How E-Retail KPIs different from traditional Retail KPIs?

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E-Retail KPIs

How E-Retail KPIs different from traditional Retail KPIs?

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How are E-Retail KPIs different from traditional Retail KPIs?

E-retail is online website of a retail store. Let’s call their KPIs, e-retail KPIs.

Traditional retail is physical brick-and-mortar retail store. Let’s call their KPIs, traditional retail KPIs.

E-retail and traditional retail by their nature are different. The difference exists from both perspectives: customer perspective and the retailer perspective.

The customer perspective drives their shopping preferences and buying behaviour. Customers who value convenience, price comparison, time-saving, and ability to shop 24×7 prefer to shop online. Whereas, customers who want to touch, feel, and try the product first tend to shop in physical stores. Increasingly, customers are buying in Omnichannel environment. That is, they discover a product in one channel, check it out in another one, and buy through a third (see Figure).

E-Retail KPIs
Omnichannel shopping is becoming the norm

The retailer perspective influences their business operating behaviour. Traditional retailers focus on maximising in-store experience for their customers while optimising store space. While e-retailers focus on online shopping experience and user personalisation.

Therefore, this influences their KPIs, or Key Performance Indicators.

E-Retail KPIs

Many e-retail KPIs are common with traditional KPIs. Some of these are the various financial ratios, customer retention, and conversion rate. However, e-retail KPIs are different from traditional retail KPIs in two major areas:

  1. Customer Acquisition Channels
  2. Customer Shopping Behaviour

Let us see how.

Customer Acquisition Channels

This is the source of customer traffic to your business. Understanding where your customers are coming from is extremely important for business growth.

E-retail channels are primarily organic search, direct search, referral, e-mails, and social media. These channels actually lead customers to e-retail store (i.e. the website). So, e-retailers can easily measure the percent of customers acquired from these different channels. They can then devise their deliberate strategy around these insights.

For example, Facebook generates 13.9% of e-retail website traffic, but actual sale happens in only 4.7% of cases. This is a critical piece of information as it will allow you to allocate resources efficiently and ultimately improve ROI.

Traditional retail channels are mainly word of mouth or advertisements in print, television, radio, and social media. For traditional retailers, it is nearly impossible to accurately calculate the percent of customers acquired from these different channels. This is because, these channels do not ‘redirect’ them to store.

For example, a customer actually visiting a store may have seen an ad or may have been referred by word of mouth. Moreover, they may not even remember this information when they visit the store.

Customer Shopping Behaviour

Customer behaviour varies a lot between in-store purchase and online purchase. Understanding customer behaviour is central to acquiring more customers.

In e-retail, KPIs like Shopping Cart Abandonment (SCA) and Customer Lifetime Value (CLV) are important and helpful. The analysis of shopping cart abandonment rate and the list of discarded items can help improve our understanding of purchase intent of customers. Similarly, understanding a customer’s lifetime value helps in targeting profitable customers more effectively.

Whereas for traditional retail, understanding shopping behaviour for every customer is problematic and costly. We can only perform market basket analysis. This will only analyse the products added together in cart. But there is no definite way to measure discarded items from cart in physical store. Moreover, physical space oriented KPIs like sales per square foot are not relevant to e-retail.  

In a nutshell, it is essential for retailers to rethink the right KPIs while taking the retail business online. More so, considering that omni-channel shopping is becoming the norm.

Author: Sumit Patil

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Cover Photo courtesy: Blue Planet Studio

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