E-commerce Glossary

We are going to introduce you to the main e-commerce metrics you should pay attention to when managing your online store.

A/B Testing

A/B testing, also known as split testing or bucket testing, is a method of comparing two versions of a web page or app feature to determine which one performs better. The goal of A/B testing is to identify changes that will lead to a desired outcome, such as increased conversions or improved user engagement.

A/B testing is typically done by randomly dividing visitors or users into two groups, with one group being shown version A and the other group being shown version B. The performance of each version is then measured and compared based on metrics such as click-through rate, conversion rate, or time on page. The version that performs better is then implemented for all users.

It’s important to note that A/B testing is usually used to test a single variable at a time. A/B testing can be used to test everything from headlines and images to entire landing pages and can be an effective way to optimize website or app performance.

ACoS (Advertising Cost of Sales)

ACoS is one of the key metrics of Amazon. The metric is used to determine the effectiveness of your ads.

ACoS = (Amount spent on ads / Total sales) x 100

If you spent $20 on advertising and it resulted in a single sale of $100, your ACoS would be 20%. The lower this metric is, the better your Amazon advertising campaign is performing. 

Amazon ACoS depends on such variables as a company’s size, industry, campaign frequency.

To easily convert ROAS to ACoS or ACoS to ROAS, use our calculator.

Affiliate Marketing

Affiliate marketing is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate’s own marketing efforts. Affiliates typically promote a business through their own personal networks, websites, or social media channels, and are given a unique link or code to track their promotions. If a sale or other desired action is completed as a result of the affiliate’s promotion, the affiliate is typically given a commission or other form of compensation. This can be a cost-effective way for businesses to acquire new customers and expand their reach, while also allowing affiliates to earn money by promoting products or services they believe in.

AOV (Average Order Value)

This metric helps sellers set realistic objectives for new shoppers. It tells the average amount spent by a customer per order when purchasing from your store. 

The formula is: 

AOV = Total revenue / Total number of orders

Using the resulting number, you can calculate how many customers you should bring in to earn a certain amount for a specific period of time.

ARPU (Average Revenue Per User)

Average revenue per user (ARPU) is a metric used to measure the revenue generated by each user of a product or service.

Use the formula below to calculate this metric:

ARPU = Total revenue generated / Number of users

For example, if a company has 100 users and generates $10,000 in revenue, the ARPU would be $100 ($10,000 / 100 users).

ARPU is commonly used in the telecommunications, media, and technology industries to measure the performance of services such as mobile phone plans and online subscriptions.

Attribution Model

An attribution model is a set of rules used to determine how credit for a sale or conversion is assigned to different touchpoints in the customer journey. Attribution models are used in marketing to understand which marketing efforts are most effective in driving conversions and to allocate marketing budget accordingly.

There are several types of attribution models, including:

  • Last-click attribution: credits the last touchpoint before the conversion
  • First-click attribution: credits the first touchpoint in the customer journey
  • Linear attribution: spreads credit evenly across all touchpoints
  • Time decay attribution: gives more credit to touchpoints that occurred closer in time to the conversion
  • Position-based attribution: assigns more credit to the first and last touchpoints, and less credit to touchpoints in the middle

It’s important to note that different attribution models can lead to different conclusions about which marketing efforts are most effective, so it’s important to choose an attribution model that aligns with a business’s objectives.

Bing Shopping

Bing Shopping is a service where users can view and compare products from multiple sellers and purchase them from a seller’s website. People use Bing as a search engine less than Google, but still the number of its users is quite large. 

Besides sponsored listings, merchants can also enjoy the free Product Listing option. But at the moment it’s not available in all countries.

For more information, check out our article How To Set Up Microsoft Shopping Campaigns (Bing Shopping Ads) For E-Commerce Store On Shopify.

