The Hard Truth of Ecommerce Performance from Optimization Expert Jacob Loveless
This year, global ecommerce sales are expected to reach $5 trillion. By 2024, that number jumps to $6 trillion.
If you’re running an ecommerce business, the massive online market potential is not news to you. But this is not a gold rush or land grab (anymore). Competition to win online shoppers’ hearts, minds and wallet share is fierce. Acquisition costs are sky-high. And current macroeconomic indicators signal more trouble ahead (think recessionary inflation, rising interest rates, plus major spending and consumer confidence dips).
Optimizing performance is critical, and the smart way to get there is by understanding the metrics that drive business outcomes. In this guide, we’ll break down the metrics that matter most, so you can leverage them to compete, stand out, build loyalty and thrive through any conditions. We’ll outline the most important optimization levers, and how to pull them, beginning with speed. Boil your optimization success to the hard truth in a single formula.
First, Putting Speed in Perspective
Speed is an enhancing drug. The speed of your website affects all metrics—engagement, revenue, customer experience, even the effectiveness of your marketing. But for the highest-performing ecommerce businesses, the goal is not a faster site. It’s the result of a faster site. And that’s why mastering your metrics—beginning with the ones we outline here— is so critical to understanding what success looks like and how to achieve it.
If increased speed isn’t positively affecting your metrics, and if you’re not seeing any impact on your business, then there’s a problem with your measurement. And it’s time to get it right.
There Is Only One Formula That Matters to Your Business. Period.
Simply put: If you’re like most ecommerce businesses, you’re likely measuring the wrong things, and you’re paying attention to too many of them.
It’s not your fault. How would you know the nuances of analytics? You’re an expert on your business, not a data. With the right approach—and a few learned hacks—you can begin looking at your business like a Google data analyst. That means only tracking and focusing on the metrics that directly affect your business goals.
Once you get clear on the right metrics, you’ll stop looking for answers in absolute numbers and look for the efficiencies that help you thrive through today’s challenges and what’s ahead. It’s essential to know what to measure, and to measure it accurately, so you can pivot when needed to optimize.
When we boil it down to the metrics that matter, it always comes back to one universal formula for ecommerce success: You spend money to drive traffic to your site, and that investment must produce enough conversions to generate a return (revenue) greater than your investment. This is the golden rule of ecommerce. The financial formula is:
It’s that simple. Forget vanity metrics like bounce rates and the countless others Google Analytics has plugged into colorful and mysterious charts for you. Most make absolutely no difference to your business. The bank doesn’t care about your bounce rate or how many people visit your site.
Remember that ultimately the only formula that matters is revenue generated compared to investment (your return on investment). And the path to optimizing your return on investment is paved with efficiency (more conversions for fewer advertising dollars).
For metrics to be valuable, they must be a lens that clarifies, not blurs, insight. That takes knowing the right questions and asking them. When you don’t ask the right questions (the metrics) you won’t get the right answers (the insight). The only goal of tracking metrics is to understand how to optimize return. That’s where the rubber meets the road for optimization.
The foundation for fully leveraging the data focuses on these three elements:
- Engaged and Unengaged Users
- New and Returning Users
- Paid and Organic Traffic
How much revenue you are generating from each of these categories matters. Once you understand the data nuances related to these buckets, you can make a real bottom-line impact. You’ll stop guessing and start growing efficiently.
Now, let’s dig in.
Jacob leads Edgemesh, an ecommerce website optimization company. Jacob built Edgemesh to fundamentally enhance how ecommerce businesses deliver high-speed experiences and drive business results without the need to change platforms, rip or replace existing architecture or build new custom websites—radically simplifying and elevating how ecommerce is done.
He purpose-built Edgemesh as a complete and easy-to-deploy solution of technology, insights, and support to drive metrics that matter: quality traffic, engagement, conversions, average order value, and ad spend efficiency. Jacob spends his days providing insights to his clients, helping them to better understand the key business and website optimization metrics so they can run their businesses more effectively.
