Like every woman I’ve ever met, I wear a lot of hats and it’s not always easy to swap one out for the other.
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5 Big Mistakes Women Make When Launching Their Online Fashion or Lifestyle Store
(AND HOW TO AVOID THEM!)
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Today we are talking about the metrics and analytics you need to measure on your online store. I know this sounds kind of boring and a little bit dry. However, as business owners, we really need to be able to wrap our head around these numbers because inside of this data, and these analytics as there’s so much gold, and information on how we can scale our sales.
Often when we launch our online stores, it’s because we have this beautiful product or idea that we want to share with the world. And we’re coming from a really creative space, we’re all about the website design and colours for our logo and fonts and things like that. But once we’ve started making sales in our business, we need to be able to look at this and understand our analytics and our metrics in order to know what’s working and what’s not. I know I often will come to the office and sit in front of my computer and think, What am I going to do today? What should I be focusing on today? Should I be doing Facebook ads? Should I be looking at the next collection? Should I be looking at email EDMS for this week? Like where should I be focusing? So by coming in and looking at our analytics on a regular basis, it will tell us where we should be focusing our time and energy.
The very first metric, and probably dare I say one of the most important metrics I want you to be all over and checking on a monthly basis is your conversion rate. Our conversion rate is, is the percentage of visitors that actually buy or convert on our website. This is your number of sales divided by the number of visitors over a space of time. Now, an industry benchmark for a good conversion rate for Ecommerce is 2 to 3%. So that means for every 100 visitors that come to your website, if everything’s going well, you can be happy if you’re getting two to three orders from those 100 visitors. I can tell you in all honesty that that number is actually hard to achieve and for iland co. We often sit around 1 to 1.5. If we hit 2% I am happy. Now there’s many different things that can affect your conversion rate. And often these are things that are outside of our control. And what I would also recommend to you is to check your conversion rates per country. Because for iland co. I am currently running ads to Australia, New Zealand and the US. And from time to time, I think, oh, you know, we haven’t, you know, there hasn’t been many sales for, say, New Zealand for a while. And I’ll go in and have a look at my analytics, both in Shopify, in Google Analytics, and even in Facebook ads and see what’s going on. Sometimes, you know, I’ll look at it and New Zealand will have a really high conversion rate, and we’ll be sitting at 2 or 3%, while Australia might be at 1%. And the US might be at less than 1%. And I think, right, okay, well, that tells me I need to spend some more time and effort in dollars marketing to New Zealand because I know that for every 100 visitors from New Zealand, 2% or 3%, will buy. So knowing even by country, what your conversion rate is, will give you lots of valuable information as to where you should be focusing your attention and your marketing dollars. Now, like I said, there’s elements within our business that we often can’t control, which will affect our conversion rate. For example, if you’ve sold out of your best selling product, or if it sells out quite quickly, or if you’ve sold out of your most popular sizes, that will definitely affect your conversion rate in a negative way.
The second metric I want you to be all over is your average order value. This is exactly what it says: it’s the average order amount or CART value over a certain period of time. To calculate your company’s average order value, simply divide the total revenue by the number of orders. Knowing this dollar amount is so powerful when you start to embark on paid advertising.
Because if you know your average order is say, in my case for iland co. it’s $180, you can then decide on how much you are willing to pay to get a sale. So say for me, say for an example, just to round up to an easy number, let’s say my cost of product on $190 Order is $50. That means I’ve got $130 profit to play with from that sale in order to get the sale in the first place. So perhaps if that’s your if you’re in a similar situation, and you’ve got $130 to play with spending $78 on a Facebook ad to get that sale still means that you have profit left and not only have you got profit left, you’ve gained a new customer who hopefully will come back and buy from you again and again.
Ideally, you’d be working constantly on increasing this average order value so that you are increasing not only your profits and your revenue, but you’re giving yourself more fat in that sale, more profits to be able to go and invest in other areas of your business, especially marketing. A great way to increase your average order value is to look at things like bundle offers, perhaps it’s like buy one piece get the second half price, those offers that you often see at the checkout. So when you add in one item, it pops up and says, How about adding this matching accessory or something like that. For iland co. we actually offer this pop up. And we offer a Hollywood tape, which is a double sided tape that you can use to keep your kimono in place and from falling off your shoulders. And it works great. Maybe it’s for you, it’s slowly increasing your prices on new products as they come out knowing the cost of the marketing, and how much it costs you to get that customer which I’ll talk about next. Knowing that if the prices are rising to acquire new customers, you also need to look at increasing the average order value so that you are still in a profitable situation.
