Let’s dive in with a few numbers, shall we?
Estimates show that by the end of this year, there will be nearly 2 billion online buyers worldwide.
From 2015 to 2017, more than 90% of the world’s data was created. In 2017 alone, more data was created than ever before.
Those are big numbers, and a significant amount of this data comes from online purchases and purchasing behavior. These facts speak volumes on the impact data has for an ecommerce business.
Retail companies cultivate plenty of this data in their pursuit of reaching a portion of these 2 billion buyers and any future shoppers who have yet to make their first online purchase.
While the data collected may not approach the level of what Google or Facebook collect on their users in a day, what you do pull in is critical to your business if you can make sense of it all.
That’s where analytics, and more specifically, those geared directly to your ecommerce business, come into play.
Understand Your Data, Understand Your Business
Most companies understand the key benefits of tracking business analytics:
- Keeping a pulse on current and future consumers.
- Maintaining a keen eye on which channels are helping expand your business and those that aren’t, or how the sales approach of your team is converting - or not converting - from those sources.
- Ensuring the massive amount of data collected from daily engagement with users, vendors, and an internal team is used to expand the business versus being stored, unused in a ubiquitous, yet overlooked cloud.
- However, it's one thing to know the importance of analytics, but it's a far greater challenge to make the data work for your company.
In a survey of founders and CEOs of several prominent ecommerce businesses, Extensiv found that 20% indicated the biggest mistake a firm can make is not fully accounting for all the costs while scaling your business. These costs can eat into profits and is a prime example of how analytics can better serve your firm's future growth.
With everyone aiming for the same goals of sales, revenue, and profitability, harnessing your data will quickly set you apart from your closest competitors. Leveraging your analytics will allow you to:
- Gain the ability to track your products, including what sells, what doesn’t, and the necessary adjustments to capitalize on those trends.
- Improve your marketing prowess to help your channels gain traction with their intended audience and be more agile in letting go of sources that provide little to no benefit for your growth.
- Cultivate greater insight into your sales and performance numbers to better gauge your current success, where potential growth lies, and how it matches up within your specific business segment.
Let's dive deep into the world of ecommerce analytics and look at different types, how to make analytics work for your firm, and the benefits you can expect to gain. We'll also touch on some of the better tools available to get your business set up and running towards a profitable ecommerce future.
What are Ecommerce Analytics?
Ecommerce analytics is the process of gathering data from all areas that have an impact on your online store and using this information to understand the trends and the shift in consumers' behavior to make data-driven decisions.
Why are Ecommerce Analytics Important
For some, tracking analytics can be overwhelming. After all, many ecommerce companies tend to make it all up as they go along. This gung-ho approach, as the theory goes, teaches us to learn from our mistakes and help us to be more self-sufficient.
While some of that may be true, trial and error isn’t an effective strategy to scale. If you want your business to make an immediate impact with customers, and eventually draw in more, you have to become more proactive about compiling and reviewing data. The more data you collect, the more ways you can cut the data and measure performance in different ways.
Knowing Where to Apply Your Resources
Ecommerce analytics lays the groundwork to help you understand which marketing and sales initiatives are working, those that aren't, and the areas where there is a greater chance for opportunity.
For instance, assume you employ five different marketing channels to draw consumers into your sales funnel.
- A Facebook social media campaign
- A robust email subscription program
- Content-rich YouTube channel
- A redesigned company website that leverages best-practice implementation
- PPC campaign
First, without analytics, it's a challenging endeavor to determine your top sources and their success rate. A basic measure of performance across these channels would be the traffic they are driving to your site. With analytic tools, you can quickly pinpoint trends in the marketplace, both in the tools you use and the customers you serve.
Now using an analytics tool, you determine which channels are driving the most overall traffic:
- Facebook social media campaign = 50% of your customer traffic
- Robust email subscription program = 20% of traffic
- Content-rich YouTube channel = 15% of traffic
- Redesigned company website = 10% of traffic
- PPC campaign = 5% of traffic
While your fifth channel - the PPC model - may be one that gets high marks from other businesses, by using analytics, you're able to discern that it doesn't work for you. If your goal is to optimize traffic, you can decide to sunset your PPC ads and pull those resources into your other channels.
The least successful ecommerce businesses are those that adopt a set it and forget it strategy. If you never stop to revisit what's going on, you'll fail to see potential opportunities.
