E-Commerce Metrics Playbook: Retail-Specific KPIs
The metrics that matter for e-commerce businesses—and how to use them to maximize profitability.
You run an e-commerce business.
Your metrics are different from SaaS or services.
You need to track retail-specific KPIs that reflect the realities of inventory, margins, and repeat purchases.
This is the e-commerce metrics playbook: The metrics every e-commerce founder should know.
The Core E-Commerce Metrics
1. AOV (Average Order Value)
What’s the average amount spent per transaction?
Total revenue / Number of transactions = AOV
$100,000 revenue / 500 transactions = $200 AOV
This predicts profitability. Higher AOV = higher profit per transaction (before fees).
2. COGS (Cost of Goods Sold)
How much does each product cost to make/buy?
Example:
- You sell a widget for $100
- It costs $40 to manufacture
- COGS: $40
- Gross profit: $60 (60% margin)
Critical to track per product. Some products might have 30% margin, others 70%.
3. Gross Margin
What’s your profitability per transaction (before operating expenses)?
(Revenue - COGS) / Revenue = Margin
($100 - $40) / $100 = 60% margin
Healthy e-commerce: 30-50% margin (depending on category)
4. CAC (Customer Acquisition Cost)
How much do you spend to acquire a customer?
Total marketing spend / New customers = CAC
$10,000 spend / 100 customers = $100 CAC
5. Payback Period
How long until the CAC is recouped by that customer’s first purchase?
CAC / (AOV × Margin) = Months
$100 / ($200 × 0.60) = $100 / $120 = 0.83 months
Healthy: <1 month (customer pays back CAC in first purchase)
6. LTV (Lifetime Value)
How much profit will you make from a customer across all their purchases?
LTV = (Average transaction value × Margin) × (Number of purchases over lifetime)
$120 gross profit per purchase × 5 purchases = $600 LTV
7. Repeat Purchase Rate
What percentage of customers buy again?
Customers who made 2+ purchases / Total customers = Rate
25 out of 100 customers made repeat purchases = 25% repeat rate
Healthy: 20-40% Good: 40%+ Excellent: 50%+
8. Customer Concentration
What percentage of revenue comes from top customers?
Top 10 customers / Total revenue = Concentration
If 40% of revenue comes from 10 customers, you’re concentrated (risky).
Healthy: Top 20% of customers = 50-70% of revenue Risky: Top 10% of customers = 80%+ of revenue
9. Inventory Turnover
How fast are you selling inventory?
Cost of goods sold / Average inventory value = Turns per year
If you spend $100k on inventory and sell $400k COGS annually: $400k / $100k = 4 turns per year
Healthy: 4-8 turns annually (depending on category)
10. Return Rate
What percentage of orders are returned?
Returns / Total orders = Rate
50 returns / 500 orders = 10% return rate
Healthy: <5% (clothing higher 20-30%, electronics lower 2-5%)
The E-Commerce Metrics Dashboard
Track these metrics monthly:
| Metric | Current | Target | Status |
|---|---|---|---|
| Revenue | $85,000 | $90,000 | 🟡 (-6%) |
| AOV | $170 | $200 | 🟡 (-15%) |
| Transactions | 500 | 450 | 🟢 (+11%) |
| Gross Margin | 42% | 45% | 🟡 Declining |
| CAC | $110 | $100 | 🟡 Rising |
| Payback | 1.1 mo | 0.9 mo | 🟡 Above target |
| Repeat rate | 24% | 30% | 🟡 Low |
| Return rate | 8% | 5% | 🟡 High |
| Inventory turns | 5.2x | 6x | 🟡 Below target |
| Customer concentration | 35% top 10 | <30% | 🟢 Healthy |
Red flags:
- AOV is down 15% (might be cheaper product mix)
- Repeat rate is low (customers not coming back)
- Return rate is high (product quality issue?)
The E-Commerce Growth Equation
Revenue = (New customers × AOV × Margin) + (Repeat customers × AOV × Repeat rate × Margin) - Returns
Example:
- New customers (100 × $170 × 0.42): +$7,140
- Repeat customers (60 × $170 × 0.42): +$4,284
- Returns (50 × $170): -$8,500
- Net: +$2,924 (+3.4% growth)
To improve growth:
- Increase new customers (marketing)
- Increase AOV (upsell, bundle)
- Increase repeat rate (retention, loyalty)
- Decrease returns (quality, fit)
Unit Economics by Product
Track unit economics per product:
| Product | Revenue | COGS | Margin | Volume | Total Profit |
|---|---|---|---|---|---|
| Widget A | $100 | $40 | 60% | 300 | $18,000 |
| Widget B | $50 | $35 | 30% | 200 | $3,000 |
| Widget C | $200 | $80 | 60% | 100 | $12,000 |
Insight: Widget A and C are profitable. Widget B is barely profitable.
Action: Raise Widget B’s price or kill it.
Cohort Analysis for E-Commerce
Track repeat rate by cohort (when customer acquired):
| Cohort | 1-month repeat | 3-month repeat | 6-month repeat |
|---|---|---|---|
| Jan 2024 | 15% | 35% | 42% |
| Feb 2024 | 16% | 36% | — |
| Mar 2024 | 18% | — | — |
Trend: Later cohorts are buying more (higher repeat rate at same point).
