The 9 Fundamental

eCommerce Metrics
and how to act on them today!

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Stop wasting time on Vanity Metrics! This guide explains

the 9 essential KPIs to focus on while growing your brand online.
We're Metrilo.
Our tool helps ecommerce brands grow through data and customer retention.
With Metrilo, founders are able to increase revenue while keeping marketing
spend under control.

This Ecommerce Metrics Guide includes the most important ecommerce

metrics we've seen successful online brands focus on while growing their
businesses. Optimizing them will make your business more profitable and
financially stable as well.

If you have any questions, reach us at [email protected]

How to read this
guide?
We made this guide as straightforward as possible. Each section is dedicated
to a metric and includes 4 sections - Why, How, Act and Actionable Advice.

Throughout the Guide, you'll see our Cheat Sheet mentioned. It's an extra
downloadable resource to fill out if you want to evaluate your performance on
Total Revenue, Total Customers, Repeat customers, Revenue from returning
customers, Total Number of Orders, Customer Lifetime Value, Cost of
Acquisition, Customer Retention Rate, Average Order Value, Return Rate,
Refund Rate, Conversion Rate.

You can download the Cheat Sheet here.

ACT
HOW Gives you a few
WHY ideas on how to
Shows how to
improve this metric
calculate this metric
Explains the metric
for your business
and tells you why it
matters

ACTIONABLE
ADVICE

We know it might be hard to translate theory into actual steps - that's

why in the Actionable Advice section, we give you a tip on how you
can easily do something about this metric today.
1
WHY
Customer Lifetime
Value (LTV/CLV/CLTV)
This is the total revenue earned from a single customer over the complete
period of their customer lifetime.

Customer lifetime value is an important ecommerce metric not a lot of brands

focus on. It is long-term oriented and most businesses concentrate on the short
term: how much can we sell now.

If you focus on the acquisition of new customers, you will be growing in terms of
customer base, but will need more and more marketing spending to keep going
like that. Every customer comes at a price (customer acquisition cost, CAC) so
to get the true profit you’re earning from them, you need to take the cost out of
the revenue:

Profit from customer = Gross Revenue – COGS – Overhead – CAC

So if you only make one sale to a customer, this will repeat every time, eating
away your profit margin.

For example, if your AOV is $50, and costs are $15, $2 and $10 respectively:

Profit from customer = $50 – $15 – $2 – $10 = $23

If you decide to increase customer lifetime value, however, things will look more like:

Profit from customer = (2 * $50) – (2 * $15) – (2 * $2) – $10 =

$56 with 2 orders where CLTV = $100.

With 3 orders:

Profit from customer = (2 * $50) – (2 * $15) – (2 * $2) – $10 =

$56 with 2 orders where CLTV = $100.
 Of course, this is a rough calculation and your unit economics may
work very differently, but the idea is you get a better and better return
on the $10 CAC invested at the beginning with each new order from
an old customer. The higher the customer lifetime value, the better
profitability you achieve because you don’t need to bleed more
marketing money.

High CLV is a sign of:

Good relationship with customers

Product-market fit and quality product
Having a budget to reinvest in marketing or new product development /
expansion
Having a core of loyal customers who deserve your special attention
Healthy margins

More:

https://metrilo.com/blog/successful-direct-to-consumer-brands-customer-ret…
https://metrilo.com/blog/optimise-ecommerce-ltv
https://metrilo.com/blog/customer-lifetime-value
https://metrilo.com/blog/increase-customer-lifetime-value-ecommerce

If you have your historical data:

HOW CLTV = Order 1 + Order 2 + Order 3 …… (most accurate for each

individual customer)

If you don’t, those formulas help estimate:

CLV = Total Revenue / Total Number of Customers

CLTV = AOV * Average number of orders per customer

CLV = AOV * order frequency per month * lifespan

The Cheat Sheet can calculate this for you.

 How to increase customer lifetime value?

Improve the offers and service (terms) with every order a customer
ACT makes.

Encourage buyers to use the product with post-purchase tips and

inspiration so they are more satisfied with it and order more.

