eCommerce Benchmarks: What Are They, and Why Are They Important to Your Business?

We all know that knowledge is power, and the amount of data you can access as an eCommerce business is tremendous. But the only data you have is from your own company, not your competitors. You need to know now only how you’re doing, but also how that compares to similar businesses.That’s where eCommerce benchmarks come in.

A powerful tool for helping you make informed decisions based on past performance, eCommerce benchmarks help you make sense of the data you collect and leverage it to improve your business. In this article, we’ll explore everything you need to know about eCommerce benchmarks, from what they are to the stats to how they can help you to how you can use them.

The best way to get real-time and accurate is using Varos, which has built a whole company that is solely revolved around showing you how you compared to similar businesses. 

What are eCommerce benchmarks?

Benchmarking is the process of measuring performance by comparing results and data points. Businesses use benchmarks to measure their success through comparison, helping them to continually improve their processes and workflows.

There are two types of benchmarks, differentiated by who you are comparing your results to.

Internal benchmarks measure and compare different things within your own business. For example, comparing your sales this quarter to the same quarter last year is an example of internal benchmarking.

External benchmarking compares things from your business to standards outside of your business. For example, comparing your sales this quarter to a competitor’s sales this quarter is a form of external benchmarking. This is Varos’ focus. 

Within the practice of benchmarking, the data points that you compare are referred to as “benchmarks.”

As an eCommerce business, there are a number of benchmarks that you can use to reveal important insights. These include:

1. Average repeat customer rate
2. Sales conversion rate
3. Bounce rates
4. Time on site
5. Abandoned cart rates
6. Page load time
7. Average order value
8. Net promoter score
9. Customer retention
10. Transaction path length
11. Customer lifetime value
12. Customer acquisition costs
13. Click-through rate
14. Average inventory sold per day

All of this data that you probably already collect is incredibly important in helping you evaluate the success of your business, pointing you to areas where you can improve and areas where you’re excelling. But it’s all much more powerful in context.

It isn’t enough just to know that your home page has a 5-second page load time. Because while that may sound short (after all, 5 seconds is nothing, right?), it’s actually considered long for this KPI – especially if your competitors’ home pages load in 2 seconds or less.

Similarly, it isn’t enough just to know that you have a 55% customer retention rate. How does that compare to last year? How does it compare to your biggest competitors? The answer to those questions is where the money is.

How to set a relevant eCommerce benchmark

When getting started with benchmarking, the first step is to choose which benchmarks you’ll look at. As part of deciding what eCommerce KPI benchmarks to work with, you’ll have to ask yourself the following questions.

• Who are our competitors?
• What KPIs do we already use and track?
• What are our goals? What do we want to improve in?
• What are areas we know we are weaker in?
• What data do we have access to?
• What are we struggling to figure out? Where do we need more clarity and insight?

Keep the answers to these questions in mind when reviewing the below list of some of the most relevant eCommerce KPIs to track.

Average repeat customer rate

The average repeat customer rate, also called returning customer rate, measures the number of customers who have made more than one purchase from you. This is one of the most important eCommerce ROI benchmarks because new customers are much more costly to acquire than repeat ones, pointing to the importance of marketing to repeat customers.

The formula for average repeat customer rate is (# of repeat customers / total # of customers) x 100.

For reference, according to Varos, the average repeat customer rate in the eCommerce space is 21% (it’s important to normalize this for product category, size and AOV - which you can do within the Varos app). If yours is much lower than that, you might want to work on retargeting and improving the customer experience. If it’s much higher, it might indicate a need to shift your focus to acquiring new customers.

Sales conversion rate

eCommerce conversion rate benchmarks are some of the most important ones you can look at. Your conversion rate is the number of site visitors who make a purchase. You can calculate it with this formula: conversion rate = (# of purchases / # of sessions) x 100. The average eCommerce conversion rate in 2021 was 5.2%.