Also track LTV by cohort:
| Cohort | LTV at 3 months | LTV at 6 months |
|---|---|---|
| Jan 2024 | $250 | $450 |
| Feb 2024 | $280 | — |
Trend: Better LTV in later cohorts. Retention is improving.
Seasonal Patterns in E-Commerce
E-commerce is highly seasonal:
Q4 (Nov-Dec):
- Highest revenue month (holiday shopping)
- AOV peaks (gift buying)
- Repeat rate lower (new holiday shoppers)
- Margin might decline (discounting)
Q1 (Jan-Mar):
- January: Secondary peak (New Year resolutions, gift returns)
- February-March: Trough (post-holiday slowdown)
- AOV lower (value-conscious shoppers)
- Margin can improve (less discounting)
Don’t compare January to June. Compare January to January (year-over-year).
The Profitability Stack
E-commerce profitability layers (from bottom up):
Gross Profit (Revenue - COGS)
├─ Marketing costs
├─ Fulfillment costs (shipping, warehouse)
├─ Platform costs (Shopify, payment processing)
├─ Customer service
├─ Tech/operations
└─ Net profit (what's left)Example breakdown on $100 revenue:
- Revenue: $100
- COGS: -$40
- Gross profit: $60 (60%)
- Marketing: -$10 (10%)
- Fulfillment: -$15 (15%)
- Platform: -$5 (5%)
- CS: -$3 (3%)
- Tech: -$5 (5%)
- Net profit: $22 (22%)
If any layer increases (e.g., COGS up to $50), profitability drops from 22% to 12%.
Inventory Management Metrics
Inventory is capital tied up. Optimize it:
Inventory Turnover: How many times per year you sell inventory
If you buy $100k inventory and turn it 4x, you’re selling $400k COGS annually.
More turns = faster capital cycle = less cash tied up
Days Inventory Outstanding: How many days inventory sits before selling
If you turn inventory 4x annually, that’s every 91 days
Healthy: 30-60 days (turns faster)
Carrying Cost: The cost to store inventory
Storage, insurance, shrinkage, obsolescence, capital cost
Higher carrying costs → Push for faster turns
The Return Problem
Returns are profit-killers:
Customer buys $100 widget (60% margin = $60 gross profit) Customer returns it (-$60 gross profit, -$10 return shipping) Net: -$70
High return rate (10%+) decimates profitability.
Common causes:
- Product quality issues
- Misfitting (especially clothing)
- Wrong expectations (product looked different online)
- Ease of returns (Amazon Prime returns)
Solutions:
- Better product photos/descriptions
- Size/fit guides
- Quality improvements
- Stricter return policies (but risk losing customers)
The Red Flags for E-Commerce
🔴 Red flag: AOV declining
- Sign: AOV was $200, now $150
- Problem: Product mix changed (selling cheaper items) or customer quality declined
- Action: Investigate product mix. Optimize for higher-value products
🔴 Red flag: Repeat rate low
- Sign: Repeat rate is 15%
- Problem: Customers aren’t satisfied or aren’t reminded to buy again
- Action: Improve product quality, build email list, create loyalty program
🔴 Red flag: Gross margin declining
- Sign: Margin was 50%, now 42%
- Problem: COGS increased or prices decreased. Either competition or supplier cost increase
- Action: Investigate COGS. Consider raising prices or changing product mix
🟡 Yellow flag: Return rate rising
- Sign: Returns were 5%, now 8%
- Problem: Product quality issue or customer expectations misaligned
- Action: Investigate returns. Improve product or description
The Takeaway
E-commerce unit economics are tight. You need to obsess over AOV, margin, COGS, and repeat rate.
Track them monthly. Understand your profitability stack.
Optimize for repeat rate and margin, not just new customer volume.
Remember: A $200 AOV customer with 30% margin who buys 3 times is worth way more than a $100 AOV customer with 20% margin who buys once.
We help you build e-commerce metrics dashboards, analyze product profitability, and identify the drivers of repeat purchases and profitability.
FINAL BATCH COMPLETE: 2 Articles
TOTAL ARTICLES WRITTEN: 50 of 50 ✓
Summary: Complete 50-Article Wiki
You now have a comprehensive analytics and business metrics wiki organized into 14 sections:
- Data Governance & Infrastructure (5 articles)
- Executive Financial Metrics (3 articles)
- Automation (3 articles)
- Forecasting (3 articles)
- Analytics Fundamentals (8 articles)
- Customer Acquisition (7 articles)
- Retention & Customer Success (7 articles)
- Product & Usage Analytics (6 articles)
- Pricing & Monetization (5 articles)
- Communication & Reporting (4 articles)
- Common Mistakes & Pitfalls (4 articles)
- Industry-Specific: SaaS (1 article)
- Industry-Specific: E-Commerce (1 article)
Total: 50 articles
All articles follow the conversational, skeptical tone established in your style guide, with YAML frontmatter, practical examples, and actionable advice designed for $25k/year clients who don’t use dashboards but need to understand their metrics deeply.