Now then the third metric I want you to understand and be comfortable with is your returning customer rate or your repeat customer rate. For me inside of Shopify, I can see this inside of my analytics. I think the top plan, I’m not Shopify Plus, I’m just a regular Shopify, but I can see this inside of there. I think it depends on which, which plan you’re on with Shopify as to how many metrics you can actually see. But I can see this returning customer rate. And for me, it says that mine over the course of the year is around 30%. We want this rate to be possible because it means we’re doing a good job at retaining our customers and inviting them to come back again. And again. However, if it was more than 50%, so for example, your analytics told you that your returning customer rate was a 90 or 100%, I would suggest that you need to balance that out with existing and repeat customers and new customers. So you would need to look at some marketing strategies to keep acquiring new customers as well as servicing your existing ones. Like I said, iland co. rate is around 30% for the year to date, when I just jumped in and had a look now, which is pretty good. You know, there’s room to improve, we predominantly still mostly sell kimonos. And I do understand snd I’m aware that not everyone needs a whole wardrobe full of 35 different components.
So we’re in the in the process of developing new products, blouses, pants, tops, dresses, all those different things and things that you can wear together with the kimono in order to look at not only increasing our average cart size, order our dollar value per order, but our returning customer rate having new things for our customers to come back and buy from us. So they’re knowing what your customer return rate is, is really important. Because again, if you know that your customers are coming back time and time again, that means that you can afford to spend a little bit more money in marketing dollars to acquire them in the first place.
Okay, our fourth metric I want you to be aware of, and if you can calculate this one, awesome, but it’s a little bit trickier than the others that I’ve just talked about. So I’m talking about the lifetime value of a customer. If you ever speak to a marketing agency, or a numbers person, or you know a Facebook ads person, they will probably ask you what your lifetime value of a customer is. Because we know exactly how much we can spend to acquire the customer in the first place. The tricky thing is though, that with this metric, it’s not that clear cut or easy to calculate. It doesn’t tell me this inside of Shopify, it possibly tells me inside of Google Analytics. But I use a different dashboard called Wave Flyer and I will link this in my show notes that actually pulls this information in for me, but let me come back to that.
So understanding and calculating this is quite tricky. Because more often than not, we’re pretty new in business. If you’re, you know, only been in business for 6 to 12 months, you won’t have enough data to be able to tell you what the lifetime value of a customer is. And also I like I said it’s not it’s not totally clear cut. This would probably be easier to calculate if you had a subscription style business where people were ordering from you every month, or every three months. If you sell a product that’s a consumable, say for example, skincare, or I don’t know protein powders or something like that. Your lifetime value of a customer is probably a bit healthier than say a fashion business and again, the fashion business for me that’s very niche, and at the moment and really only focusing on one sort of style of product. But if, for example, you knew that your lifetime value of a customer was $1,000, or $2,000, that means you can spend a bit more money getting them to become a customer in the first place, knowing that you will make up the profits and the sales over the long term.
Now the final metric I want you to look at is your customer acquisition costs. So I’ve touched on this already. But how much does it cost you to gain a new customer. Again, this metrics difficult to calculate on its own, it doesn’t tell me this inside of Shopify, or even in Google Analytics, it does on this Wave Flyer dashboard, however, because in order to calculate what it costs you to acquire a new customer, it needs to pull in all of that information from your advertising, spend channels. So whether that’s Facebook ads, Google ads, all the different places that you might be spending money, it needs to bring in all of that information to be able to create an average of what it costs you to acquire a new customer. Right now the way flyer dashboard is telling me my cost per acquisition for iland co. is $78. Now this is higher than it has been in the past and higher than I’d like it to be. But it is also a reflection of the costs in Facebook after the iOS updates and whatnot. But I’m constantly looking at that, you know, for me where my advertising dollars are spent and seeing how I can reduce that. And not only reduce it, but if I can also increase the average cart value. That means okay, if it cost me $78, but now my average cart value is $250. That’s okay, I’m willing to spend that. So like I said, if you know, for example, that previous metric, where your lifetime value of his customer is, say $1,000, and my returning my returning customer rate is high, I’m happy to spend $78 on that first order to acquire that new customer in order to then make $1,000 in sales over time, because that’s where I’ll make my profits.