Monitoring Success: Key Performance Indicators (KPIs) for Measuring Growth and Making Data-Driven Decisions

As your dropshipping clothing business grows, you’ll need to find a way to track your store’s performance. 

Knowing what works and what doesn’t allows you to strengthen your effective approaches and replace the unbeneficial ones with more productive strategies.

So, how can you measure your progress? The answer is KPIs. 

In this post, we provide you with the most important KPIs for your dropshipping clothing business that will help you monitor your success and make data-driven decisions. 

The key performance indicators, or commonly referred to as KPIs, are quantifiable metrics that allow businesses to evaluate their performance and measure progress towards a specific goal.

In more simple terms, KPIs are data points that offer insights into different aspects of your business, such as your business’s financial state, marketing strategy, and sales performance, to name a few.

To give you an example, some businesses may have the goal to increase conversion rates by 10% within 6 months, some may want to accomplish a 40% increase in organic traffic, while others plan on decreasing their shopping cart abandonment by 60%.

Based on these objectives:

• for the first goal, a KPI can track the number of visitors that have made a purchase;
• for the second goal, a KPI can track the number of visitors that come to your website from organic traffic sources (search engines, social media, etc.);
• for the third goal, a KPI can track the number of customers that haven’t gone through the checkout process.

KPIs are important in dropshipping because they guide your fashion dropshipping business toward growth and profitability.

Here’s why you must measure KPIs:

• Performance evaluation: KPIs allow you to keep tabs on all kinds of business results related to your goals and give you an accurate evaluation of how well your dropshipping business is performing. 
• Goal reaching: KPIs provide you with a good vision of your goals and help you stay on track to reach them.
• Early problem detection: KPIs can serve as early warning signals, allowing you to identify issues or areas of concern before they escalate into significant problems. 
• Data-driven decisions: KPIs allow you to make informed decisions based on data rather than relying on assumptions. 
• Identifying profitable strategies: Running an online boutique involves experimenting with marketing channels, sales pitches, and pricing strategies. KPIs enable you to pinpoint what’s working and what isn’t. 
• Continuous improvement: By tracking KPIs, you can refine your strategies over time. This adaptability is vital for staying relevant in the long run and keeping continuous growth.
• Cost management: Successfully managing a dropshipping business involves keeping a tight grip on expenses. KPIs help you keep an eye on your costs and change them over time so they can fit within your budget.

There are many types of KPIs dropshipping fashion businesses can track. Naturally, there is no need to track all of them but only those that are relevant to your business and goals.

The three most important KPIs from which you can choose fall into these categories:

• Marketing
• Sales
• Customer support

Marketing KPIs help you understand how well your marketing strategy is performing. How’s your organic traffic? Who are your leads? How effective is your customer engagement? These KPIs will provide you with answers to all of those questions.

Website traffic shows you the total number of people that have visited your fashion eCommerce website. 

This metric helps you find out where your visitors are coming from and what are the main traffic sources they’ve been using to land on your website.

Formula: The best and most accurate way to track website traffic is by using an analytics tool such as Google Analytics. 

Mobile traffic measures the number of people who have accessed your fashion store by using a smart device.

With a large number of people doing their shopping via their mobile phones, this metric can help you optimize your web design for mobile devices.

Formula: Just like with the website traffic, you can easily track your mobile traffic in Google Analytics.

The lead value metric allows you to track which leads are valuable for your dropshipping business and are likely to bring you profit.

This way, you can make much better decisions in choosing leads worth pursuing and have the best chances of becoming paying customers.

Formula: lead value = total sales/ number of leads

Click-through rate is especially important for PPC as it measures the percentage of people who have clicked on an advertisement.

The metric is calculated by dividing the total number of clicks by the total number of impressions (people who’ve seen but haven’t clicked on the ad).

Formula: click-through rate = number of clicks/ number of impressions

The bounce rate lets you know how many people have exited your website shortly after landing on it and without taking any action.

