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17 Oct 2018

Essential E-Commerce KPIs for Middle East Market Entry

The secret to effective performance measurement is to keep it simple, especially if your online selling business is in its early days or focused on penetrating new regional markets, like the potentially lucrative Middle East, an area poised for explosive e-commerce growth.

With digital commerce being such a data-rich environment, it’s easy to mistake simplicity for inadequacy, invoking the very real threat of paralysis by analysis through the use of too many metrics.

If you find you are trying and failing to meet or understand too many metrics, it might make sense to step back and reevaluate which ones really are the key performance indicators, with perhaps six to ten being the optimal number.

Prioritize the Measurements That Matter

Which KPIs should you choose? A lot depends on the goals you have set for penetration of the Middle East, but the metrics outlined below should collectively give you a clear, actionable overview of marketing and sales performance, enabling you to target the right areas for improvement.

Conversion Rate

Conversion rate is simply the percentage of visitors to your site that actually made a purchase. This KPI is calculated by dividing the number of visits ending in a purchase by the total number of visits.

Example: If your online store received 1,200 visitors in a single month, and 24 of them purchased something, your conversion rate for that month would be 24/1200 = 0.02 or 2%.

Conversion rate is a critical KPI to monitor, regardless of your goals, so if you don’t already have this metric on your dashboard, you should certainly add it.

Average Order Value

The higher the average value of your customers’ orders, the more profit you make, notwithstanding other factors, like the cost of selling your products. Those factors can also be measured with KPIs, but average order value (AOV) should be one of the first on your list of must-haves.

To calculate AOV, you need to know the exact amount of revenue that your store or social-selling business generated in a given period of time, and the exact number of orders placed by your customers. Divide the revenue total by the number of orders, and you will have the average order value.

Example: If your store made a total of $50,000 in one month, and the total number of orders for the month was 750, the average order value would be 50,000/75 = $66.66.

If the conversion rate KPI is crucial for understanding how many visits to your website result in sales, AOV is essential to understand how well your marketing induces customers to spend.

Shopping Cart Abandonment Rate

One key to increasing conversions is to understand why visitors elect not to make a purchase. There can be many reasons, but those prompting them to abandon an initiated sales transaction should be primary targets for your attention.

To measure shopping cart abandonment rate, you need to know the number of completed sales transactions, and the total number of transactions initiated (regardless of whether they were completed). Assuming you have that data, apply the following formula:

1 – (# of completed sales transactions/# of initiated sales transactions). This will give you the percentage of abandoned carts (cart abandonment rate).

Example: If the total number of completed transactions in your store was 750 in one month, and the number of initiated transactions was 1,000, the cart abandonment rate would be 1 – (750/1000) = 1 – 0.75 = 0.25 or 25%.

If you are entering the e-commerce market in the Middle East, you should be aware that cash-on-delivery (COD) is the dominant payment method among consumers in the region.

To avoid high levels of cart abandonment, you might consider finding a way to offer COD to your customers, or otherwise, make it very clear on your product pages that you don’t offer that payment option. If your visitors reach the checkout page before learning they cannot pay with cash, the likelihood of abandonment is much higher than it might be in other regional markets.

Other Important E-Commerce KPIs

If you could have only three KPIs for your e-commerce business, conversion rate, average order value, and cart abandonment rate would probably be the ones to opt for. Nevertheless, many other KPIs exist to help you piece together a picture of marketing, sales, fulfilment, and customer service performance.

You won’t go far wrong, for example, by integrating any or all of the following into a primary dashboard of six to ten KPIs:

• Repeat customer rate: The percentage of customers making further purchases after the first one.

• Cost of goods sold: COGS measures the total accumulated costs of creating a product (or purchasing it) and all other costs incurred along the way to a successful sale.

• Website traffic by source: A measurement of the total number of visits to your e-commerce website, broken down by source (such as email, social selling, referrals, and paid advertising)

• Time-on-site: Tracks how long visitors stay on your site. Time on site is essentially a measure of visitor engagement.

• Gross margin: This KPI is a calculation of the value of your sales minus your COGS.

• Perfect order: This fulfilment KPI is a composite measurement of the percentage of customer orders delivered on time, in full, free from errors, and with accurate documentation.

A combination of any of these KPIs, along with the top three covered in more detail above, will give you a comprehensive view of performance without being overwhelming.

Bonus Takeaway: Remember the ‘K’ is for Key

Of course, if you wish to capture lots more metrics, there is no harm in doing so, but you should probably not attempt to monitor them actively. Instead, you can reserve them for use, when needed, to help analyze issues highlighted by your primary KPIs.

Ultimately, the right combination of metrics will depend upon the exact nature of your business model and strategy. Whatever you do, try not to track too many or make them too complex. Keep things simple and measure what matters, so you can realistically monitor your KPIs constantly, understand them, and most importantly, act on the intelligence they provide.