Bounce Rate

Bounce rate is a metric used to measure the percentage of visitors to a website who leave the site after only viewing a single page. A high bounce rate indicates that many visitors are leaving the site without interacting with any other pages. A low bounce rate, on the other hand, indicates that visitors are engaging with the site and viewing multiple pages.

The formula is:

Bounce rate = Number of single-page sessions / Total number of sessions

For example, if 100 visitors come to a website and 50 of them leave after viewing only one page, the bounce rate would be 50%.

Bounce rate can be a useful metric for understanding how visitors are engaging with a website. A high bounce rate can indicate that there is a problem with the website, such as poor navigation, slow load times, or irrelevant content. Improving website speed, optimizing the website’s design, and creating high-quality content can help to reduce bounce rate.

It’s important to compare your bounce rate to industry benchmarks or to your own historical data to get a sense of whether it is high or low.

Break-Even ACoS

Before starting advertising on Amazon, it’s important to determine break-even ACoS (Advertising Cost of Sales). In order to do it, follow these steps:

  • Find out your profit margin: [(Value of sale – Item cost) / Value of sale] x 100

Note that the Item cost should include everything that goes into its producing, selling and importing.

  • Find out your ACoS by using the following formula: ACoS = (Amount spent on ads / Total sales) x 100

You can determine your perfect ACoS using an ACoS calculator.

  • Compare the numbers. 

If your profit margin is, for example, 70%, then the ACoS shouldn’t exceed this percentage in order to break even with ads on Amazon. A Higher ACoS means that you are losing money from ads. 

Bundling

Bundling is a marketing strategy in which a company offers several products or services for sale as a single combined package. The goal of bundling is to increase sales and revenue by offering customers more value for their money.

There are different types of bundling:

  • Product bundling: offering several products for sale as a single package deal
  • Service bundling: offering several services for sale as a single package deal
  • Pure bundling: only selling products or services as part of a bundle
  • Mixed bundling: selling products or services both individually and as part of a bundle

Bundling can be a useful way for companies to increase sales by making it more convenient for customers to purchase multiple products or services at once. It can also be used to increase the perceived value of a product or service by including additional items or services with it.

Buy on Google

Buy on Google is a platform where users can quickly buy products they are not redirected to a seller’s site and pay for items right on Google. One of the features of this service is that it’s commission free. Unfortunately, this checkout experience is currently available only for US merchants.

CAC (Customer Acquisition Costs)

CAC helps sellers know the cost of getting a new customer. 

Use the formula below to calculate this metric:

CAC = Marketing expenditure / Number of new clients

This metric reflects the success of a seller’s sales and marketing campaign performance. 

Cart Abandonment Rate

Cart abandonment rate is a metric used in e-commerce to measure the percentage of online shoppers who add items to their shopping carts, but do not complete the purchase.

The formula is: 

Cart Abandonment Rate = Number of abandoned carts / Number of initiated checkouts

For example, if a business had 100 initiated checkouts and 25 of them were abandoned, the abandoned cart rate would be 25%.

A high cart abandonment rate can indicate that customers are encountering problems during the checkout process, such as issues with shipping costs, payment options, or website usability. Businesses can use this metric to identify areas for improvement and to develop strategies to reduce the abandonment rate, such as sending abandoned cart emails, offering free shipping, or simplifying the checkout process.

CLV (Customer Lifetime Value)

The metric shows the total revenue that a company could expect from a client.

You need this formula to calculate CLV:

CLV = AOV x PF x Average length of the client relationship (in years)

* AOV Average Order Value

* PF Purchase Frequency

To increase this metric, sellers should do their best to make clients satisfied with the products and services offered by this particular e-commerce business.

Conversion

Conversion refers to the process of turning a website visitor into a paying customer or a lead. In e-commerce, a conversion typically refers to a completed purchase, but it can also refer to other desired actions such as signing up for a newsletter, filling out a contact form, or downloading a product brochure.

In digital marketing, conversion rate is the percentage of website visitors who take a desired action.

