If you run an ecommerce business you definitely know what your revenue is. In order to estimate revenue, growth or business for the next quarter or year you will need to use this formular for your website.
Revenue = traffic x conversion x aov
Revenue: total value of all sales for the period
Traffic: number of users coming on the website
Conversion: percentage of traffic that converts into the period (once or multiple times)
AOV: average order value.
How often to track Ecommerce Formula?
We recommend looking at such information at least on a weekly or monthly basis. Also, if the trend is not something you’re happy with you can always do one of the following:
- increase traffic.
If traffic (users) go up, and conversion rate and AOV stay the same you’ll end up with higher revenue
- conversion rate
It’s always good to improve conversion rate. This way, with the same traffic and the same Average Order Value you’ll make more money, without spending more on ads for example
- average order value
Same as increasing conversion rate, AOV is important to generate more revenue. You can do Upsells or Crosssells for example, to generate more from existing customers.
Simple Ecommerce Formula Calculator
Average Order Value:
Advanced Ecommerce Formula
If you want to go advanced and have many returns that can’t be ignored then the formula will be:
Revenue = (traffic x conversion x aov) – Returns
Returns can be quite high, especially in industries like Fashion.
For having good data related to your ecommerce store, those 3 things are a must every time:
- Analytics: Use tools like Google Analytics to track key metrics.
- Feedback: Collect customer feedback to identify areas for improvement.
- Optimize: Make data-driven decisions to refine your strategies.
Metrics related to Ecommerce Formula
Here are some metrics related to ecommerce formula.