Ecommerce Analytics for Beginners: Simple Metrics You Should Watch to Increase Your Profits

There are a million different data points you can track in your ecommerce store. Clicks, conversions, bounces, visitors and more. How do you know what they all mean and which ones to focus on?

The answer depends on what phase your business is in. Typical startup phases work like this:

Discovery –> Validation –> Efficiency –> Scaling

Many new entrepreneurs make the mistake of jumping directly from the Discovery Phase to the Scaling Phase, tossing up a store and then throwing money at marketing. But if you start scaling too early, you’re likely to see major losses. You’re only ready to scale if you’ve gone through the Validation and Efficiency Phases first.

In this post, we’ll focus on how you can use analytics to move through each phase and grow your business sustainably.

Phase 1 – Discovery

If you’ve already got your Shopify store setup then you should have already completed this phase. It involves determining your value proposition, gauging interest in your products and lots and lots of research.

During this phase, you likely won’t have much in the way of analytics to track. Instead, focus on researching and gathering as much data as possible.

ecommerce analytics shopify

Phase 2 – Validation

Alright, you’ve found some potentially great products, you’ve got a store setup and you’re ready to start testing. This phase is all about achieving product/market fit. You want to validate that the products you’ve chosen solve a customer’s problem or desire. If they don’t do that, no one’s going to buy them. Use the following 5 metrics to validate your store and products before moving on to the next phase.

Bounce Rate – This is the percentage of people who visit your website and then “bounce” or leave without taking any action (clicking on other pages, making a purchase, etc.). A high bounce rate can be due to poor design, slow page loading time or simply a bad impression.

Pages Per Visit – How many pages does the average user visit during a single session on your site? A higher number indicates that they’re interested in your products.

Time On Site – How long does the average visitor spend on your site? If you’re selling complicated or expensive products, customers may need a bit more time to research and decide if your products are worth the cost. If you’re selling cheap, easy to understand products, customers won’t need as much time.

Returning Visitors – How many people return to your shop after their first visit? People return to shops they like, so a good ratio of returning visitors means you’re doing something right.

Customer Lifetime Value (LTV) – This simply means how much money you’ll make from the average customer from all purchases they make from your store. If your average customer visits your store twice and spends $100 each time ($200 total), and your profit margin is 20%, your LTV is $40. That means you make an average of $40 from each customer. The higher your LTV, the more you can spend on ads and marketing to attract more customers.

You’ll need to calculate LTV yourself, but the rest of these metrics can be viewed in Google Analytics, which you can setup for free. If you find that any of your numbers are off, put yourself in your customer’s shoes and try to see what they might want changed. Come up with a few possible solutions and test them until your numbers improve.

If you’re really unsure what could be causing your poor numbers, ask others for feedback on your site. You can post the link on the Shopify forums or on the Review My Shopify subreddit.

Once you get those numbers up, you can move on to the Efficiency Phase.

Phase 3 – Efficiency

Now that you’ve validated your products, you want to make sure that your customer acquisition processes are as efficient as possible. That means having an easy to navigate website that loads quickly and provides an excellent shopping experience. People want what you’re selling, so make it easy for them to get it!

ecommerce analytics shopify

During this phase, you’ll want to focus on these 3 metrics:

Page Load Time – No one is going to sit around and wait for your pages to load, so your site must load as quickly as possible. Check your Site Speed in Google Analytics to see if you need to improve your load times.

The most common cause of slow load times is large images. You want to have detailed product shots, but they must be optimized for the web so they don’t slow your site down.

Conversion Rate – This is the percentage of people that went to your website and either signed up or bought something. To monitor this, you’ll want to enable ecommerce tracking in Google Analytics. You’ll then be able to see your conversion rate in the ecommerce report.

Just like with the “Time On Site” metric, if you’re selling high-end, expensive products, your conversion rate might be 1% or lower because of the complexity of the purchase. But if you’re selling simple, inexpensive products, you’ll want to have a much higher conversion rate.

If you find that your conversion rate is too low, use Google Analytics to see which of your pages have high bounce rates and low conversion rates. Make sure all of your pages and checkout processes are easy to understand and navigate.

Customer Acquisition Cost (CAC) – This is simply how much money you spend to acquire each customer. It’s typically the highest expense in an ecommerce business. To calculate your CAC, divide the amount you spend on marketing by the number of sales your marketing generates. So if you spend $1,000 per month on Google ads, and that generates 100 sales, your CAC is $10.

You can divide your CAC by your LTV to figure out the max you can spend on customer acquisition. If your CAC is $10 and your LTV is $40, you can spend up to $30 more per acquisition and still break even. Keep in mind that if your CAC is higher than your LTV, it means you’re losing money.

Once you’re performing well in the above metrics, you can start scaling.

Phase 4 – Scaling

So you’ve gotten your site running efficiently and you’ve optimized your customer acquisition processes. Now you’re ready to blow up your bank account! But you gotta spend money to make money, right?

ecommerce analytics shopify

Scaling means investing more time and money into marketing to increase sales. So at this point, you should start running bigger ad campaigns while keeping an eye on all the above metrics plus the ones below:

Revenue – You want your revenue to go up as your ad spend goes up. Duh.

Transactions – Same as revenue. You want the number of transactions to increase as your marketing expenses increase.

Unique Visitors – Again, you should be getting more visitors with more spend.

If all these numbers are trending up, you can keep increasing your marketing budget and keep scaling your business. It’s a good idea to check all your numbers weekly and try to keep improving week after week.

Conclusion

If you know what phase your business is in, you know which metrics you need to be tracking in your analytics as well as what steps you need to take to improve your numbers before moving to the next phase. It can be tempting to dive right into the Scaling Phase, but it’s likely you’ll lose money if you haven’t optimized things first.

Once you’ve moved through each phase and are seeing success in scaling your business, you need to continue tracking the metrics listed here to make sure you stay on track. Keep a spreadsheet to track week over week numbers in order to spot potential problems and continue growing your business.

About the Author

Gennifer is the Customer Support Magician at ByteStand, where she lives and breathes customer service education while sipping coffee in her pajamas.

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