The 7 Essential Metrics Every B2C E-Commerce Business Needs to Thrive.

Welcome to the world of B2C e-commerce business metrics, the key indicators of your business performance. The e-commerce industry is constantly evolving with the latest trends and changing customer behavior. It's important for every entrepreneur to constantly monitor and track these metrics to keep growing and thriving in the competitive world of online business.

• Customer Satisfaction Level: One of the key metrics to measure the success of your business is the customer satisfaction level. It's important to keep your customers happy and satisfied to retain them and attract new ones.
• Average Order Size: The size of each order is also a crucial indicator of business performance. Increasing your average order size can lead to higher profits and happier customers.
• Number of Repeat Customers: Repeat customers are the backbone of any successful e-commerce business. It's important to track this metric to know how many customers are coming back to your store and what you can do to retain them.

Discover the other four key performance indicators that you should track and measure to grow your B2C e-commerce business. Keep scrolling to learn more and take your business to new heights!

Customer Satisfaction Level

In any business, customer satisfaction is crucial to the success of the company. B2C E-Commerce businesses are no exception. Customer satisfaction levels are a key performance indicator (KPI) used to measure how satisfied customers are with the products or services the company provides.

Definition

Customer satisfaction level is a metric that measures how happy customers are with the products or services a business provides. It is an essential measure for every business as it can help to identify areas that need improvements. When customers are satisfied, they are likely to come back and refer others to the business.

Use Case

For B2C E-commerce businesses, customer satisfaction level is a critical metric as it can impact sales, customer loyalty, and the company's reputation. A satisfied customer is more likely to be a repeat customer and to refer others to the business. Customer satisfaction also helps brands to build trust and reputation with their customers.

How To Calculate KPI

The formula for calculating the customer satisfaction level KPI is:

Calculation Example

Suppose an E-commerce business surveyed 500 customers and received feedback from 400 customers. Out of these 400 customers, 300 were satisfied with the products and services provided by the business. To calculate customer satisfaction, the formula will be:

KPI Advantages

• Helps to identify areas for business improvement and growth.
• Can increase customer loyalty and retention.
• Can improve brand reputation and positively impact sales.

KPI Disadvantages

• Surveys may not be representative of all customers.
• Surveys can be subjective and may not reflect actual customer behavior.
• Results may be influenced by other factors that the business cannot control.

KPI Industry Benchmarks

The industry benchmark for customer satisfaction varies by industry, but generally, a score above 70% is considered good. For example, according to the American Customer Satisfaction Index (ACSI) benchmark, the e-commerce industry's average customer satisfaction score is 81.6%. However, it's essential to note that industry averages may fluctuate, so it's best to benchmark against a reliable data source and aim for scores that are above-average for your industry.

Average Order Size

Definition

The average order size KPI for B2C e-commerce measures the average amount spent by customers per order. This metric helps businesses understand the spending habits of their customers and identify the revenue generated from each transaction. It provides an indication of the effectiveness of marketing and sales tactics and the efficiency of inventory management.

Use Case

Tracking the average order size allows businesses to:

• Identify the impact of promotions, discounts, and pricing strategies on customer spending
• Tailor product offerings and marketing strategies to encourage higher purchase amounts
• Monitor the efficiency of cross-selling and upselling techniques
• Evaluate the impact of changes to the e-commerce platform and user experience on customer behavior

How To Calculate KPI

The formula for calculating average order size is:

Calculation Example

An e-commerce business generated a total revenue of $10,000 from 100 orders in a month. To calculate their average order size, they divide the total revenue by the number of orders:

Their average order size for the month is $100.

KPI Advantages

• Helps identify revenue opportunities and growth potential
• Enables businesses to evaluate marketing and sales effectiveness
• Provides insights into customer behavior and spending habits
• Assists in making data-driven decisions for inventory and product management
• Enables comparison with industry benchmarks to identify areas for improvement

KPI Disadvantages

• Does not take into account order frequency or repeat customers
• May not capture the impact of high-value orders on overall revenue
• Can be influenced by outliers and seasonal fluctuations

KPI Industry Benchmarks for the KPI: 'Average Order Size'

The average order size varies significantly across industries and business types. For example, the average order size for clothing and fashion retailers is around $100, whereas the average for electronics and home appliances is closer to $500. Online marketplaces, such as Amazon, have an average order size of around $35. It is important to compare the average order size against industry benchmarks and competitors to identify areas for improvement.

Number of repeat customers

Definition

The number of repeat customers measures the percentage of customers who return to your e-commerce store to make a purchase again. This metric shows how well your business is retaining customers, and the loyalty of your customer base.

Use Case

Tracking the number of repeat customers is vital for any B2C e-commerce business looking to grow. It helps identify if your strategies to keep customers loyal are working or not. A high percentage of repeat customers means your business is doing well, and a low percentage means you need to change your strategies to keep customers happy and returning.

How to Calculate KPI

To calculate the number of repeat customers KPI, use the following formula:

Calculation Example

Let's say your e-commerce store had 1000 customers in a quarter, and 200 of them made a purchase again. Using the above formula,

The number of repeat customers for the quarter was 20%.

KPI Advantages

• The number of repeat customers KPI provides valuable insights into customer loyalty and retention rates.
• It helps businesses develop strategies that keep customers coming back, thus generating more revenue.
• This metric is cost-effective and easier to track than acquiring new customers.

KPI Disadvantages

• The number of repeat customers KPI may not always reflect the overall health of your business, and other metrics should be analyzed alongside this.
• If you don't have a large customer base, a few repeat customers can skew the percentage and misrepresent overall patterns.
• If customers are mostly returning to purchase low-cost products, measuring repeat customers may not be as valuable.

