19 E-commerce Financial Metrics With Formulas

19 E-commerce Financial Metrics With Formulas

Once, the british physicist William Thomson Kelvin said:‍‍What is not defined cannot be measured. What is not measured, cannot be improved. What is not improved, is always degraded.‍As the e-commerce industry is approaching the $8.1 trillion mark by 2026, Thomson's statement gains even greater relevance for businesses in this space, emphasizing the crucial role of data and parameters in achieving success.‍Data is everything. E-commerce businesses need data and parameters to effectively establish business objectives, formulate strategies, execute informed decision-making, and accomplish desired goals. 

But what data should you prioritize? In our metrics corner series, we highlight the key finance metrics that drive growth and financial performance for fast-scaling e-commerce businesses. 

In this post, you’ll learn:
- What are e-commerce financial metrics?
- Why are e-commerce financial metrics important?
- E-commerce financial metrics you must mindfully watch
- How Bluecopa helps e-commerce teams measure financial KPIs?
- Why don’t you start measuring?
Let’s roll.‍‍

E-commerce Financial Metrics

E-commerce financial metrics are quantitative measurements used to assess the financial performance and health of an e-commerce business. These metrics provide valuable insights into various aspects of the business, such as revenue, profitability, efficiency, customer acquisition, and retention.‍Monitoring and analyzing these metrics help e-commerce businesses make data-driven decisions and optimize their operations for growth and profitability.

Why are E-commerce Financial Metrics Important?

E-commerce financial metrics provide a quantitative and objective foundation for understanding and managing the financial aspects of an e-commerce business. They facilitate informed decision making, goal setting, performance evaluation, and investor relations, all contributing to the overall success and growth of the business. They are important for several reasons:

• Performance evaluation: Financial metrics provide a clear picture of the e-commerce business's performance and financial health. By monitoring key metrics, businesses can assess their revenue, profitability, and overall financial performance. This evaluation helps identify strengths, weaknesses, and areas for improvement.
• Decision making: Financial metrics enable data-driven decision making. They provide insights into various aspects of the business, such as sales trends, customer behavior, marketing effectiveness, and operational efficiency. By analyzing these metrics, businesses can make informed decisions on pricing strategies, marketing campaigns, inventory management, and resource allocation.
• Goal setting and tracking: E-commerce financial metrics serve as benchmarks for setting and tracking business goals. They help define realistic targets and measure progress towards achieving them. Whether it's increasing revenue, improving profitability, or optimizing marketing ROI, financial metrics provide the necessary framework for goal setting and performance monitoring.
• Investor confidence: For e-commerce businesses seeking investment or partnerships, financial metrics play a crucial role in building investor confidence. Metrics such as revenue growth, gross profit margin, and customer acquisition cost demonstrate the business's financial viability and potential for returns.
• Performance comparison: Financial metrics enable benchmarking and performance comparison against industry standards or competitors. Businesses can assess how they stack up against their peers, identify areas of competitive advantage or disadvantage, and make strategic adjustments accordingly.

E-commerce Financial Metrics You Must Mindfully Watch

1. Gross Merchandise Value (GMV)
   Gross merchandise value (GMV) is the total value of products sold by e-commerce businesses over a particular duration. GMV is a reliable growth indicator that can be used to track a company's performance over time and reveal insights into its overall health. It is particularly applicable in the customer-to-customer market and the consignment sector.
   
   GMV = Sales Price of Goods x Number of Goods Sold
2. Net Revenue
   Net revenue is the total revenue a company generates after deducting returns and discounts. It is an important measure of a company's performance and is often listed on income statements.
   
   Net Revenue = Gross Revenue - Expenses
3. Net Revenue %
   Net revenue percentage is the percentage of revenue that remains after discounts, allowances, and refunds have been deducted. It can help identify strong and weak earning segments and areas that can be expanded or eliminated.
   
   Net Revenue % = (Net Revenue/ Total Revenue)* 100
4. Revenue by traffic source
   Revenue by traffic source is a breakdown of the overall revenue generated through the various marketing channels. By analyzing this data, businesses can:
   - Identify channels that are successfully boosting sales and ones that need to be optimized
   - Make the most of marketing spending and focus on traffic sources that have the highest ROI
5. Revenue per session (RPS)
   RPS, or revenues per 1000 sessions, is a metric that measures how much revenue a website generates for every 1000 visitors or sessions. It is an important indicator for businesses that generate revenue through website visits.
   