Finally, analytics allows you to make smart decisions, both operationally and financially. Using our example, we can surmise a few things and start to plan better for the future:
- Facebook is your rockstar source; you should dedicate more resources to solidifying it.
- Email and YouTube are garnering your company plenty of attention and might prove even more lucrative if given more focus.
- Your redeveloped website is showing great promise, and more resources may further boost its reach. Of course, if you’re now satisfied with its numbers, you can pump those resources into another channel elsewhere.
- The PPC model, as the lowest performer, should be cut loose, with those resources either saving you money or being reallocated elsewhere in your business.
Analytics helps you ask the right questions and determine where best to place your resources in terms of time and money.
Improve Your Conversion, Improve Your Bottom Line
Web analytics isn't just about knowing where your traffic is coming from; it is also about improving your ecommerce sales with those potential customers.
The more data you acquire, through various methods of testing or experimentation with your website, landing pages, or advertising, the better your approach will be.
Let’s look back at our traffic channel example and another way that analytics can help you dig deeper into your data.
Let’s say you capture 1000 pieces of traffic from all sources each month.
We noted your new YouTube channel is generating 15% of that overall traffic - 150 actual views. But what if it's only producing a 5% conversion rate? From those 150 YouTube visits, you’re only closing between seven and eight actual sales.
Now, examine your PPC source. Sure, it sits at a lackluster 5% of overall traffic, which is 50 clicks. But analytics show its conversion rate is a brisk 25%, translating into 12 actual sales. That is five more sales per month than your YouTube channel produces. Even at a 15% conversion rate, it would match the larger traffic source in actual sales generated.
If you pay next to nothing for the YouTube channel, it's a relative bargain. But if you’re putting far more into the social channel than your long-standing PPC source, maybe you shouldn’t cut the latter channel after all.
While it’s critical to understand which channels prove the most successful pulling in traffic (or any other of your company’s basic metrics), one of the most effective and overlooked uses for analytics is the ability to view your numbers in a new light.
Analytics is not just about raw numbers, but also the percentages or dollar amounts that rest just below the surface.
More Knowledge, Better Direction, Greater Growth
It may seem a bit cliche, but with ecommerce analytics, you improve your capacity for knowledge. The additional insight the data provides can have a profound impact on the growth of your business.
Again, let’s revisit our traffic channel scenario.
We’ve determined that YouTube is producing mixed results. You’re generating some substantial traffic numbers for a relatively new source, but through analytics, you’ve discovered it's not a big converter - or at least not yet.
Your data tells you that some tweaking might be necessary to dial into the YouTube viewers who will ultimately become buyers. You can employ A/B testing to refine the videos you post and the messaging they contain to determine which version has a higher conversion rate.
You now have an opportunity to take a middling traffic source and turn it into a conversion monster. Conversely, you may find that YouTube is best used for exposure and not transitioning those viewers into customers - but that’s okay too.
The more data you procure, the more you can determine what is working, what isn't, and what needs improvement. Having this data equips you to become more competitive in the marketplace.
You’ll gain a distinct advantage over competitors who are less enthusiastic about developing their internal knowledge base.
That's the “why” of ecommerce analytics. But our traffic and conversion example is just one set of data you can measure. There are several different categories of ecommerce analytics, and each provides important data that you should be tracking.
Types of Ecommerce Analytics
When referencing the most vital ecommerce analytics, there is a core set of metrics from which you derive everything else: Audience, Acquisition, Behavior, Conversion, Paid Marketing Activities, and Product Performance.
Arguably the most straightforward element on this list, Audience is all about who are your current and would-be customers. It includes data points about their demographics, which entails:
- Income and occupation
- Where they live and their native language
- Interests, and even specific preferences for products, services, or content
Audience metrics also look at the tools they use to engage with your brand. Devices and platforms like:
- How they access your website (mobile or desktop)
- What OS they use (PC or Mac)
- Which browsers they use (Chrome, Firefox, or Safari)
Audience analytics help you make decisions on how you advertise, which platforms to optimize for and determine which locations and demographics your business appeals to most. Once you understand your audience, you can fit customer groups into “personas” or examples of the characteristics that your ideal customers share.
Acquisition is all about how you are marketing to your audience. This level of analytics tells you how users are finding your online store, marketplace listings, or content you might produce.
- Are you successful with search engines and organic search?
