get your average order value – $40.61

The tricky point here is that Google Analytics doesn’t track all the transactions of your store, so to have the full picture of your sales you need to use the tools that will help you get 100% data (like RJMetrics).

What you can do to increase order size value.Offer free delivery on all orders over $x, bundle deals, implement suggested selling and many more.

Conversion Rate

The conversion rate tells how effective is your store at closing deals.

The basic calculation is: (Number of Sales) / (Number of Visits) = Conversion Rate

For example, your store is visited 5000 times and 200 of those visits end in a sale, you have a 4% conversion rate. But once again, be accurate with the number of missing transactions you receive by the Google Analytics.

According to the Nielsen Norman Group, the average conversion rate for eCommerce stores in 2014 is 3%. Depending on what you’re counting, a good conversion rate is usually in the 1–10% range. If you have less than 1% you might have problems.

Pulling site usability and design, pricing, product copy or developing a strong advertising campaign can help you increase conversion rates.

Bounce Rate

Bounce Rate is a percentage of visitors who leave your site immediately, probably because they didn’t find what they were looking or the website was too complicated/annoying to use.

The basic calculation is: (Number of visitors who leave immediately) / (Total number of visitors) = Bounce Rate

High bounce rate is a conversion killer. If the bounce rate for your landing pages is high (80%+) you need to fix it: attract the right visitors with the right keywords, improve usability, use good layout, provide valuable & unique content.

Shopping Cart Abandonment Rate

According to a Baymard Institute, the average shopping cart abandonment rate is 68%.

The basic calculation is: (#of people who don’t complete checkout) / (# of people who start checkout) = Shopping Cart Abandonment Rate

As an example, if 500 people add items to carts, but only 100 actually purchase them, then we have the following picture:

Purchases not completed: 500 -100 = 400

Shopping Cart Abandonment Rate: 400/500 = 80%

If your site visitors put an item in their carts but stop along the way there could be several reasons for that: something took their mind off (maybe the dog needed to go out) or they found a form too long/confusing/complicated. The first one you can’t control, the second you can.

In Google Analytics, go to the Goals->Funnel Visualization to understand where exactly visitors leave the checkout process and why it’s happening. Here’re some ideas for checkout abandonment rate improvement:

  1. Remove fields from the too long registration form
  2. Add security badges and trust seals
  3. Be transparent about shipping costs
  4. Reduce checkout steps
  5. Start abandoned cart recovery campaign

Cost per Acquisition

Cost per Acquisition is a critical marketing metric. It can tell you which campaigns can drive your sales and which will become a costly pile.

The basic calculation is: (Total Cost of Marketing Activities) / (# of Conversions) = Cost per Acquisition

In other words, CPA tells you how much you need to spend to get a paying customer. Why is it so important? Because it helps you determine the true return on investment. In the end,if a campaign brings you only clicks but no orders, it’s not successful.

You may employ different methods to bring in new customers: paid campaigns, SEO, social media ads, high-quality content.

And the question is how can you reduce Cost Per Acquisition? Try to optimize your campaigns’ settings, pause all unprofitable campaigns, fix tracking issues and use other methods of acquisition reduction.

Traffic

Where does your audience come from? Which channels produce the most customers? What social networks, keywords work best for your business? Knowing all this data will help you get the broad picture about your most high-performing and under-utilized channels.

If you’ve recently launched an online store, you should watch these metrics:

  • Traffic-sources/channels
  • Unique visitors
  • Visitors-per-source/channel
  • Bounce rate
  • Branded vs non-branded keywords

Net Profit

Net Profit is the actual amount of profit a business generates after all expenses. It tells you the profitability of your ecommerce business after taking all costs into account.

The basic calculation is: (Total Revenue) – (Total Expenses) = Net Profit

To increase Net Profit, businesses need to increase their revenue and decrease their expenses. You can lower expenses by improving the efficiency of production or making fewer purchases. You can increase revenue by attracting new clients, raising prices or vice versa making sales.

Customer Lifetime Value (LTV)

Customer Lifetime Value measures the total amount of money a customer spends in a store during his relationship with it.

Why does it matter? The main reason why is that you should be earning more from your customers than the actual cost you spend to acquire them. In other words, if it costs you $100 to acquire a customer, you should develop a plan to make this $100 off of that customer within the next year.