KPI Industry Benchmarks for the KPI: 'Number of repeat customers'

The average range of customer loyalty rates is between 20-40% for e-commerce businesses. However, this varies based on the industry, product type, and customer behavior trends.

Delivery success rate

Definition

Delivery success rate is a crucial KPI metric for B2C e-commerce businesses that measures the percentage of successful deliveries compared to the total number of attempted deliveries.

Use Case

Delivery success rate is essential for assessing your customer satisfaction and identifying areas for improvement in your delivery process. A higher success rate means happier customers and increased customer loyalty.

How To Calculate KPI

Calculation Example

Suppose your e-commerce business attempts 1,000 deliveries in a month, out of which 900 deliveries are successful. Your delivery success rate would be:

KPI Advantages

• Assists in measuring customer satisfaction levels
• Helps in identifying areas for improvement in the delivery process
• Can improve your brand reputation and customer loyalty

KPI Disadvantages

• Does not take into account customer expectations beyond delivery
• Cannot provide insight into the specific reasons for delivery failure

KPI Industry Benchmarks

According to industry benchmarks, a delivery success rate of 95% or higher is considered ideal for e-commerce businesses.

Inventory Turnover Ratio

Definition

The inventory turnover ratio is a financial metric that calculates the number of times a company sells and replaces its stock over a given period. The KPI measures how efficiently a company manages its inventory.

Use Case

The inventory turnover ratio is crucial for B2C e-commerce businesses that hold a significant amount of inventory. The KPI helps businesses make informed decisions about when to restock, how much to buy, and how to manage slow-moving inventory.

How To Calculate KPI

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Calculation Example

Let's say a B2C e-commerce business with a Cost of Goods Sold of $1,000,000 and an average inventory of $250,000.

KPI Advantages

• Helps identify slow-moving inventory
• Assists in making informed purchase decisions
• Improves cash flow management

KPI Disadvantages

• Does not consider inventory cost or selling price
• May not be applicable to service-based businesses
• Different accounting methods can impact calculations

KPI Industry Benchmarks for the KPI: 'Inventory Turnover Ratio'

The inventory turnover ratio varies by industry. Generally, a higher inventory turnover ratio is better as it shows that a company is efficiently utilizing its inventory. However, it is important to compare the ratio to industry benchmarks to understand its performance. For example, the inventory turnover ratio for a grocery store typically ranges between 15-20, while a fashion retailer might have a ratio of 4-5.

Cost of goods sold

Definition

Cost of goods sold (COGS) is the amount of money a company spent on producing or acquiring the products it sold in a specific period. It includes the direct cost of materials, production labor, and other overhead expenses incurred during the production process.

Use Case

COGS is a critical KPI metric for B2C e-commerce companies as it directly impacts the profitability of the business. Tracking COGS helps companies to determine their gross profit margin on each sale, which is essential to make informed decisions about pricing and inventory management.

How To Calculate KPI

The formula to calculate the COGS is:

Calculation Example

For example, if a company has a beginning inventory of $10,000, purchased goods worth $50,000 during the period and ended with an inventory worth $12,000, their COGS would be calculated as:

KPI Advantages

• Helps companies to price their products appropriately by ensuring that pricing reflects the cost of production
• Enables businesses to identify inefficiencies in their production process and find ways to reduce the cost of production
• Helps businesses to monitor their profitability and make necessary adjustments to their strategy

KPI Disadvantages

• Does not account for indirect costs, such as marketing and administrative expenses, which can impact overall profitability
• May not be accurate if inventory management is poor, or there are errors in recording inventory counts
• May not be suitable for all types of businesses and industries

KPI Industry Benchmarks for the KPI: 'Cost of goods sold'

Industry benchmarks for COGS vary widely depending on the sector and type of product being sold. For example, retail businesses often have a COGS of 70-75% of sales, while software companies have a much lower COGS of 20-30% of sales. It is essential to compare COGS with industry standards to ensure that a company is competitive in their sector.

Top Seven B2C E-Commerce Business KPI Metrics: Average Delivery Time

In today's fast-paced world, customers expect their products to be delivered as soon as possible. As an e-commerce business, meeting these expectations is vital to success. In this chapter, we will discuss one of the crucial KPIs for B2C e-commerce businesses: average delivery time.

Definition

Average delivery time is the average time taken from when an order is placed to when it reaches the customer's doorstep. This includes the time taken for order processing, packaging, and shipping.

Use Case

Tracking the average delivery time is essential for improving the customer experience. A shorter delivery time improves customer satisfaction, which leads to repeat business, positive reviews, and increased revenue. In contrast, a longer delivery time results in unhappy customers, negative feedback, and decreased revenue.

How To Calculate KPI

To calculate the average delivery time, use the following formula:

Calculation Example

Let's consider an example to understand the calculation of average delivery time. Say, in the last month, an e-commerce company has fulfilled 100 orders, and the time taken for order fulfillment was 2 days, and shipping took 3 days. We can calculate the average delivery time as:

Therefore, the average delivery time for this company is 0.05 days, or approximately one hour and twelve minutes.

KPI Advantages

• Measuring the average delivery time helps businesses improve the fulfillment process.
• A shorter delivery time can improve customer satisfaction and loyalty.
• Positive reviews and repeat business can increase revenue.

KPI Disadvantages

• Tracking average delivery time can be challenging for businesses with complex supply chains.
• Different delivery methods may have varying delivery times, making it challenging to determine an accurate average.
• External factors such as weather, natural disasters, or COVID-19 may impact delivery times and skew the average.

KPI Industry Benchmarks for the KPI: 'Average Delivery Time'

Benchmarking the average delivery time against industry standards is necessary to gauge performance. According to a study by MetaPack, the average delivery time for B2C e-commerce businesses in the United States is 4.5 days.