AOV vs CR vs RPV vs GMV in Ecommerce: Important Metrics You Should Know
Whether you’re a seasoned ecommerce player or a new entrant, understanding and measuring the performance of your online store is vital for growth and profitability.
The four most important ecommerce metrics that can significantly impact your bottom line are the Average Order Value (AOV), Conversion Rate (CR), Revenue Per Visitor (RPV) and Gross Merchandise Value (GMV).
What are eCommerce Metrics?
Ecommerce metrics are measurements that help you understand how your online store is performing. They provide an overview of the overall business health and can help in decision making and strategic planning.
Importance of AOV, CR, RPV, and GMV
These four metrics are essential for evaluating the performance of your ecommerce store from various perspectives, revealing the financial health of your business, and forming effective growth strategies.
1. Average Order Value (AOV)
Average Order Value (AOV) representing the average total of each order placed by customers over a specific period of time.
This metric matters because it gives a glimpse into customer behavior, indicating how much they’re willing to spend each time they shop from your online store.
AOV is instrumental in measuring and evaluating your pricing strategy, promotional offers, and product selection. Monitoring AOV allows an insight into whether customers are inclined to buy just one product or add several items to their cart each time they make a purchase. It can reveal whether they’re buying high-value items or lower-cost products.
To calculate AOV, you simply divide your total revenue by the number of orders. For example, if your total revenue is $20,000 and you’ve had 400 orders, your AOV is $50.
2. Conversion Rate (CR)
The Conversion Rate (CR) stands as one of the vital heartbeat metrics to ecommerce business.
Conversion Rate signifies how successful your site is at funneling visitors to complete a conversion, usually a purchase. It’s a window into the effectiveness of your marketing initiatives, offering insights on customer behavior and your website’s usability.
Simply put, if you have a high site traffic volume but low sales figures, your conversion rate is low. A high conversion rate, conversely, indicates your ecommerce strategy is on the right track - your site design is user-friendly, your product offerings and prices are attractive, and your users find what they’re looking for on your site.
Calculating your conversion rate is reasonably straightforward. It’s the total number of conversions divided by your site’s total visitors within a set timeframe, multiplied by 100%. For example, if your site had 15,000 visitors in a month and made 1,500 sales, your conversion rate for that month would be (1500/15000) x 100% = 10%.
Remember, optimizing conversion rates shouldn’t be a one-time project, but an ongoing strategy. Keep testing and tweaking various site elements to continually improve the user experience and bolster sales.
3. Revenue Per Visitor (RPV)
Revenue Per Visitor (RPV) is another vital ecommerce metric that tells you how much revenue each visitor to your site brings on average.
RPV is calculated by dividing your store’s total revenue by the number of visitors. This metric is beneficial in assessing the effectiveness of your online marketing strategies and ensuring they’re cost-effective.
It allows you to see whether your marketing and promotional efforts are truly paying off in terms of increased revenue.
Let’s say your online store makes $50,000 in one month and attracts 20,000 visitors. To calculate the RPV, you would divide the total revenue ($50,000) by the number of visitors (20,000). The result is $2.50 - so, on average, each visitor to your site that month generated $2.50 in revenue.
If your RPV is higher than the cost of acquiring (CAC) a visitor (through marketing or advertising costs), you’re in a profitable situation. But if it’s the other way round, it indicates that you are spending more to attract customers than they are bringing in as revenue.
4. Gross Merchandise Value (GMV)
Gross Merchandise Value (GMV), also known as Gross Merchandise Volume, gives insights into the overall volume of sales over a specific period. Technically, GMV refers to the total value of goods sold through an ecommerce platform before any deductions for fees, commissions, returns, or cancellations.
This metric helps you understand the raw sales volume, giving an immediate understanding of the business’s scope and size. Therefore, tracking GMV can help you gauge the growth rate of your business and determine if you’re reaching your sales targets.
It’s worth mentioning that while GMV can show impressive sales volumes, it’s NOT indicative of profit. Nevertheless, a steady increase in GMV signals a positive wave in attracting and selling to customers.
Calculating GMV can be quite straightforward; you multiply the price at which each product was sold by the number of those items sold within a given time period. For instance, if you sold 250 laptops at $300 each, your GMV for that particular product would be $75,000 in that specific time period.
While the Gross Merchandise Value does not directly indicate profits or overall financial health, it’s a valuable metric to evaluate the scale and growth of your ecommerce store.
Strategizing and focusing on optimizing GMV can help increase your user base and order volumes, and when paired with other vital ecommerce metrics like AOV, CR, RPV, you will have a comprehensive assessment of your business’s performance and profitability.
Understanding and utilizing these four fundamental ecommerce metrics – AOV, CR, RPV, and GMV, can help businesses maximize their profitability and ecommerce success.
By tracking these metrics, you can spot trends, enhance customer experiences, streamline marketing efforts, and optimize your investment returns. As you set up your tracking and performance reporting, keep these four metrics at the top of your list.
Remember, data guides the best decisions, and harnessing these insights can set you apart from your competition.