There are several different methods of calculating customer lifetime value. I will stick the very basic LTV equation: (Average Order Value) x (# of Repeat Sales) x (Average Retention Time)

As an example, let’s say you have 100 customers. Each of them spends on average $55.50 and 30 of those customers have come back on average 3 times a year. You expect to retain those customers for 2 years. This is what you’ve got: (55.50) x (3) x (2) = $277.50

Here are a few strategies for boosting Customer Lifetime Value:

  1. 94% of businesses believe that personalization is critical to company’s success. So use the customer’s name and recommendations to reflect previous behavior.
  2. Focus on customer service – offer free updates and lifetime assistance, be available when customers need you, provide multichannel support, analyze and improve your emails, make customer service easy.
  3. Reward loyalty – early access to sales, an exclusive first look at new products, exclusively inform about the upcoming sales, let them have their hands on your brand-new products, give away free items for every x order, reward them with bonus points and so on.
  4. Incorporate customer feedback to improve everything from design and product pages to user experience and customer service.
  5. Incorporate up-sells into your offers.
  6. Offer exclusive deals for social shoppers.
  7. Create content that educates and motivates.

Tools for Tracking Your Ecommerce Metrics and KPIs

The key of getting valuable data from all these metrics is to have access to them in the first place. Of course, there a number of tools out there, so to help you sorting out the best ones we offer you our favorite variants.

1. Google Analytics

No need to introduce Google Analytics. With this tool you can easily track most of the metrics of your site, better understand users’ behavior and monitor the effectiveness of your KPIs and campaigns.

The only “but” lies in missing transactions, no information towards Net Profit, inaccurate traffic data and issues with refunds, coupons and taxes tracking.

2. RJMetrics

RJMetrics collects all your data: web traffic analytics, data base, email marketing, customer support, ad platforms and more.

Data from multiple resources gets compiled together, so you can analyze your stats whenever you want. You can fully customize your reports and share it with your coworkers, partners or clients.

The Bottom Line

Choosing the correct KPI’s begins with clearly defining the goals of a business. What KPIs you settle on will depend on your business model.

Also, it’s important to remember what works for one business might not work for another, because usually businesses drive different objectives and different KPIs.

Don’t just track KPIs for no good reason, because you will lose track of the goals that matter. And of course choose a reliable tool to collect your data.

What KPIs do you keep an eye on for your e-commerce store and what tools do you use to track the key metrics of your site? Post your thoughts in the comments. 

Chinese New Year and Marketing Opportunity

The Chinese New Year Travel Rush, known as ‘Spring Movement’ (春运 Chunyun), usually begins 15 days ahead of Lunar New Year’s Day and lasts for about 40 days (usually from mid-January to late February).

This year an estimated 450-500 million Chinese citizens are expected to travel to their home towns to spend China’s biggest and longest holiday with their families.

This huge holiday presents a great opportunity for savy marketers tapping into the largest consumer market in the world. The mass uptake of transport orientated advertising, e-hongbaos, Chinese tourists making trips overseas and novelty items that cash in on ‘the year of the Rooster’ are not to be under-estimated in a country prioritizing this time of year and the unique Chinese cultural practices surrounding it. For international brands it is important to stay ontop of these trends.

Advertising on public transport

CNY sees the largest mass migration of human beings on the planet, it is the longest and highest annual period of transport usage anywhere in the world. In 2016, it was estimated that Chinese travelers made around 2.9 billion trips in total during the 40-day period.

This widespread use of public transport, particularly the bullet train network, represents a huge opportunity for advertisers. The modern CRP train network now boast digital screens, placed in the back of seats. Digital ads are screened between content played with interactive QR code based ads encouraging users to scan and interact. Whilst on long journeys across China (which can be up to 15 hours), there is a relatively captive market with a lot of time on their hands.

Metro systems in the larger cities see increased usage as they effectively act as the major transport hubs. The metro in both Beijing and Shanghai are now implementing LED ad boards which are built into the tunnels and spaced out correctly to create moving, digital displays. The footfall and exposure will be much higher at this time of year.

Vehicle usage increases by four times on the roads so large physical billboards are erected at busy intersections, although this is costly it certainly results in high levels of traffic, if you excuse the pun..

E-Hongbaos

‘Hongbao’ is the infamous ‘red envelope’ that is traditionally presented at this time. It is an envelope filled with cash and reflects good will and prosperous fortune for the year ahead.

In the digital age e-versions are now hugely popular with Alipay, the largest third party payment system in China encouraging users to send their red envelopes via their APP. Users then receive the money into their account. To incentivize users last year Alipay gave away millions of dollars in free prizes for users who used their e-hongbao service.

WeChat are also hot on their heels with their e-wallet service. Users send hongbaos via personal chat or they can be posted in a group with a random or equal allocation of the total figure shared to everyone who opens it. It has not surprisingly been a way of motivating users to engage with brands on the social network by sharing their posts and attracting followers.

This is such a popular phenomenon that Alipay are now launching a ‘Pokemon Go’ style augmented reality game where users interact with the physical world and locations around them (based on GPS) to locate hongbaos. This presents huge opportunites for O2O, that is online to offline based marketing and vice versa.