Spice up each order with useful or fun inserts and freebies to make each
delivery exciting.

Engage in a discussion with negative reviewers, reward positive reviewers.

Customize offers on past buying behavior, products browsed, etc.

Send reactivation emails at the average time between orders mark, not before.

If you find a campaign that stimulates loyalty a lot, reuse it with all your
customer segments. If you have a product that creates loyal fans, feature it
in most campaigns.

Involve people in product development, naming, coming up with

ideas for new variants, etc.

Stimulate more frequent orders (more details in dedicated section)

Increase AOV (more details in dedicated section)

More:

https://www.metrilo.com/blog/start-with-retention-marketing
https://www.metrilo.com/blog/emails-drive-customer-lifetime-value

Our report on DTC brands recently found the following CLVs across niches:

Apparel $218
ACTIONABLE
ADVICE

CBD $477

Coffee $169

Cosmetics $190

High-performance sports clothing $161

 Meal deliveries $63

Own food products $118

Pet stuff $107

Supplements $94

Tea $55

Grand total $168

Compare your CLTV to the average in your niche and start from there.

More:

2
https://www.metrilo.com/blog/free-retention-analysis

Customer Acquisition
Cost (CAC)
CAC is how much you spend on average to get people to purchase for the first
time. The lower it is, the better. This means you make more money on each sale
rather than paying for it. If your customers average CLV is $50 and the cost of
WHY acquiring one is $45, that means there's just $5 left for you.

CACs vary greatly among acquisition channels so keeping a close eye on them
is very important. Some channels might be wasting your money and others may
be an overlooked gem promising great profitability at almost no cost.

CAC = Total costs for acquisition / total new customers

HOW This can and should be calculated for each acquisition channel separately
because it varies greatly.
 An average across channels only shows average profitability, but
in order to optimize your marketing spending and get better ROI,
you need to break it down by channel.

How to increase customer lifetime value?

After analyzing your acquisition channels and finding the ones bring
ACT the best ROI, double down on them. Make them a priority.

Drop channels that cost way too much and not bring at least your
average CLV.
Drop What can be improved with the average-performing channels:
find better sites to be featured? Work with influencers closer to your
ideal target audience? Improve ads? Improve your blog’s SEO?
that cost way too much and not bring at least your average CLV.

Increase your customer retention - this will offset the CACs in the form
of repeat orders.
If you haven’t already, explore organic (not paid like ads)
acquisition channels such as content marketing, partnerships
with other brands, email and community building.

More:

https://www.metrilo.com/blog/start-with-retention-marketing

ACTIONABLE ADVICE

A general rule of thumb is to keep the CAC to be up to 30%

of your CLV. Check your acquisition channels and start
optimizing the ones costing you more than 30% of the CLV
they bring.
3
WHY
Customer
Retention Rate
Also known as repeat purchase rate. It stands for what percentage of
customers shop more than once from you.

Repeat orders mean higher profitability on each acquisition paid. The higher
the repeat purchase rate, the higher the ROI.

The fact that people buy from you repeatedly also means they like the product –
there’s product-market fit. You have found the right audience and the product
works. Like many entrepreneurs, Moiz Ali from Native struggled in the
beginning, “I knew we had a mediocre product because nobody would buy
again.”

Repeat orders mean people are loyal to your brand and probably even spread
word-of-mouth about you. The more devoted they are, the stronger your
community grows.

And finally, when you know that 40% of your customer base will shop this
month, it's a steady stream of revenue and a solid ground for sales forecasts.

And to make you feel better - Casper, the DTC darling, has a retention rate of
about 20%.

RPR = Repeat buyers number/ Total number of buyers

HOW Of course, it can be calculated for a period of time or all-time.

Here’s the average retention rate by niche as per our recent survey:

Tea 20.9%

Own food products 24.5%

 Cosmetics 25.9%

Apparel 26.0%

Meal deliveries 29.0%

Supplements 29.1%

Coffee 29.6%

Pet products 31.5%

High performance sports clothing 33.0%

CBD 36.2%

Grand total 28.2%

More:

https://www.metrilo.com/blog/free-retention-analysis

Strategies to increase repeat purchase rate

Find out what products drive repeat orders and promote them
ACT heavily.

