In this article, we’ve teamed up with Syft to share the 5 most important KPIs to track as a Shopify business.
Although competition and tracking KPIs can be daunting, it is a healthy part of running a Shopify business. Oftentimes, it is the competition that promotes innovative or avant-garde thinking. Competition compels us to do better and be better. But this isn’t up to gut feeling alone. To stay ahead of your competitors, it’s a good idea to track certain critical KPIs and benchmark these against your competitors.
In this article, we’ll cover 5 top Shopify KPIs to track to get ahead of the competition:
1. Traffic to Shopify website
This refers to the number of people visiting your website and is an important metric to keep your eyes on as it can help you to determine where to focus your marketing efforts. Traffic can be divided as follows:
- Direct: These are people who typed your URL into their search bar, meaning that they were already interested in your products.
- Organic search: This is traffic from search engines as a result of your search engine optimization (SEO) efforts, which could result from landing pages, blog posts, etc.
- Email: Visitors from your email campaigns or other email marketing efforts.
- Social: Traffic from social media platforms such as LinkedIn, TikTok, etc.
- Referral: People visiting from other websites that you have partnered with, such as listicles, guest blogging sites, and review sites.
By keeping an eye on this KPI, you will be empowered to hone in on the marketing channels that are already proving fruitful. For instance, if you determine that most of your traffic is coming from Facebook, you may want to invest more time in keeping your Facebook page up to date and using it more actively to advertise your products and services.
Moreover, you may detect gaps or opportunities in terms of drawing in traffic from other sources that you haven’t tried yet.
2. Conversion rate
So, you’ve figured out how people are finding your site. That’s great, but don’t you want to know how many people have actually bought your products?
The conversion rate is the rate at which users on your e-commerce site are converting (or buying from you). This is calculated by dividing the total number of visitors (to a site, page, category, or selection of pages) by the total number of conversions.
Conversion indicates the strength and quality of the traffic coming into your store to make a purchase.
While the average e-commerce conversion rate varies greatly by area of expertise and business, surveys estimate that it is approximately 2%. Meanwhile, Amazon has a non-Prime conversion rate of approximately 33%. This KPI’s importance cannot be overstated.
Here are a few ideas for improving your conversion rate:
- Fix technical issues on your website such as slow load times.
- Give each page one task with one call to action. Too many options confuse viewers and lead to them taking no action.
- Use a simple design. Your goal is to generate sales, not be considered the da Vinci of web design.
- Create a sense of urgency to incentivize those who are on the fence. If there are only 10 products left or there’s a sale that’s ending at midnight tonight, people are more likely to bite the bullet and add that product to the cart.
Think of it this way: the easier it is to buy from you, the more likely customers are to convert.
3. Gross profit margin
The gross profit is the profit a business generates after subtracting all the costs associated with manufacturing and selling its products or services. You can calculate your gross profit by subtracting the cost of goods sold (COGS) from your total sales.
This KPI can help you to assess your store’s financial health. It has the capacity to make the biggest impact if you track it over time or compare it to the gross profit margin of your competitors. By benchmarking your store’s gross profit margin against those of your industry peers, you can get an idea of the kind of targets you can set yourself to exceed the industry average.
Generally, 40% is considered a good profit margin for a Shopify e-commerce business. However, this depends on the type of business you run and how much competition you have. For a small e-commerce business, the average gross margin is 30% while for larger stores, it’s 37%.
To improve your gross profit margin, you may consider:
- Raising prices: This is an obvious solution but not always the best one as no one likes having to pay a higher price. Nonetheless, raising prices can help you to cover the increasing costs of production and run at a profit.
- Improving efficiency: If you don’t want to raise prices and upset your customers, you may want to think about ways in which you can improve the efficiency of your production line. Are there ways in which you can reduce labor costs with new technologies or better systems?
Analyzing your gross profit margin can help you to price your products appropriately, increase efficiency in your operations, and even save on production costs.
You can sync your sales data, including COGS data, with a Shopify accounting integration from Amaka. The integration runs an automated daily sync and includes taxes, Shopify fees, shipping costs, taxes, returns, gift cards and more. And you can then use Syft’s KPIs feature to analyze your growth profit margin and its variance over time.
4. Shopping cart abandonment rate
The shopping cart abandonment rate tells you how many users are adding products to their shopping cart but not checking out. It’s a good indication of how user-friendly and appealing your checkout system is. The lower this number, the better.