E-commerce, users with spare time shop online.

Alibaba, the largest e-commerce player in China have developed the largest e-commerce infrastructure in the world. This includes reaching to smaller 2nd and 3rd tier cities. In the run up to CNY shoppers will order to deliver to their homes in more rural areas and the smaller cites. Alibaba will typically see an increase in orders before the festival begins, with the improved road network, delivery fleet and internet penetration rate China has become more connected than ever before. Digital ecommerce facilitates shopping for consumers across the country, not just those in the large, 1st tier cosmopolitan cities. This also benefits cross-border ecommerce which has become the key infrastructure for sales for international brands. With large families giving gifts in the form of hongbaos e-retail also typically spikes just after the CNY period.

Chinese Tourists

Then of course with this being the longest holiday there is the opportunity to travel. Ctrip, the largest travel provider in mainland, reported there will be 6 million outbound trips this year. Catering for Chinese visitors at this time is important, many destinations now offer special New Year dinners and events in hotels and destinations around the globe.

The most popular destinations for tourists are South Korea, Thailand, Japan, US, Singapore, Australia and Indonesia. The focus still tends to be on Asian countries that are closer and more convenient in terms of location. Having said this, as disposable incomes keep rising you expect to see the Chinese middle class choosing luxurious destinations further away in the western hemisphere.

 

‘Year of the Rooster’ products

This is the year of the Rooster, many novelty product variations around this sell very well. Limited editions versions or packaging is a good move. Features and games based around this theme can also be launched to drive traffic online and up-promote Rooster related content. The symbolism of each animal is important with the Chinese being associated with an animal from birth based on which year they were born. Special offers or rewards for those born in this animal year remain popular with brands.

 

To conclude it is important to capitalize on such seasonal trends as CNY. The Chinese greatly appreciate such tailored marketing whilst the mass movement, travel trends, hongbao culture and large gatherings of families in their home towns can be tapped into by savy marketers operating in China.

Benji is a digital specialist based in Shanghai, for more information see his website here.

 

AMZN Crushing Mobile

As BI reports, Amazon is dominating the mobile commerce space. Oppenheimer highlighted by just how much saying …“At the end of 2014, Amazon had roughly the same number of mobile unique visitors as Walmart and eBay, in the US. As of December 2016, Amazon has more unique visitors than the apps of those two companies’ combined,”.

And outside of Walmart and Ebay, the rest of the entire retail industry is way behind to the point you could be forgiven for writing them off entirely in the future of mobile commerce:

amzn-mob

So we have an Amazon dominated mobile commerce landscape in the near future. But long-term, perhaps as has always happened, the Internet will throw something new at us.

Chinese brick and mortar is crumbling: the future is all digital!

Benji is a digital marketing specialist based in Shanghai, he writes extensively on digital strategy in China and is passionate about providing solutions for western businesses looking to expand into the aptly named ‘mysterious orient’. For more information see his blog and website here.

Image result for crumbling wakk

Traditional retail shopping in China is in decline alongside the continued growth of e-retail, online activity and digital spending generally. Retail revenue is falling by 15% year on year whilst the digital market grows by 25% per year. Unless businesses realize that the future is all digital they will incur the costs of not developing with the times.

Many malls with mainstream brands are struggling to generate enough revenue and attract a high footfall. There are also an increasing number of ‘ghost’ shopping areas, with many of the entrepreneurial peasant class opening shops with all their family savings only to find themselves closing within a year, the human cost is high. Small businesses are always hit hardest.

It is vital for western businesses to invest in digital first and foremost, ‘clicks not bricks’ should be your new mantra. There will always be some demand for physical shopping but those stores attracting the highest footfall are also implementing successful marketing campaigns on the Chinese internet, digital will always be a key component.

So why is traditional shopping on the decline and online now the solution?

1)      Convenience

The largest urban areas are increasingly polluted, congested and affected by overstretched public services, it is increasingly inconvenient to travel to shop, especially because of the size of the country. E-commerce offers an infinitely faster process with quality platforms such as ‘Tmall’ associated with genuine brands in a market known for counterfeits. Even if users are looking for copycat products platforms such as ‘Taobao’ are renowned for selling everything under the sun too. Shopping online is simply more convenient with quality not being sacrificed.

2)      Pace of life

Fast paced, frenetic modern China is still on an upward trajectory, this is a country (especially on the east coast) growing in a spectacular way. The new wave of Chinese careerists work hard and long hours, therefore the ease of e-commerce services combined with the speed of purchasing is a key factor. Online shopping is largely facilitated by the breakneck speed of modern China, it is a response to changing consumer habits.