Identify the campaigns that bring in loyal customers and do more of

them.

Send reminder emails when people are statistically ready to buy

again (Metrilo measures your Average Time between Orders – TBO)

If your products are not exactly suitable for reordering, send retention
email campaigns with similar products. Segment your customer base
by interest based on their shopping behavior.

Оffer different variants of the product bought if that fits.

Use feedback to engage people for longer. Take ideas for new
products and involve them in the naming, choosing of colors, etc.

Include a coupon for next order and/ or a sample in the box.

Unboxing is a very important point of interaction for DTC brands so
it’s worth investing in.
 Provide improving customer service with every order - more
perks, faster delivery, better deals - as an incentive for loyalty.

Use content marketing to keep people engaged until they’re

ready to shop again.

More:

https://www.metrilo.com/blog/successful-direct-to-consumer-brands…

4
ACTIONABLE ADVICE

What is your retention rate? For a month, try to sell to existing

customers instead of acquiring new ones. At the end, take stock
- how did it impact revenue?

Revenue from
Returning Customers
Customer retention is key, but it has many forms. You can have a great
customer retention rate and still need a lot of new customers all the time to
actually grow in revenue. This would be due to the ratio between the revenue
WHY returning customers and new ones bring. Even if half of your customers shop
repeatedly, it might not be enough if the sales are not big enough.

On the other hand, even with a much lower share of returning customers who
spend a lot more, however, you can be alright. Imagine knowing that every
month you’ll surely get about 40% of sales from returning customers. What a
relief! You have to invest in marketing to get only the other 60%. That takes a lot
of pressure off and probably can save your cash flow (see below).

Our report found an average revenue from returning customers of 60%. That’s
beyond awesome, but keep in mind that most of the brands surveyed prioritize
retention so it’s a result of intentional efforts.
 RRC = (Revenue from repeat purchases / Total Revenue) * 100

HOW Calculating revenue from returning customers can be tricky. You can
start a free14-day Metrilo trial and get the metric for free.

How to stimulate existing customers to spend more?

Improve the terms, customer service, offers and perks for loyal customers.
They need to feel special, pampered and appreciated so they return again and
ACT
again. Making it easy, pleasant and interesting for them to shop will only
increase the average order size.

The more data about shopping behavior and interests you gather on
customers, the more customize your approach. Send personal offers to VIP
customers if needed.

Superfans who place huge orders should be more important than influencers
who get products for free.

Involve customers in product ideation. They’ll be more engaged and willing to

shop more.

Try to expand your service to be able to supply out of stock sizes, for example,
or serve existing customers in such a way that they want to buy everything in
your store.

If you have this data in your analytics, what is the share of revenue from
new vs returning customers? If that from new customers is larger, what
are the top traffic sources bringing in one-time buyers? Probably you
should stop working on them since they hurt profitability. And which
ACTIONABLE
ADVICE

channels bring you the most returning customers? They deserve your
attention and investment.

*Metrilo provides all this data.

5
WHY

HOW

ACT
Average Order
Value (AOV)
Average order value directly influences revenue. If you increase it, revenue
automatically goes up without the need for more traffic or more conversions.
The same marketing investment, the same effort, but more sales. It’s cheaper
and easier to get bigger orders than to drive more traffic or increase
conversions.

AOV = Total revenue / Number of orders

It can also be calculated for each customer individually.

How to increase AOV

Offer bundles of products people buy together already

Have useful filters so customers can easily go through and choose many items

Suggest complementary products right on the product page

Use categories that are not so general (e.g. dresses) but more related to the
buyer’s goal (e.g. wedding guest dresses, spring break party dresses, modest
work dresses and so on). This makes product discovery more fruitful.