Metric 1: Engaged User Conversion Rate
What Matters
The Amount of Revenue You’re Generating from Engaged Users
What It Means
Engaged users are the users you should be paying attention to for conversion, and when analyzing your conversion rates. They’re your most valuable asset—the users who engage with your site and are most likely to convert to sales. Engagement can include actions like viewing more than one page, responding to an offer or completing a transaction. Non-engaged users are not convertible. They have not demonstrated the minimum level of engagement necessary to convert and should not be factored into your conversion rate.
Why It Matters
Knowing what percentage of your users are engaged is the simplest but most foundational optimization metric. It doesn’t matter what else you know until you know this because you can’t grow revenue without convertible users. Sales conversion takes engagement, not just traffic.
If you measure engaged users only, your conversion numbers make sense. It separates the signals from the noise for accurate, actionable insight. On the other hand, by including unengaged users in your metrics, you risk making the wrong assumptions.
For example, if you look at conversion rates as a measure of return on marketing dollars for digital ads, paid social or SMS campaigns, and you measure conversion for all users, the data might suggest tapping the brakes on a campaign that is working. That’s because the return on investment will skew lower by assuming a larger total audience that includes unconvertible users.
Edgemesh recently worked with a customer to rejigger its metrics. When we began, the marketing team was planning to realign its campaigns and pull SMS. We helped them realize, with the correct data, that in fact, SMS campaigns were driving significant conversions.
Here’s an example of what to look for when measuring engaged user conversion rates:
In these examples, if the businesses had included all users in the conversion rates, it would have seen a significantly lower conversion rate, and the wrong business decision may have been made.
Now What?
Let’s break it down: If 100,000 people show up to your site, and 37,000 engage in some way, then you know how many people might realistically buy from you. The rest of the people, and how you reach them, are important for other reasons and can be measured differently. But to optimize either group requires evaluating and addressing separately.
Engaged user conversion is a measure of the efficiency of your marketing dollars—the foundation for everything else you evaluate. Start here and get rid of the noise early.
A Note on Engaged Users:
If you’re counting people who aren’t engaged, they may not even be people. Don’t let bought traffic become bot traffic. Edgemesh has integrated bot detection into every page request with no negative impact on performance. And not all bots are bad bots. Crawlers like the GoogleBot are critical to performance, and Edgemesh differentiates between verified bots (good bots) and non-verified (bad bots). More about protecting your ad spend from bots here.
5 Reasons Users Aren’t Engaging
- Bots (most common)
- Slow landing page experience (53% of mobile users give up after three seconds of loading)
- Measurement error (e.g., mismeasuring the length of a session)
- Broken page experiences (page not found, mismatch of ad content to page content)
- Bad targeting (compare engagement rate across channels)
Metric 2: Average Order Value
What Matters
The Amount of Revenue You’re Generating from New vs. Returning Users
What It Means
Average Order Value (AOV) is calculated by dividing the total value of all orders over a period of time by the total number of orders over the same period.
An important consideration here is returning versus new users. New visitors are people coming to your site for the first time on a device. Returning users have come to your site before. The ratio of new to returning users can be telling. It indicates how effectively you have nurtured returning users.
Why It Matters
Since new users are more expensive to acquire (generated through paid advertising), AOV is a critical metric for measuring your expected revenue versus your acquisition costs. Acquisition costs are much lower for returning users, who often return via email, SMS and other lower-cost channels. Increasing the rate of returning users helps lower overall customer acquisition cost, driving up your LTV/CAC ratio.
To drive increased sales, you must invest in driving traffic, improving experience and optimizing the conversion funnel. That’s why it’s important to concentrate on increasing cart size, or AOV. Improving AOV helps maximize your investment. Increasing AOV offsets your customer acquisition costs and drives bottom-line profitability.
Now What?
This is where speed and user experience are essential, not only on your site, but on the journey to getting to it. The experience for users may start with a marketing email. From the moment they click on the link, the experience begins. That’s why it must be quick and simple for the entire journey—from the time they click on the link to the point at which they purchase.
Be thoughtful about your links. Sending a repeat user to the homepage is like waiting all day for someone to knock on your door, then run away when they arrive. Send shoppers to personalized and contextual landing pages that are optimized for speed.