The formula is:

Conversion rate = Number of conversions / Number of website visitors

A higher conversion rate generally indicates that a website is more effective at converting visitors into customers or leads.

To increase conversion rate, businesses may use various tactics such as A/B testing, User Experience optimization, personalization, and retargeting. They may also use analytics to track and analyze the performance of their website, including metrics such as bounce rate, time on site, and pageviews per session to identify areas for improvement.

CR (Churn Rate)

Churn Rate is used to find out the number of clients that stopped buying from an online store.

The formula of the metric is:

CR = (1 – 2 ) / 1

1 Clients at the beginning of a time period,

2 Clients at the end of the period.

This metric always depends on a company’s industry. For example, for a single-purchase e-commerce business, the average Churn Rate is considered to be around 75%.

You can always check such metrics as Retention Rate and Churn Rate in CRM/CDP. Changes in these metrics reflect the health of a business. It makes sense to monitor the change in RR and CR on a regular basis.

Average Churn Rate for E-commerce

This metric always depends on a company’s industry. For example, for a single-purchase business, the average Churn Rate is considered to be around 75%.

According to the Omniconvert report, companies selling gifts, consumer electronics, apparel clothing accessories, shoes, and toys have the highest churn rate. It means that customers don’t often come back to buy again from such stores.

Source: Omniconvert

CTA (Call to Action)

A call to action (CTA) is a statement or button that prompts a user to take a specific action, such as making a purchase or signing up for a service. CTAs are commonly used in marketing and advertising to increase conversions and drive sales. They can be placed in emails, social media posts, and website pages. Examples of CTAs include “Buy now”, “Sign up”, and “Learn more”. The goal of a CTA is to motivate a user to take the next step in the sales or conversion process.

CTR (Clickthrough Rate)

Click-through rate (CTR) is a metric used to measure the effectiveness of online advertising. 

The formula is:

CTR = Number of clicks on an ad / Number of times the ad was displayed (impressions)

CTR is used to evaluate the effectiveness of an online advertising campaign and to compare the performance of different ads. A higher CTR generally indicates that an ad is more appealing and relevant to the audience, and therefore more likely to lead to a conversion or sale. CTR can be used to gauge the overall performance of a campaign, as well as to test the performance of different ad variations.

CTR is a common metric used in pay-per-click (PPC) advertising, where advertisers pay only when their ad is clicked. In these cases, a higher CTR can result in a lower cost per click (CPC) and a better return on investment (ROI) for the advertiser. 

Google Free Listings

Google Free Listings is a great opportunity to list your products that will appear across the Google ecosystem for free. Sellers can reach more customers, however, it’s not guaranteed that the items will appear in searches.

For more information, check out our article A guide to Google Free Listings.

Google Shopping

It is a service that gives customers an opportunity to search for products and compare them between different retailers. The products are displayed either in the main search engine results page or under the shopping tab.

Note that Google Shopping is not a marketplace even though its services are similar.

This is a great channel for online sellers to scale their businesses as products get more visibility. Merchants can also list their items for free (Google Free Listings).

For more information, check out our article Google Shopping Feed Optimization to Scale Your Sales.

Microsoft Shopping

Microsoft Shopping campaigns allow advertisers to visually show their ads to users on Microsoft (Bing). One of the main advantages of this campaign type is the opportunity to target unique demographics. 

Bing is usually used in conjunction with Google Ads campaigns as a complement. Moreover, an average CPC (cost-per-click) for Bing Ads is quite affordable compared to Google Ads. 

For more information, check out our article “How to Set Up Microsoft Shopping Campaigns (Bing Shopping Ads) for E-Commerce Store on Shopify”.

PF (Purchase Frequency)

Purchase Frequency shows the number of times that a customer makes a purchase in a given period.

To calculate it, use the following formula:

PF = Number of orders / Number of customers

Numbers of orders and customers should be within the period you need to analyse (e.g 12 months).