- Is social media a significant driver of traffic to your site?
- Do paid ads pay off in directing viable leads to your product?
- Or does social media, blog posts, or email campaigns represent the bulk of your visitors?
How users find you is critical to determining how you craft your marketing strategies and which channels will prove the most fruitful.
Who your users are, where they're coming from, and what technology and channels they used to find you - that is a compelling combination of analytical data points.
Now, what about the actions they take when they're on your online store?
Tracking user behavior helps you understand the products that interest them most and the content they prefer. But it goes much deeper than that.
- Are users bouncing from a page on your website just as quickly as they land on them?
- Do they show interest in a product or products, but never make a purchase?
- Is there a certain page they go to first, second, or third?
- Do they fail to click on related links upon visiting a single page?
- Which page is the one with the highest bounce rate?
How a user engages with your brand doesn't just tell you something about them; it also tells you more about your brand and website.
- Perhaps your website is loading too slow
- Maybe your content isn't engaging enough, or certain call-to-actions (CTAs) need to be stronger
- It may even be that your product selection or availability leaves a lot to be desired.
The data you collect about a user's behavior isn't solely meant to change their behavior; it will also help you improve conversion rates.
Use it to optimize and improve your site's performance, create content that attracts people instead of turning them away, and present products or services that consumers want to buy.
The point when a piece of traffic becomes a lead, and then that lead becomes a customer is the most critical transition period for your ecommerce business. The data culled from your current conversions is crucial in not just increasing them in the future, but also making sure they occur faster.
The major points to look at include:
- How long does it take a non-paying user to convert to paying customers?
- How many times do they visit your site before making a purchase or engaging with certain types of content?
- Do you have conversions that occur in higher numbers during certain days, weeks, or months of the year? Is the activity seasonal?
- Is there a specific channel that is converting better than others? Why?
- What is the cost tied to converting these customers?
Recognize when people make their move will aid you in crafting better marketing and promotional strategies. This includes when to discount and when not to, as well as improvements to your customer service that can quickly move someone from an interested party to a satisfied buyer.
Paid Marketing Activities
Paid marketing activities - less formally, your marketing campaigns – examines whether or not you spend marketing dollars wisely, and if you receive a favorable return on the investment you're making.
You can measure your return on investment (ROI) across any marketing outlet - strategies that include:
- Email marketing campaigns
- Advertising on partner sites
- Social media advertising
Regarding the latter, you can segment social media analytics even further.
Facebook alone is a powerful social engine for ecommerce brands. Not only does it provide an extraordinary platform for advertising, but it also features a deeply rooted analytical structure allowing you to leverage mountains of data to target highly specific demographics and bettering your conversion rates.
But beyond Facebook, you can dive into analytics for outlets such as Twitter, Instagram, YouTube, LinkedIn, Snapchat, or Pinterest.
The last major aspect of metrics for ecommerce analytics is your product performance. Product Performance digs into the revenue, profit, and number of units of a product that are sold. The key to effectively tracking your product's performance is to get as granular as possible. By tracking profitability at the SKU level, you can determine which products are generating profit and which are losing you money with each sale.
Tracking costs on a per-unit level is an important way to track ROI as it pertains to particular products, allowing you to see your profits both holistically, by a specific sales channel, or by a specific product.
Some key measurements of product performance include:
- Top sellers and worst sellers (either by number of units sold or revenue generated)
- Sales channel listing profitability
- SKU profitability
- Inventory turnover
Which Performance Indicators Should You Track
Certainly, there's a lot of customer data and information that's available to track. From your website to your advertising to how customers interact with your brand, every activity produces a trackable metric.
What are the key performance indicators for ecommerce you need to be following?
The honest answer is that it depends on your business needs. However, there is a general list of metrics worth having on your radar, even if you prioritize some over others.
The following list provides actionable data to increase traffic and leads, convert them to customers, and retain them as clients. Further, they give insight into growing your business and increasing revenue - the ultimate goal for every ecommerce business.
- Product and Brand Visibility Online: It's pretty straightforward, but how easily discoverable is your brand and the products you sell. Can users find you through marketing or advertising channels? Or do you need to make adjustments to your SEO and how your brand appears online? Where are you ranking on Google or marketplaces searches?
- Website Traffic: This is a broad area that includes metrics for new users, times a user has visited your site, the number of sessions per user, which pages they are viewing or the number of times they view a page, and how long they spend on your site.