Remember that every time you send a message to someone’s email, you’re asking for their time. To earn that time, you better deliver value. If you deliver value with every engagement, you increase your chance to turn a new user into an engaged user, then a returning user, which lowers overall acquisition costs and generates better ROI. Keeping and growing your returning user base is the most efficient way to scale marketing costs
A Note on AOV:
As your average order value increases, your average conversion rate decreases. Keep this in mind when measuring both.
Metric 3: Experience Metrics (First Contentful Paint, Time to First Byte and Largest Contentful Paint)
What Matters
The Amount of Revenue You’re Generating from Paid Vs. Unpaid Traffic (and Your Acquisition Costs)
What It Means
First Contentful Paint (FCP) is when the browser renders the first element on your page. It answers the user question, “Is this site working?” Time to first byte (TTFB) is the time between when the browser requests a page and when it receives the first byte of information from the server. A slow TTFB will mean all other metrics will lag. Largest Contentful Paint (LCP) is the time it takes to see the largest image on the page. Since this is usually the hero content, it’s the moment when your core visual message is displayed.
Why It Matters
These three metrics are the measure of users’ first experiences with your site. They determine whether shoppers will stick around, engage, convert and return. By optimizing your site’s FCP, you are not only speeding up the overall load times and increasing page speed, you’re demonstrating to users that their requests are being handled. Once users see something on your page, they become infinitely more patient for what’s next.
If it takes three seconds to get to FCP, you’re losing users. To keep their interest, it better be under a second. TTFB should be about a quarter of a second.
LCP is one of Google’s Core Web Vitals, which influence organic search rankings. They are available on the Google Analytics command center dashboard, and if you’re performing badly—even if it’s not affecting the experience on your site— you have to fix it.
Experience Metrics Benchmarks
Benchmarks can be helpful to track your performance against competitors and understand how you stack up against others. But they can also be tricky because no business is the same. So, review the benchmarks below as a guide, not a hard target.
Time to First Byte
A Good TTFB is <200 milliseconds
A Bad TTFB is >500 milliseconds
Also, note and understand the distribution. Averages are not useful for performance metrics. If 10 percent of your visitors experience a two-second TTFB , that’s 10 percent of customers who are likely to never transact.
First Contentful Paint
A Good FCP is <2 seconds
A Bad FCP is > 4 seconds
Largest Contentful Paint
A Good LCP <2.5 seconds
A Bad LCP is >4 seconds
A Note on Landing Page Speed:
To optimize performance and drive revenue, you want every page on your ecommerce site to be lightning fast. But when you use tools like Unbounce to build your custom landing pages, speed suffers. The necessary consistency across all pages has long been a technology challenge. But it’s one Edgemesh has been working to solve. Edge Routing from Edgemesh is coming in early 2023 to ensure all pages are optimized for the fastest speeds. Every page. Every single time.
The Reality of Google Analytics
Google Analytics is packed with data. That makes it an indispensable tool for ecommerce optimization. It’s also why most companies don’t get real value from it.
Much of the data it provides isn’t helpful for typical ecommerce businesses. So, if you’re struggling to interpret your Google Analytics reports and use them to make business decisions, don’t get discouraged. It’s not your fault.
Google Analytics is built for businesses the size of Google, not small or medium-size ecommerce stores. Google expects data to be analyzed across millions of page views per day, averages these metrics and assumes you have a solution in place to remove spurious visitors (e.g. bot traffic). These are all factors that affect data, and they’re all challenges ecommerce businesses face.
A business the size of Google benefits from the high volume necessary to make measurement statistically valid. In many cases, if you don’t have a sample size of at least 30,000 points in measurement, you won’t get the insight you need to make smart business decisions based on the data. Most ecommerce sites don’t have the volume of monthly transactions or page views necessary for reliable insights.
There are still plenty of ways to get value out of this free tool. To get the most value, consider enlisting the expertise of a data expert, or invest the time to learn how to get the answers you need from it. The resources are available, and the return is well worth the investment.