Bounce rate is commonly used to assess the effectiveness and user-friendliness of a website. Reducing the bounce rate can lead to improved user engagement, longer visit durations, and increased conversions.

Formula: bounce rate = number of one-page visitors/ number of total visitors

The return on ad spend (ROAS) is another important metric for running paid advertising campaigns. It shows the revenue generated from ads compared to the amount you’ve spent to run those ads.

This KPI provides insights into whether an advertising campaign is profitable or not, allowing you to optimize your budget allocation.

Formula: return on ad spend = revenue generated from ads/ cost of ads

KPIs for sales report how your fashion dropshipping business is performing in regard to profits, conversions, and costs.

Sales Revenue measures the total income generated from selling your products. 

It’s a fundamental KPI that reflects the financial health of your business and is influenced by various factors, including pricing, marketing, and customer demand.

Formula: sales revenue = number of products sold x product sale price

The conversion rate shows the percentage of your website’s visitors that have completed a certain action you’ve wanted them to complete. It can be signing up for an account, subscribing to a newsletter, and making a purchase, to name a few. 

The conversion rate KPI measures the effectiveness of your website to drive visitors to perform the specific actions set by you.

Read out the best ways to improve your conversion rate.

Formula: conversion rate = total number of visitors / total number of buyers

Gross profit margin refers to the percentage of profit you are generating from your sales after deducting the cost of goods. 

This metric allows you to take a good look into your fashion store’s financial state and analyze how profitable your business is after subtracting the costs you’ve paid.

Formula: gross profit margin = (revenue– cost of goods sold) / revenue

Cart abandonment rate indicates the percentage of shoppers who’ve added products to their online shopping carts but didn’t go through with the purchase. 

Reducing this metric is crucial for improving your conversion rate as it directly impacts your profits. 

Formula: cart abandonment rate = (completed orders / initiated checkouts) x 100

The average order value calculates the average amount a customer spends in a single transaction. 

This metric can help you understand your customers’ purchasing behavior and guide you through updating and setting retail prices and improving selling tactics.

Formula: average order value = revenue/number of orders

Customer lifetime value gives you an estimation of the total revenue you can expect a customer to generate throughout their relationship with your store – in other words, during the period they are being loyal and repetitive consumers.

Measuring the customer lifetime value metric helps analyze your customer retention strategies.

Formula: customer lifetime value = (average purchase value x average purchase frequency) x average customer lifespan

The customer service KPIs help you provide your customers with the absolute best customer support. 

The customer satisfaction score, or short CSAT, measures the satisfaction your customers express with your products and services.

The CSAT is a highly valuable KPI as it lets you know if maybe you need to spend more time improving your relationship with your customers.

Formula: In most cases, the CSAT is measured by requesting your customers to fill out a survey

Customer retention rate is another key KPI that measures the number of customers your eCommerce fashion store succeeds in retaining.

You want to strive for a high customer retention rate as this indicates that you can successfully maintain long-term relationships with customers. Consequently, your business is bound to experience an increase in dropshipping sales and profit.

Formula:  customer retention rate = (number of customers at the end of a specific period – number of new customers during that period) / number of customers at the start of that period x 100

The net promoter score (NPS) measures how likely your customers are to recommend your products. 

Usually, the way you track this KPI is by asking customers how likely would they recommend your fashion store on a scale of 0-10. Based on what they answer, customers get divided into three groups: detractors (those who give a score of 6 or less), passives (those who vote between 7 and 8), and promoters (those who give a 9 or 10).

Formula: net promoter score = percentage of detractors – percentage of promoters

Tracking KPIs helps you monitor your business’s performance, better understand your customers, and figure out what strategies work best for you.

Now that understand why KPIs are so important for your fashion store and feel confident in measuring them, we invite you to explore a partnership with BrandsGateway and set your dropshipping clothing business for success.

Schedule a free demo call today and seize the opportunity now.