- Cost Per Acquisition: How much does it cost for your business to gain a new customer. You look at this as an overall number and through each marketing channel. You can find this by dividing the total marketing expense by the number of customers acquired in the period the money was spent.
- SKU Profitability: The individual profit generated by a product within your portfolio. Tracking this level of information allows you to quickly identify how your products are performing so you can capitalize on high-performing SKUs and mitigate costs. It can also help determine which products you should focus marketing dollars on.
- Number of Visits to Sale: On average, how many visits does a first-time customer makes to your website before they finally make a purchase. This informs whether changes should be made to reduce the time frame.
- Sales Conversion Rates: Your sales divided by the number of visits it took to achieve the sale. The particular metric provides multiple areas to measure, including your conversion rate for each marketing channel, including stand-alone campaigns, such as email, special promotion, working with an affiliate, or by individual product or service.
- Online and Offline Impressions: Whatever marketing channels or ad platforms you employ, you'll want to track how often users view those ads and those they view most often. This also includes channels such as Google AdWords or if your brand engages with influencers or has similar arrangements to heighten your brand's exposure.
- Social Media Reach and Engagement: If you advertise on social media, you need to know if people are viewing your ads or engaging with any content you produce. While Facebook is the critical source here, don't overlook video impressions if you have a presence on YouTube or engagement on Twitter or Instagram (learn more about how to drive traffic with video here).
- Shopping Cart Abandonment: A critical metric to understanding how many visitors go through the steps of contemplating a purchase, but don't cross the finish line. While this number should be low, it also presents follow up opportunities to try and gain the sale.
- Purchases and Transactions: This is another broad category of metrics that looks at how customers are making purchases. Each metric can inform a different aspect of your business, including how a buyer interacts with your site before making a purchase (total number of transactions), what a customer's total value is to your business based on the total value of their purchase, or simply just the average value of each transaction.
- Mobile Visitors: It's beneficial to track the device people are using to engage with your website or make purchases. If you don’t optimize your site for mobile, there is a greater than zero chance you're losing traffic and sales because of it.
Configuring for Ecommerce - Google Analytics
Getting into the nuts and bolts of ecommerce analytics isn't as challenging as you may think.
In a moment, we will cover additional analytics tools and platforms that assist with web analytics, marketing analytics, tracking conversion rates, or provide robust analytics reports. First, we must explore Google Analytics.
Viewed by many as the beginning, middle, and end of online analytics, Google Analytics is a remarkable product for two central reasons. One, it's free. Two, it's relatively easy to use the platform's essential tools. (Note: Its free until you need an enterprise-level solution.)
As a platform used by over 27.5 million live websites, its popular and sits on a large bed of data that you can use to your advantage.
The platform provides access to a number of critical metrics, including:
- Acquisition overview
- Social overview
- Bounce rate
- Traffic sources, including top of the line integration with Google Ads
- Average Session Duration
- Percentage of New Sessions
- Sessions by Channel
- Pages Per Session
- Pageviews by Page
- Interactions per Visit
- Exit pages
- User Location
- Devices Used
- Site Speed
That’s just a brief overview. There is a lot more, from user management to dashboards and reporting to enhanced ecommerce data collection.
It may seem like a lot, but Google Analytics also simplifies the confusing world of web analytics and ecommerce tracking. For some smaller startups, it might even be too much information, which is a nice problem to have – you can take whatever data you want from it at the time you need it.
Although it's made analytical data accessible to even the smallest of ecommerce businesses, much like Google itself, it's a powerhouse platform. Larger enterprise groups will appreciate the mountain of data available to find new opportunities, areas primed for scalability, or potential areas to improve efficiencies.
Regardless of your ecommerce business, even if you employ Google Analytics for its most basic functionality, it provides plenty of data-rich insight into your customers and their behavior.
Dive deeper into the program, and you'll pull tons of information about product movement or popularity, your website or any landing pages you've set up, and how well your audience receives the content you produce.
Remember how we earlier stressed the importance of knowing the right questions to ask? Google Analytics operates similarly.
- What are your customer demographics?
- Which piece of content generates the most views? The least views?
- How much time does a user spend engaging with your online presence?
- Does engagement lead to them becoming a customer?
Google Analytics helps to answer these and many more questions about your online business.
