What is Ecommerce Sales Equation

So you want to understand sales for your online shop. The simplest equation is:

S = T x RC x AOV – R

[Sales= Traffic (T) * Conversion Rate * Average Order Value – Returns]

The formula is easy to remember and contains the following metrics:

  • Traffic (number of users who visit your website for a specific period)
  • Conversion Rate (percent of those users who purchase in the same period
  • Average Order Value (Should not contain shipping costs)
  • Returns – Value of canceled ordered or returns.

It is critical to remember that these are the only parameters we have to play with to increase sales. Options are:

  1. Increase Visitors, optimize Conversion Rate or increase Average Order Value
  2. Decrease Returns / Canceled orders.

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