Understanding which eCommerce return key performance indicators (KPIs) to track helps you make data-driven decisions that will help your store’s performance.
While there are a number of eCommerce return KPIs that are important to track, some of the most relevant ones include conversion rate, repeat purchase rate, and average order value.
By tracking relevant KPIs, you can get a better understanding of how your online store is performing and make informed decisions to improve your profitability and customer retention.
What are eCommerce Return KPIs?
Key Performance Indicators (KPIs) are measurable metrics that help you track how your eCommerce store is performing.
Measuring eCommerce KPIs provides you with updated and relevant information about your revenue, customer behavior patterns, return trends, and more.
Tracking eCommerce KPIs relating to returns can help you make more informed decisions on how to improve your returns process.
The Importance of Tracking eCommerce Return KPIs
Tracking eCommerce return KPIs provides valuable insights into your customers’ buying behavior and the effectiveness of your returns process.
By monitoring these metrics, you can identify patterns and trends in returns, which can help you address the root cause of returns and make improvements to your products, shipping process, and customer experience.
Your returns data can be used to optimize your returns strategy, reduce costs associated with returns, and increase customer satisfaction and loyalty.
Monitor and analyze your eCommerce return KPIs regularly to better understand your returns process and optimize your store.
7 eCommerce Return KPIs to Track
A successful eCommerce return strategy depends on tracking the right return KPIs.
So which eCommerce return KPIs should you be tracking? And what do those metrics mean?
1. Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is how much it costs your eCommerce store to acquire a new customer. Acquisition costs can include marketing and advertising expenses, sales commissions, and any other costs associated with attracting potential new customers.
Tracking your customer acquisition cost helps you determine whether your marketing strategies are effective and how to maximize your return on investment (ROI).
When tracking CAC as a KPI, you’ll be able to see exactly how much more expensive it is to acquire new customers than to retain existing ones, and focus your efforts accordingly.
How to Measure Customer Acquisition Cost
To calculate your customer acquisition cost, divide the amount spent on marketing and onboarding efforts by the number of new customers.
2. Conversion Rate (CR)
The conversion rate (CR) is the rate at which visitors are converting on your site. Usually, when talking about eCommerce stores, conversion means purchases.
An effective way to reduce the perceived risk of making a purchase is having a customer-friendly return policy that’s easy to find on your site. 66% of customers check a return policy before making a purchase.
Making your return policy and return process easier and more convenient will improve your conversion rate, since visitors to your online store will feel more confident about making a purchase.
How to Measure Conversion Rate
To calculate your conversion rate, divide the number of conversions by the total number of visitors, then multiply by 100 to get the percentage.
3. Average Order Value (AOV)
Average order value (AOV) is how much customers spend per order.
Tracking your average order value gives you a clearer view of your revenue per customer and helps you make informed business decisions such as when to offer free shipping.
Your AOV determines how much you are getting out of each customer, and as a result, out of each dollar spent on customer acquisition.
Increase your average order value by getting high spenders and frequent customers to sign up for a loyalty program and rewarding them for their loyalty, and by targeting low spenders with special offers and cross-sells.
How to Measure Average Order Value
To calculate your average order value, divide your total revenue by the number of orders.
4. Repeat Purchase Rate (RPR)
Repeat Purchase Rate is the percentage of total customers that come back for a second purchase.
Having a customer return for a second time increases their likelihood of becoming loyal customers and buying from your store again and again.
Repeat purchase rates vary depending on the industry. For example, groceries naturally have a higher rate of repeat purchases than electronics. Additionally, the size of the eCommerce store plays a role, with larger and more diverse stores such as Amazon receiving more repeat purchases than specialized stores.
Product returns have a direct impact on your repeat purchase rate. Providing an easy and reliable returns process shows your customers what to expect if they need to make a return again in the future. Although it may seem counterintuitive, providing a hassle-free returns process makes your customers more confident to buy from you again.
How to Measure Repeat Purchase Rate
To calculate your repeat purchase rate, divide the number of repeat customers by the total number of customers, then multiply by 100 to get the percentage.
5. Return Rate
Product Return Rate is the percentage of products that are returned.
It’s no surprise that tracking your product return rate is a central KPI for returns management. By tracking your eCommerce return rate, you can measure customer satisfaction, identify the reasons customers return orders, determine order accuracy, and take corrective measures to reduce your return rate.
How to Measure Return Rate
To calculate your product return rate, divide the number of returned products by the total number of sold products, then multiply by 100 to get the percentage.
6. Shopping Cart Abandonment Rate
Shopping Cart Abandonment Rate is the percentage of customers who add items to their shopping cart but then abandon it before completing the purchase.
Your shopping cart abandonment rate is an indication of how intuitive and trustworthy your checkout process is. Tracking your cart abandonment rate can help you identify hiccups in the checkout process that might be preventing customers from finalizing their purchases.
How to Measure Shopping Cart Abandonment Rate
To calculate your shopping cart abandonment rate, divide the number of completed purchases by the number of shopping carts created, subtract that from 1 then multiply by 100 for the percentage.
7. Customer Lifetime Value (LTV)
Customer Lifetime Value (LTV) is the total value of a customer based on their overall sales. This KPI provides important insights into how customers interact with your business and if your marketing plan is working as expected.
Keeping track of your LTV helps you increase customer loyalty and retention, which is important because returning customers buy more often and spend on average 67% more than first-time customers.
Having a high customer lifetime value is a great sign of good customer retention, and boosting your customer LTV should be one of your eCommerce store’s key goals.
How to Measure Customer Lifetime Value
There are multiple definitions of LTV, from basic calculations that only look at revenue to more complex calculations that factor in gross margin and operational expenses. For the sake of simplicity, we’re calculating LTV using revenue.
To calculate a customer’s lifetime value, multiply that customer’s Average Order Value by the number of purchases they’ve made. You can calculate an overall average LTV by calculating the average order value and the average number of purchases made per customer.
Track Return KPIs with ReturnGO
Tracking the right eCommerce return KPIs can hugely improve your eCommerce returns strategy.
Use an automated platform like ReturnGO to help you track the relevant return KPIs and streamline your returns process to maximize customer retention and sales.
Keeping an eye on these eCommerce return KPIs will help you grow your business, keep more customers, and retain more revenue.