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4 Best Conversion Rate Metrics for E-Commerce Startups

By Marcel Deer
Kelly Hendrickse - Editor for BeProfit
Edited by Kelly Hendrickse

Published February 20, 2023.

Small business entrepreneur working at home office, BOX, tablet and laptop online.

Online business is booming—and many want a piece of the action. E-commerce sales are expected to make up over 20% of global retail sales in 2023 and capture just under a quarter of the global retail business by 2026.

But the downside to this is the immense competition that new platforms have to contend with. More customers visit e-commerce sites, but does that convert to more sales and profits?

These four best conversion rate metrics for e-commerce startups can help find the answers.

1. Customer Conversion Rate

From marketing to website design, hiring customer support teams, and designing sales tools, it costs a lot to keep your website running and drawing customers in. But once the customers are on the site, how many make purchases or sign up for loyalty programs?

The customer conversion rate values quality over quantity by focusing on how many site visitors actually take action. This could involve clicking links to products you are promoting, signing up for loyalty rewards, or anything else you really want them to do on your site. 

Customer Conversion Rate =

Total Number of Site Visitors / Number of Actions Completed x 100

This formula provides an essential metric for any business looking to build customer retention and increase sales and revenue. This should be analyzed regularly to ensure your customer conversion rate is high.

For example, if Store A has high site traffic, but a low customer conversion rate, it implies that the money and effort that’s gone into marketing a specific action or promoting their website is most likely going to waste.

» Check out how to increase your Shopify conversion rate here

2. Sales Conversion Rate

As opposed to the customer conversion rate, the sales conversion rate focuses on one particular aspect—number of sales. The average e-commerce conversion rate is 1.74%.

You should view the sales and marketing team in tandem to reach this conversion rate. This metric helps you determine the quality of leads produced by your marketing team and evaluate how well your sales team is doing.

Sales Conversion Rate (%) = Total Sales / Number of Site Visitors x 100

For example, if Store A's site receives 60 site visitors this month, but this only converts to one sale, what is their conversion rate?

Sales Conversion Rate (%) = Total Sales / Marketing Leads x 100

= 1/60 x 100

= 1,67%

So, Store A has a sales conversion rate less than the average. One way to improve your startup's general sales conversion rate is to examine the leads that your marketing team is producing. Are they valuing quantity over quality? If yes, then you may need to re-evaluate your priorities, like looking into utilizing more effective e-commerce ads.

Sales conversion rates can be checked weekly or monthly, but they shouldn’t be carried out scarcely. Without such reports, startups could bleed much-needed capital, resulting in massive losses.

» Learn about your shop's conversion by calculating micro and macro conversions

3. Customer Retention Rate

Anything from a bad site experience to slow customer service could lead to your e-commerce business losing customers. An important job of an e-commerce startup is to make sure customers stay loyal to your business.

Analyzing this is where customer retention rate calculations come in. It measures the number of customers you’ve kept over a specified period (monthly, quarterly, yearly), which can offer you useful insight into what you’re doing right and which practices need a bit more work.

Customer Retention Rate (%) =

[(Total Customers - New Customers) / Number of Customers Before] x 100

Let's take Store A as an example again. Say they have 10 new customers this month, had 150 total customers last month, and now have 100 customers in total for this month.

Customer Retention Rate (%) =

[(Total Customers - New Customers) / Number of Customers Before] x 100

= [(100 - 10) / 150] x 100

= [90 / 150 ] x 100

= 60%

This shows that Store A was able to retain 60% of their customers.

It's important to note that it's much cheaper to keep an existing customer happy than to abandon them and chase new potential customers because existing customers are more likely to buy your products and refer your site to friends and family. This will mean better potential for greater sales conversion rates.

» Looking to know more? Find out benefits of customer retention analysis

4. Average Order Value

Now that you know how many customers you're keeping and the rate of customers that may be completing actions, like purchases, it's useful to know how much each customer spends on your site in one go. Here's how to calculate the average order value (AOV):

AOV ($) = Total Revenue Over Certain Period / Number of Orders Placed

So, let's say Store A made $20,000 last month and had a total of 500 orders.

AOV ($) = Total Revenue Over Certain Period / Number of Orders Placed

= $20,000 / 500

= $40

This means Store A's average order value for last month is $40.

This value can help your budding e-commerce platform establish the groundwork for future strategies because it helps you understand the value of individual customers. An increased AOV for returning customers can naturally perform well because there are minimal to no extra costs needed to generate these purchases.

If you’re spending a lot of money on marketing and receiving thousands of hits on your website every day, but none of these result in big sales, for instance, it may be time to re-evaluate your strategies. For example, your site navigation may need improvement or you may need to explore a dynamic pricing strategy.

Get on the Right Conversion Rates Track With BeProfit

Tracking all these conversions for your e-commerce startup may be overwhelming, from trying to understand consumer behavior to sales and marketing tactics. But it is crucial to monitor these metrics so you can find where your site's strengths and weaknesses lie. Not to worry, though, BeProfit can help with this. This way, you can focus on the data results and use them to make strategy adjustments to help improve your business' growth and number of sales.

» Ready to see how BeProfit can help? Book a demo today