Stimulate bigger orders with free shipping, freebies and other incentives over a
certain value

Eliminate risk with easy returns so people are more willing to order a lot

Provide live chat support to help people choose - upselling is easier this way
Have mix & match offers

Sell in bulk or multipacks (3-month supply, for example)

More:

https://www.metrilo.com/blog/ultimate-13-tactics-increase-average…
 Check your current AOV. Does it differ greatly between campaigns,
products or traffic sources? We recommend gathering feedback from
customers from those differing groups to find out why the difference.
Then, either replicate the things that are working across the board, or if
ACTIONABLE
ADVICE

impossible, focus on the high-AOV channels, etc.

6
WHY

HOW
Refund and Return
rates
Returns and refunds are pretty common when you run an online business,
and controlling their rate helps you see the big picture and minimize the
chance of losing money. You can drill down further by product or country and
identify potential problems with a shipping partner or a misleading product
page. If a product has a pretty high return rate, maybe you shouldn't be
selling it in the first place, right?

Return Rate in %

RrR = (Orders With Returns / Total Orders) * 100

Refund Rate in %

RfR = (Refunded orders / Total Orders) * 100

Check what's common between your returns and refunds - is it a particular

acquisition channel (e.g. marketing message setting wrong expectations),
specific products are not of good quality, or just don't hold well during
ACT transportation
 ACTIONABLE ADVICE

7
Ask for feedback on refunded and returned orders. Most people are
pretty honest when they have nothing to lose and they'll tell you why
they're disappointed.

Conversion Rate
If your traffic is increasing every month but your orders aren't - you have a
problem with conversion. If less than 1% of your visitors place orders and the
rest just browse, maybe you're not attracting the right people to your website.
WHY Conversion rate should be broken down - and optimized - by acquisition
channel and device as well.

CR = (Total number of customers / Total Unique Visitors) * 100

HOW Also make sure to calculate this metric by acquisition channels and devices.

There are a few ways you can improve your Conversion Rate:

Attract more qualified traffic (reach mostly Target Customers)

ACT Make sure your checkout flawless. Use conversion funnels to see where you
lose potential sales

Optimize mobile and tablet experience

Use remarketing to recover abandoned carts (email works too)

Use pop-ups to collect emails and try to activate them by using drip
campaigns

ACTIONABLE ADVICE

Check your conversion rate on Mobile devices. If it's way worse than on
Desktop, optimize for mobile because you're losing sales at this very moment.
8
WHY
Order Frequency
Rate
By focusing on CLV and repeat purchase rate, you are able to offset acquisition
costs over the customer lifetime and make a profit off them instead of relying on
only one order.

More frequent orders:

Help increase your customer lifetime value in a shorter period. Otherwise, you
have to work on keeping a customer for longer, usually years, which can be
harder and requires a long-term strategy.

Translate into a stable revenue coming from repeat orders (to benchmark that
metric and other for DTC brands, check out our report), which also means
predictive cash flow.

Are easier on your operations because repeat customers are familiar with your
terms and usually don’t need much assistance.

Mean people convert easily for repeat orders and they love or really need your
products so they can be your brand ambassadors and spread the word about
you as well.

It’s natural to want people to buy from you more often – it makes sure you stay
in business. With an average customer lifespan of 3 years, you’d better fill up
this time with as many orders as possible. There’s a difference between 1 order
per year for 3 years (3 in total) and 1 order per month for 3 years (36 in total),
right?

Order frequency rate = Number of orders per specific period

(e.g. a 2 orders a month)
OR
HOW
Order frequency rate = Total number of orders from a customer /
Customer lifespan (usually in days)

Ex. 5 orders/ 100 days = 1/ 20 or 1 order every 20 days

 How to make people buy more often?

The time between orders depends on the products you sell, of

ACT course. So it’s normal that people don’t shop for formal gowns every
month. Just try to nudge every next order just a bit earlier than the
last with carefully timed emails. (Cohort analysis will help you.)

Use win-back emails like back-in-stock alerts, low stock or price

change on wish list items.

Instead of just 3 or 4 big holiday-related campaigns a year, run more,

smaller ones targeted at different customer segments.