You can also check PF in the CRM/CDP.

AOV and PF are especially important for advertising management. They allow merchants to understand the maximum CPO (Cost Per Order) and ROAS (Revenue on Ad Spend).

Average Purchase Frequency for E-commerce

Purchase Frequency is affected by various factors.

Omniconvert’s report showed how this metric differs by industry.

Source: Omniconvert

Let’s assume you sell goods in the beauty and fitness industry. If you found out that your average PF is 1.6, you should think of the ways to encourage your customers for new purchases

Remarketing

Remarketing is a digital marketing tactic that aims to show ads to users who have visited your site before or interacted with the content on your social media. Most visitors don’t convert when they browse your site for the first time. This strategy has all chances to result in higher conversion since it targets people who are more likely to be interested in your products.

The most popular kinds of remarketing are:

  1. Remarketed display ads
  2. Video remarketing
  3. Email remarketing

Remargeting campaigns are very powerful. Using them, you stay connected with your audience and encourage them to return to your site.

ROAS (Return on Ad Spend)

It’s one of the most important marketing metrics. ROAS shows the amount of revenue you earn for each dollar spent on the advertising campaign for your e-commerce business.

The formula of this metric is simple:

ROAS = Revenue from an ad campaign / Cost of the campaign

Let’s assume you spent $500 on an advertising campaign that resulted in a revenue of $3000. The ROAS is $6. So, for every dollar spent on the ad campaign, your company gets $6.

To easily convert ACoS to ROAS or ROAS to ACoS, use our calculator.

Average ROAS in E-Commerce

A good ROAS ratio varies greatly by industry. The higher it is, the more you earn from your advertising campaign. The average ROAS for e-commerce is considered to be 2.87:

Average ROAS

ROI (Return on Investment)

This financial ratio is used to measure the profitability of all investments made in a business. 

There are many ways to calculate Return on Investment. We suggest using this formula:

ROI = Net income / Cost of investment x 100

The higher the percentage is, the better your investments perform.

ROI greatly depends on the industry and investment type, so there is no average value. You may want to compare your results with those of the companies operating in your industry.

RPR (Repeat Purchase Rate)

Repeat Purchase Rate, also known as the repeat customer rate or repeat business rate, is a metric used to measure the percentage of customers who make a repeat purchase from a business.

RPR = Number of repeat customers / Total number of customers

For example, if a business has 100 customers and 25 of them make a repeat purchase, the repeat purchase rate would be 25%.

This metric is used to measure customer loyalty and the effectiveness of retention strategies. A higher repeat purchase rate is generally seen as a positive sign for a business, as it indicates that customers are satisfied with their purchases and are more likely to continue doing business with the company.

RR (Retention Rate)

The metric shows the percentage of customers who keep purchasing your products. 

This formula is used to calculate RR:

RR = [(1 – 2) / 3] x 100

1 – Clients at the end of a time period,

2 – New clients during the time period,

3 – Clients at the beginning of the time period.

It’s a valuable measure that indicates a seller’s ability to sustain customer relationships.

tACoS (Target ACoS)

While break-even ACoS shows the upper limit above which the ads campaign is not profitable, target ACoS tells how profitable it is.  

To determine this metric, use this formula: 

TACoS = Break-Even ACoS – Desired Profit Margin

For instance, your break-even ACoS is 40% and desired profit margin is 20%. So, the target AcoS would be 20%. This is the percentage you should strive for.

tROAS (Target ROAS)

tROAS is a Google Ads Smart Bidding strategy. When users search for products that are similar to yours on Google, the strategy predicts the value of a potential conversion and adjusts bids in order to maximize the return. So, if the search doesn’t seem to result in a high-value conversion, it will bid low, and vice versa.

Before using this strategy, make sure you meet certain requirements, namely, in the past 30 days a campaign must have at least 15 conversions. For Discovery campaigns, the requirement is different 75 or more conversions for the same period.