How To Calculate Ecommerce Growth

May 04, 2020


Ecommerce today is a fast-moving enterprise. It is competitive and it offers immense profit opportunities. Consumers can order for anything, anywhere in the world. Products arrive right at their doorsteps, and this is what makes eCommerce brilliant and attractive. Everyone wants in on this fast-growing industry. Ecommerce has been existing for over two decades, and over the past few years, it has grown at an unprecedented pace. According to a report from Statista, the global ecommerce industry value reached an estimation of $2.3 trillion and is predicted to hit about $4.5 trillion in the year 2021. A lot more detail and tact are required to scale productivity and maximize profit. It’s therefore important to understand the key performance indicators (KPIs) that the biggest ecommerce giants monitor and optimize for profit.

Year over Year Growth

Growth trends are important for understanding patterns and developing informed business strategies. Digital sales growth from one year to the next provides ecommerce companies with comparable data year to year. This performance measure helps to identify short-term and long-term growth patterns from one year to the next.

Sales Growth Rate

Yearly, the sales growth rate of ecommerce industry increases, and in 2019, it increased to $3.76 trillion. Ecommerce platforms and owners typically want to know the speed at which growth happens in the sales of digital products over time.

Repeat Purchase rate

The consistence of consumers on Ecommerce platforms is a significant metric for performance. It’s expected that repeat customers indicate customer satisfaction. Not every ecommerce platform or product attracts repeat purchases. Like every offline store, mart they often calculate their growth by the number of returning clients.

Conversion Rate

As much as advertising is on a pay-per-click basis, sale is the final aim. The conversion rate of a page or product is the average amount of actual sales compared to the number of clicks, views or visits that is recorded.

Order Value

Each digital or ecommerce product has a value attached to it. This is typically not just the price of the product. There are typically other upsell or down sell values attached to a product. The order value is calculated by dividing the total revenue an ecommerce platform makes in a period by the number of customers in that period.

Lifetime Value

Consumer lifetime value is the value that each customer adds to your company, over a lifetime, which could be over 12 – 24 months. It is the most important metric for measuring gross profit in ecommerce.

Gross Profit

This is the gross margin at which specific products or ecommerce line items are deemed profitable. It’s the over revenue from selling ecommerce products less the cost of delivering these products to the end-user.

Net Profit

This is the revenue from the entire ecommerce operation and less the expenses incurred. This gives an overall estimate of how the ecommerce company is performing after collecting the gross profit of singular products.

In conclusion, ecommerce is a growing retail industry trend with a lot of potential. Understanding the KPIs to measure will sure keep you ahead of the market. Constantly monitoring these KPIs provide ecommerce owners the right information to improve strategy and optimize store growth year over year.