Ideally, your conversion rate will remain steady or even increase over time. If it’s low or suddenly drops, it might indicate a few different things, like that your website isn’t working properly or your shipping rates are too high.

Customer lifetime value

Customer lifetime value is the total revenue your business can expect from a single customer throughout their entire relationship with you. You can calculate it with this formula: customer lifetime value = average value of a purchase x # of times the customer will buy each year x average length of the customer relationship (in years).

This number varies significantly based on industry and product, but it’s a good indicator of how much you can spend on acquisition and still make a profit.

Customer acquisition cost

Your customer acquisition cost tells you how much it costs to get a new customer on average. You can calculate it with this formula: customer acquisition cost = amount spent on marketing / # of new customers.

This KPI for eCommerce goes hand in hand with customer lifetime value to help you make sure you’re not overspending on customer acquisition.

For reference, according to Varos, the average CAC in the eCommerce space is $45 (it’s important to normalize this for your product category, size and AOV - which you can do within the Varos app)

Abandoned cart rates

When customers add a product to their cart and don’t finish the checkout process, it’s called cart abandonment. Your abandoned cart rate is calculated with this formula: (# of completed purchases / # of shopping carts created) x 100.

If your abandoned cart rate is much higher than your competitors, it could mean that there are errors in the checkout process stopping people from completing their purchases. But with average abandoned cart rates hovering between 70% and 85%, don’t worry if they seem high – that’s normal.

Average order value

Your average order value tells you the amount of money customers typically spend at one time in your store. You can calculate it using this formula: average order value = total revenue / total number of orders.

This metric is highly helpful in goal-setting. For example, if your sales goal for next quarter is $250,000 and your average order value is $250, you’ll know that you should strive to acquire 1,000 customers during the quarter.

Bounce rate

Bounce rate is actually a metric relevant to anybody with a website, not just online retail benchmarks. This metric tells you the number of people who go to your website and leave without taking any action like visiting another page. Your website’s analytics engine should be able to provide you with the average bounce rate for each page.

The average eCommerce bounce rate is between 20 and 45%, with one higher than that potentially indicating flaws in your website’s design or usability.

Net promoter score

The net promoter score is a measure of customer loyalty and satisfaction calculated by asking your customers  “On a scale of 1–10, how likely are you to recommend us to a friend or family member?”. Anybody who answers a 9 or 10 is considered a promoter, a 7 or 8 is considered passive, and a 6 or less is considered a detractor.

You can calculate your net promoter score with this formula: NPS = % of promoters - % of detractors. The higher your net promoter score, the better. Any score over 0 is considered good, and scores over 50 are considered excellent.

If your net promoter score falls into the negative numbers, take a look at your customer experience and customer service conversations to see what issues people might be having.

How to analyze your eCommerce benchmarks to improve sales & marketing

eCommerce benchmarks can offer you invaluable insights, but they aren’t going to improve your business on their own. To make the most of the insights you get from your benchmarks, you’ll need to analyze and apply them. Ask yourself:

• Why are my benchmarks what they are?
• What areas of improvement do my benchmarks point to?
• What do my benchmarks indicate I’m already doing successfully?
• What changes can I make to improve my benchmarks?
• What goals can I set for future benchmarks?
• What processes can I put into place for regularly benchmarking and applying the insights I find?

Another important point to consider is where you’re finding your benchmark data. This is much easier with internal benchmarking as opposed to external benchmarking, as you can use your own internal analytics. But the kind of insight you can mine from external benchmarking is considerable, helping to give you a valuable picture of how you’re doing against your competitors.

To help you out, Varos offers a free external benchmarking tool you can use to get benchmark data from companies like yours. You’ll get accurate, real-time metrics from thousands of eCommerce businesses in your vertical that you can use to see how you’re doing and how you can improve. Schedule a demo today to learn how Varos can take your benchmarking to the next level by providing the data you’ve been looking for.