According to the Baymard Institute, the average rate of shopping cart abandonment for e-commerce sites is almost 70%! There are a few reasons for this, such as:
- Unexpected shipping costs;
- Website errors;
- A complicated checkout process;
- A declined card; and
- Visitors who just aren’t ready to buy yet.
Although there are many potential sales lost to shopping cart abandonment, it’s not all doom and gloom. Research shows that discerning merchants can recover approximately 63% of that lost revenue! To do this, you need to carefully monitor your cart abandonment rate.
Here are a few suggestions for reducing this figure:
- Include signs of legitimacy, such as reviews of your products, in conspicuous places.
- Make the process as clear and simple as possible, from signaling when an item has been added to the cart to illustrating when coupons or discounts have been applied.
- Offer free shipping. When customers see no additional costs being added at checkout, they’re much more likely to go through with their purchase.
- Try adding a “Buy Now” button to speed up the checkout process. While “Add to cart” still gives customers the time to think through their purchasing decisions, “Buy now” taps into their impulsive desire to spend – which may have been what brought them to your site in the first place.
Pro tip: In Shopify, you can use cart permalinks to take your customers directly to the first page of the checkout screen with items preloaded in their carts.
It’s a good idea to check up on your shopping cart abandonments every month so that you can continuously improve the checkout process.
5. Repeat customer rate
While we’ve considered the importance of driving traffic to your store and converting that traffic into sales, we haven’t touched on something that is just as important as customer acquisition – customer retention. Repeat customers play a critical role in keeping your business going, conducting marketing for you via word of mouth, and inspiring brand loyalty.
The calculation for the Repeat Customer Rate is:
[No. customers who have purchased before / Total no. customers] x 100 = Repeat Customer Rate (%)
Most e-commerce businesses have a Repeat Customer Rate of approximately 25-30%. If fewer than 25% of your customers are repeat customers, you may want to retarget previous customers to get them to buy again. If, on the other hand, you have an even higher rate of repeat customers – say 50% – well, you may then want to turn your attention to acquiring new customers and expanding your customer base instead.
Here are a few ways you can turn once-off customers into repeat customers:
- Introduce seasonal products: The same customer who bought a swimming costume from you may well return for your winter coat sale.
- Offer accessories for products customers have previously purchased: Sold a customer a cell phone recently? Perhaps they’d like a new phone cover, charging cable, or wireless earphones to go with that.
- Identify which of your products tend to produce repeat orders: If quite a few customers have repeatedly bought the same product, you may want to promote this product to your existing customer base.
- Segment your customer base: Perhaps certain customers like going for your latest releases while others prefer your classic products. Once you’ve established this, you can send targeted emails for each segment.
How to get started with tracking Shopify KPIs
Thanks to the amazing tools available today, you have access to all the data you need to review your KPIs with a great degree of accuracy. Combining the power of Shopify with Amaka can help you pull through transaction-level detail into your accounting software, which you can then analyze in depth with reporting tools, such as Syft, making it easier than ever before to set and review KPIs for your e-commerce store.
Remember, KPIs are great indicators of your business’s health but they’re not sufficient in and of themselves. The true value is in the takeaways from data analysis that can be put to use.
Monitoring key performance indicators (KPIs) is pivotal for Shopify businesses to gauge their progress and maintain a competitive edge. These top 5 Shopify KPIs provide invaluable insights, allowing businesses to optimize their strategies, enhance customer experiences, and ensure sustained growth. By tracking these KPIs diligently, businesses can make informed decisions that steer them towards success in the highly competitive e-commerce landscape.
Consider the use of a freelance talent marketplace like Toptal, where you can hire a top-tier Shopify developer, who can help you track and monitor these and other important KPIs. Moreover, a Shopify developer can also dive deep into each metric to determine next steps and necessary actions to optimize your Shopify store, guaranteeing future growth and long-time success.
Alex Hoffman is the Engagement Manager at Syft Analytics. She is in charge of Syft’s content strategy across all channels, including the education platform, Syft Campus. Alex enjoys creating helpful, educational, and entertaining content to help you make better business decisions.
Alex also currently has a Master’s in English Literature and a Master’s in Creative Writing. In her free time, she’s a big reader (and writer) and has been known to dabble in anything from dancing and Pilates to cooking, running, Yoga, and true crime podcasts. You can find her on LinkedIn.