Use one order to drive the next with coupons and samples.

Pay special attention to loyal customers so they shop often.

Diversify your product range to give customers more reasons to

shop.

More:

https://www.metrilo.com/blog/order-frequency-rate-make-people…

ACTIONABLE ADVICE

In your ecommerce analytics, look at how often customers return to

shop again. If you don’t know, you probably need better tracking.
You’ll be able to improve this metric once you see how you're
actually doing.
9
WHY
Cash Flow
29% of ecommerce businesses fail because they run out of cash, says a recent
study. They fail not because their product is not good or because sales are
bad. They fail because they don’t manage their cash flow properly to continue
working. Cash flow should be planned and executed carefully to avoid
shortages and disruptions of operations. A few examples:

If all your money is tied up in a bank deposit, you can’t use it to buy inventory
to answer spikes in demand. You have money but not enough cash on hand.

If you are waiting to get paid for a large wholesale order, this might earn you a
good profit, but today you still might be unable to pay suppliers for the
materials.

If you use up all available cash to buy a new machine, you will need to wait for
more revenue to come in to make all other payments.

If you have a stable positive cash flow, you can afford to put extra money in
marketing, for example, because it won’t hurt your ability to pay your other
dues and will generate more sales.

You can be very profitable and still run cash flow negative if you invest all profit
in an expansion before securing your other overhead.

More:

https://www.metrilo.com/blog/order-frequency-rate-make-people…

Cash flow is the money you have available to cover current expenses to keep
the business running. The cash flow formula for ecommerce looks like this:

HOW
Cashflow = Revenue – (Rent + Payroll + Inventory buying + Utilities
+ Equipment + Marketing + Taxes + Insurance + Interest + Fees)

This amount changes weekly if not daily because of the various payments that
come in and go out of your business. It is your liquidity at any given moment. A
positive cash flow means more money comes in the business than goes out.
 Ways to keep ecommerce cash flow positive

Don’t overstock on slow-moving items. Look at monthly quantities

ACT needed to spread out your orders of such items as much as possible
or drop them entirely.

Look at which products get repeat orders and stock on them.

Look at product correlations with bestselling products – what else you

need to always have in stock?

Plan your campaigns well in advance to project inventory needed

and the cash needed to provide it.

Speed up inventory turnover – run a campaign with a featured

product right when you stock it. This will enable you to sell fast and
put the money in new inventory again, earning more revenue faster.

Improve CLV and repeat order rate

Increase AOV to cover cash shortages

Move to acquisition channels that provide fast conversions - sales

come in as you pay CAC

Negotiate discounts with suppliers if you pay early; otherwise, delay

payment to the last moment

For the moments in the month when cash dips, you should keep sales
coming in with free marketing campaigns.

To speed up the money transfer at order, you can offer incentives for
people to pay by card if in your country of operation they usually pay
on delivery.

For small ecommerce businesses it might be a better idea to rent or

lease equipment as needed instead of buying it.

ACTIONABLE ADVICE

Map your expenses throughout the month in a spreadsheet - when

is payroll due, when do you pay suppliers, etc. Then, put an
average daily revenue in. It should look like a calendar of green and
red. Do you fall short of cash on any day? Try to move expenses so
you never run out of cash depending on your revenue streams.
 Optimizing these key performance metrics will lead to more revenue and
growth of your ecommerce business. If you want to monitor them in real time
without configuring reports, Metrilo offers a handy ecommerce analytics
dashboard. You will have your metrics as accurate as possible and
immediately as sales happen. Track changes, see what works and what
doesn’t and improve.

Dashboard

Revenue Visitors - 23 on

$52,719 1.76% down 12,093

Successful orders New customer

604 8.3% up 105

Conversion rate 8.03% on desktop
604 6.41% on mobile

Top performing products Valuable custo

Try Metrilo ecommerce Red shoes

34 sales
John Tw
16 orders

analytics free for 14 days Leather bag

32 sales
Barbara
12 orders

Customer LTV Abandonment rate

$106.23 23.11%
more Learn more

Updated January 2021