3)      Alibaba have developed world leading e-commerce platforms

There is the quality of Chinese e-commerce to also consider. Retail outlets are always limited by where they can locate, the space available and high rental costs. Alibaba however grew online without such burdens and developed a world leading network and series of platforms which facilitated this move to digital e-commerce. Tmall, their flagship site is hosting official branded ‘stores’, it is popular with international brands as their target market regularly shop here. ‘Alipay’ the companies payment system also facilities cross border commerce with both RMB and international payments accepted.

4)      The nationwide e-commerce infrastructure has grown

With a select number of tier 1 cities boasting the best in shopping services other tier 2 and 3 urbanites were previously left out. Now however with the growth of Alibaba’s national delivery network smaller cities are benefiting from the same range of products on offer. Physical store expansion has inevitably not grown at this same rate due to the far higher costs, Chinese stores therefore need to embrace e-commerce and utilize the range of platforms on offer to grow in the digital sphere.

5)      China’s propensity for digital

The digital revolution in China has been unprecedented, this is especially so with the uptake of mass market smartphone technology. With such a strong mobile culture it is unsurprising that users also shop in this way. With e-commerce platforms optimized for mobile, shopping ‘on the go’ is a growing trend. The new wave of Chinese consumers are growing up in a culture where they expect this type of ‘instant gratification’ and e-shopping in such a strong consumer culture is inevitably affected.

6)      e-commerce in conjunction with WeChat’s social network has a promising future

It is still early days but businesses can now open micro stores on WeChat which can be linked to their official accounts. With WeChat pay already linked to users bank accounts this facilitates incredible ease of purchase. Marrying e-commerce and social media in this way is a revolutionary step that will further promote the rise of e-retail over traditional store shopping. When one door closes another one opens.

The good news is that for every Chinese merchant stuck in the offline paradigm, there is at least one getting there online game on. McKinsey has estimated 46m new online jobs will be created by 2025 against to 31m lost. It is timely that, with the Chinese states drive to move from a manufacturing economy towards a creative and innovative tertiary economy, that such digital growth has been witnessed. China is hurtling towards the future and commercial activities need to embrace new digital solutions to grow in this changing environment.

 

 

 

 

New Regulations in the Chinese Cross-Border E-Commerce Business in 2017

What is Cross-border e-commerce?

crossborder-websites

Cross border e-commerce really took off in 2014. It allows sellers outside China to directly sell to Chinese consumers without going through ‘middlemen’. This is not the only benefit. By doing so, many foreign companies are able to legally bypass a number of Chinese laws and regulations applying to the sale of goods. This was particularly beneficial for the cosmetics industry which reaches the widest audience in B2C rather than B2B.

Packages from abroad were entering the country through either a free trade zone, such as Shanghai or Hong Kong, to finally be sent to customers with limited customs interference.

Tmall Global and JD Worldwide are the two biggest platforms for cross border commerce, Alibaba (Tmall) being the leader with 39% of the market.

New Regulations, the End of the Cross-border e-commerce?

But on the 8th of April came very threatening news for the e-commerce world. The Chinese authorities declared their intention to change the rules that currently apply to digital cross-border sales. From now, foreign products will have to be registered and labeled according to Chinese law and regulations. Moreover, an additional tax is to be applied when the product is bought, this is applied via domestic platforms.

This change is not surprising. The Internet is always ahead of regulations when it comes to novel concepts but as time goes on regulations adapt to current situations. It is the normal process of things. Governments always come to target unregulated sectors of activity, especially when money is involved.

But here is where things get complicated: the registration process can last as long as 2 years for some products. Also for cosmetics, it is mandatory that some products have been tested on animals, which can be against business ethics and create issues in their home markets.

Initially planned to take effect of 1st may 2016, the policy has been postponed to 11 may 2017. As you can guess, companies reacted poorly to the news but it is in their DNA to evolve. I’m a big believer in the human capacity to get through difficulties and challenges. This change in regulation will be no exception, but let’s see what companies need to do to make a success of this current situation.

 

Key Factors leading to Success for Companies expanding into China

Cross border is, in our opinion, becoming more and more a way to test the water, to see if what you have to offer is in demand. If you see there is an audience for your product, you should move forward toward establishing a presence in China.

This is actually a more lucrative approach, you need to become fully committed to the Chinese market by increasing your visibility and developing your e-reputation online.

E-commerce platforms in China now will host your products or services, you utilize Tmall and JD.com’s existing infrastructures and customer base in order to leverage your products.

It is important to take a 360 degree approach to the Chinese market. Your visibility on e-commerce platforms is important but also your online reputation, content, customer service and adapted product will be the key to success.

The keys to success are good a e-reputation and visibility combined.

Benji is a digital marketing specialist based in Shanghai, China. For more information see his blog and website here.