José João M. G. Rodrigues | Head of Data & Analytics at Mercadão & Lola Market

Selecting just three metrics for an ecommerce business is indeed a challenging task due to the diverse areas that need consideration, each with its own set of metrics. However, after careful consideration, I would prioritize the following three key metrics:

- "Number of Users with Orders" (also known as the number of customers): This metric provides valuable insights into how many users have made purchases within a specific timeframe, offering a fundamental understanding of the customer base.

- "Average User Frequency": By dividing the "Number of Orders" by the "Number of Users with Orders," we can calculate how frequently, on average, a user makes purchases. This metric helps gauge customer engagement and loyalty.

- "Average Order Value" (also known as the order basket): Analyzing the monetary value of an average order within the specified timeframe gives essential insights into customer spending behavior and revenue generation.

These three metrics are pivotal for several reasons. First, ecommerce businesses often possess significant advantages in understanding their customers, and monitoring these metrics allows for a deeper comprehension of customer behavior and preferences. Second, the combination of these three metrics enables us to construct a sales equation, providing a comprehensive view of sales performance. By multiplying the "Number of Users with Orders," "Average User Frequency," and "Average Order Value," we obtain the total sales figure for the period. This powerful equation helps isolate the impact of each metric on sales and allows for insightful analysis when comparing variations between different periods. For instance, suppose we observe a significant increase in total sales compared to the previous period. With the sales equation, we can dissect this growth and understand which specific metrics contributed the most to the upturn. Was it primarily driven by an influx of new customers ("Number of Users with Orders"), an increase in the number of purchases per user ("Average User Frequency"), or a rise in the average spending per order ("Average Order Value")? Analyzing these individual components helps us pinpoint the exact drivers of success or areas that require improvement. This level of granularity empowers us to make data-driven decisions and implement targeted strategies to address specific challenges.By employing the sales equation as an analytical tool, ecommerce businesses can fine-tune their strategies, optimize marketing efforts, and tailor their offerings to meet customer demands more effectively. It facilitates a deeper understanding of the dynamics within the business and offers valuable insights for driving continuous growth and improvement.

While these metrics are highly valuable, I would also like to acknowledge the importance of "Session Conversion Rate" as an honorable mention. This metric serves as a critical indicator of site or app effectiveness, reflecting the percentage of online sessions that convert into orders. Monitoring session conversion rate is essential for understanding and optimizing the overall user experience and conversion funnel.

Overall, the combination of these three core metrics and the honorable mention provides ecommerce businesses with a solid foundation for data-driven decision-making, enabling them to optimize performance, enhance customer experiences, and achieve sustainable growth.