   RPS = (Revenues / sessions) * 1000
6. Number of Orders
   The number of orders is a crucial performance indicator that gives businesses insight into the total amount of transactions occurring on their platform. It helps businesses streamline their e-commerce strategy and track the success of marketing campaigns.
7. Average Order Value (AOV)
   Average order value (AOV) is an e-commerce metric that measures the average total of all orders placed during a certain period. It is a key indicator to analyze important business decisions such as advertising spend, product pricing, and customer behavior.
8. Cost of Goods Sold (COGS)
   COGS, or Cost of Goods Sold, is the direct cost of selling products for e-commerce businesses. It includes labor, manufacturing, shipping, and other costs to make the product market-ready.
9. Gross Margin (GM)
   Gross margin is a key business metric that measures how much money a company makes from each sale after deducting the cost of goods sold. A high gross margin indicates that a company is profitable, while a low gross margin suggests that the company may be facing challenges.
10. Gross Margin Rate (GMR)
    Gross margin rate (GMR) is a percentage of revenue remaining after deducting COGS. A higher GMR indicates a more profitable business, while a lower GMR suggests production or pricing issues. Businesses can use GMR to make informed pricing, manufacturing, and growth decisions.
11. Customer Lifetime Value (CLV)
    Customer lifetime value (CLV) is the total revenue a customer is expected to generate for a business throughout their relationship with the business. CLV can be used to make decisions about pricing, sales, promotion, and customer retention.
12. LTV/CAC
    LTV: CAC is the ratio of a company's Customer Lifetime Value to Customer Acquisition Cost. It is a key metric for measuring the success of a company's marketing and sales efforts.
13. Average revenue per session (ARPS)
    The average revenue per session (ARPS) is the amount of money generated by each unique visitor to a company's website. Businesses can use ARPS to track the health and effectiveness of their brand.
14. Return/Refund rate
    Return and refund rates are essential metrics for e-commerce businesses because they can significantly affect revenue.
15. Card chargebacks
    A chargeback is when a customer disputes a charge on their credit card. This can happen for a variety of reasons, such as unauthorized use, fraud, or a product that was not received or not as described.
16. Processing fee
    Payment processing fees are costs that businesses pay to process payments from customers.
17. Shopping Cart Abandonment Rate (CAR)
    Shopping cart abandonment is when a customer adds items to their cart but doesn't complete the purchase. It's a major problem for e-commerce businesses, as it can lead to lost sales and revenue.
18. Earnings before interest and taxes (EBIT)
    EBIT, or earnings before interest and taxes, is a measure of a company's profitability from its core operations. It is calculated by taking a company's net revenue and subtracting its operating expenses.
19. Net profit margin
    The net profit margin is the most accurate indicator of a company's profitability. It is calculated by dividing net profit by total revenue.

How Bluecopa Helps E-commerce Teams Measure Financial KPIs?

Key performance indicators (KPIs) are important for organizations of all sizes. They help them track their progress and ensure they are on track to achieve their goals. However, there are several challenges they face when it comes to measuring KPIs. These challenges include:

• Data quality: Data quality is essential for accurate KPI measurement. However, data can be of poor quality due to many factors, such as duplicate data, missing data, incorrect input, and data corruption.
• Data timing: KPIs need to be measured at the right time to be accurate. However, data can be delayed or not available at the time it is needed.
• Access to tools: There are several tools available for KPI measurement. However, these tools can be expensive and difficult to use.
• Deriving value from data: Once data has been collected, it is important to be able to derive value from it. This can be a challenge, as it requires a deep understanding of the data and the ability to use it to make informed decisions.

Bluecopa helps organizations overcome these challenges in numerous ways. Firstly, it integrates with many data sources, implementing data transformation and cleansing to make sure data is in good shape. Secondly, it fetches data in real-time, in turn measuring KPIs.‍‍Lastly, it has an easy-to-use Excel-like interface making it a viable tool for finance users. With Bluecopa, you can manage thousands of transactions in an Excel-like interface yourself without having to depend on data teams and enjoy ad hoc analysis.

Why Don’t You Start Measuring?

With so many variables to consider, it's easy to lose sight of the most crucial ones. Keeping track of these key e-commerce financial metrics allows you to uphold your business and produce profitable outcomes. Finance observability platform, Bluecopa ensures that you are always up to date on business-critical metrics. So, what’s for the wait? Propel further by tracking these helpful KPIs today. Get yourself a personalized demo.