Big data has been changing the state of business for years. More companies than ever are shifting towards digital business models. They are finding new ways to leverage data analytics and AI technology to maximize their ROI.
E-commerce startups are investing most heavily in big data, which is why the e-commerce analytics market will be worth over $22 billion by 2025. They are in very competitive markets and have to go head to head with giants like Amazon and eBay. They must make every penny count.
Fortunately, new e-commerce companies are in a good position to benefit from data. They have access to troves of valuable data, which can be used to improve the profitability of their business models.
The problem is that some new e-commerce companies don’t know how to use data technology effectively. They need to know not just what data tools to use, but also what variables to focus on. We talked about sophisticated uses of big data, such as mapping customer journeys with analytics. However, that won’t do much good if you don’t understand the fundamentals. Keep reading to learn more about the metrics that data-driven online stores are prioritizing.
Metrics Analytics-Driven E-Commerce Companies Focus On
There hasn’t been a better time to build a successful e-commerce business than now as the pandemic prompted millions of people to turn to the internet to find goods, services, and solutions for their multiple needs while confined within their homes.
Most research firms coincide that digital adoption has accelerated as a result of lockdowns and that is good news for companies that are building their businesses in the online realm.
However, you can’t expect to be successful without investing strategically in data-driven solutions. Big data can give companies a competitive edge, but only if they know what to focus on.
If you are an e-commerce entrepreneur who is just starting to work on a new idea or working tirelessly to grow your existing venture, in this article, we share 7 metrics that you should keep an eye on to make sure your business is moving in the right direction. You will be able to use data analytics tools like Google Analytics and Crazy Egg to make the most of them.
Meanwhile, if you are looking for more recommendations for e-commerce businesses or to join a community of fellow entrepreneurs to further enrich your journey the Beprofit eCommerce profit community is a great place to learn and grow.
#1 – Customer acquisition costs
Acquiring new customers for your e-commerce startup is a must to keep growing its top-line results both now and in the future.
However, the cost at which you acquire these new clients is important as that will play a key role in determining the business’s feasibility.
If you use the right data analytics tools, there are multiple ways to calculate customer acquisition costs. The preceding link from HubSpot lists some of the data analytics platforms that can help. The easiest approach is to divide the total amount spent in this particular endeavor every month by the number of customers who have completed their first purchase during that period.
#2 – Customer retention rate
Retaining customers is crucial to building a sustainable e-commerce startup as those clients will end up accounting for most of the firm’s top-line results in the future.
With this in mind, you should keep track of how many customers continue to buy from you after their first purchase is completed along with other complementary metrics such as the frequency and size of these purchases.
The higher your retention rate the better, as the business will progressively build a loyal customer base. This will increase its financial stability and will make results more predictable.
Google Analytics has some metrics that can help you estimate your customer retention rate. You can look at returning visitor rates and see how many sales come from those users. However, the data analytics features in a customer relationship management platform can be a lot more useful.
#3 – Average revenue per user/customer
The success of the strategies you implement to increase sales must be measured from different standpoints. One of the best metrics to get a good perspective of how these client nurturing efforts are doing is average revenues per user customer.
This metric can be easily calculated by dividing your monthly sales from the average customer base. If the trend is pointing upwards compared to previous months, it means that your nurturing initiatives are yielding good results.
This is one of the easiest metrics to evaluate with the right analytics tools. Google Analytics and similar platforms help you easily identify value derived from every customer.
#4 – Gross margins
Top-line profit margins are the most important for any retail business. They are measured by subtracting direct costs from total sales to then divide the result by the business’s net sales.
A high percentage is great as it will reduce your break-even point while it will also give you more room for you to increase your overhead whether that means hiring more personnel or leasing a warehouse.
Gross margins can be improved by negotiating better prices with key suppliers, increasing the price of certain products, or pushing down logistic costs.
#5 – Monthly cash burn
Most startups burn cash in the early stages of their development as their operations are initially not self-sustainable and need to be expanded rapidly.
However, as sales grow, this cash burn should be progressively reduced both in relative and absolute terms. Otherwise, the business will be forced to raise more and more capital and that would result in the continuous dilution of its existing stockholders.
#6 – Revenues per employee
As the business grows, entrepreneurs should stop wearing unnecessary hats and pass some torches to someone else within the team.
For startups, hiring personnel might not always be comfortable from a financial standpoint but productivity will tend to increase if activities are properly spread across the team.
To keep track of how productive new hires are, the revenue per employee metric portraits if sales are increasing or decreasing after new people have been enrolled.
A stalled RPE metric will typically mean that the business has reached a temporary peak and that should prompt the founder to think twice before bringing more people in.
Building a successful e-commerce business might be challenging but it could be a very rewarding experience. The pandemic has boosted online shopping volumes, making this the perfect environment to launch an online venture.
The metrics we outlined above should help you in identifying if your e-commerce business is moving in the right direction or not.