To get started, visit the Google Analytics page for a step by step sign up process. If you need help setting up the analytics tool specific to your business and ecommerce goals, we suggest this incredibly detailed guide.
For Google Analytics to be of any value, you must have a means for tracking the activity that occurs on every page of your website. To achieve this, follow this guide for setting up your analytics tag.
This activity is fed into reports which you can review and take action on.
While Google Analytics provides a lot of information tied to your advertising and online performance, there are additional tools that your company will want to look at to help broaden your ecommerce analytics.
Top Ecommerce Analytics Tools
When you're ready to move to that next level, there are numerous analytical tools to assist you.
Since no two companies are alike, your ecommerce business may find some metrics more important than others. Of course, factors relevant to one company in one industry may not matter as much to others in a different field.
With that in mind, the following list encompasses both software platforms and specialized tools. You can broaden your approach to ecommerce analytics as well as helping to fill specific needs for your online business.
To better understand how users to your website directly engage with it, HotJar should be part of your analytics toolbox. The platform employs specialized tracking tools, including heatmaps, instant behavioral feedback, and video recordings of user sessions.
The latter feature presents a visual representation of the activity on your site. This translates to capturing real-time customer interaction on your website and using that data to improve the consumer experience.
Trackable metrics include:
- User behavior
- Sentiment monitoring
- User session recording
- Conversion funnel optimization
In the area of ecommerce analytics, Hotjar is arguably the top platform when it comes to figuring out how users engage with your brand. From their data, you can refine your website and online stores to make them more user-friendly and better revenue generators.
If yours is already an enterprise-level business or is approaching it, and your customer engagement is lengthy or involved, Woopra is a great platform for you. It targets your customer's journey, from their very first point of contact, and is built specifically for ecommerce firms. The platform offers detailed tracking of your customers through "People Profiles."
Trackable metrics include:
- Real-time details on who your users are
- Mechanisms for following their activity and behavior
- Trends on their engagement over time
The benefit is to help you better interact with your customers and improve your conversions.
Woopra helps overcome one of the critical mistakes that many ecommerce companies make - focusing so much on new business that they neglect the need to retain current customers. On their platform, you're given the information for improving that journey.
Woopra is also a flexible platform where you can automate different processes and integrate with a number of other ecommerce platforms.
Extensiv (formerly Skubana)
Extensiv Order Manager is an order and inventory management software that unifies data across channels and warehouses for multichannel ecommerce companies. Sitting across many sources of data, Extensiv possesses stout analytic tools for ecommerce firms requiring an all in one solution.
Trackable metrics include:
- Product performance, including best and worst sellers, SKU and listing profitability, inventory aging, and turnover.
- Profitability reporting that breaks down the costs of goods sold and profitability per each unit included in an order
- Inventory analytics that tracks value, trends, low inventory levels and replenishment needs
- Detailed overview of sales across different channels and shipment costs
- Inventory accounting, costs of goods sold, landed costs and vendor pricing
- Customer metrics to determine how your biggest spenders and most popular items are driving revenue.
If your firm needs to pair together its inventory and analytical pursuits, Extensiv goes a lot further than most inventory tools to bring your operations under one umbrella.
If you anchor your online presence with a WordPress website instead of other ecommerce platforms, then the MonsterInsights plugin is a must.
Admittedly, it's not nearly as robust or feature-rich as some other options, but it is straightforward to set up and use.
Trackable metrics include:
- Revenue generation in real-time
It presents all of your analytics in a clear, easy to understand dashboard and through well-organized reporting.
If you are seeking out something with a deep feature set, and have the technical prowess to host it yourself, then consider the open-source Matomo. It can serve as a viable alternative to Google Analytics and includes many similar features like conversion optimization features, with heatmaps, funnels, goals, form analytics, and A/B testing.
Trackable metrics include:
- Real-time users info, including location, device, and operating system
- Exit pages
- Traffic referral
- Online form tracking
The key difference with Matomo is that its a paid platform, versus the free option that Google Analytics provides. It is, however, a powerful tool with plenty of robust features and is perfect for those who want to opt away from a Google-based solution.
Mastering ecommerce analytics is by no means an overnight endeavor. It takes time to integrate the various platforms and tools that your company needs to accumulate actionable data, and then analyze the information you've gathered.
However, with patience and a solid understanding of the metrics most critical to your business, your new analytical approach will pay off with increased growth and higher revenues.