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Understanding Orders
One metric you probably know well and check often in Shopify is orders. At Tydo, we define orders as the total count of transactions made on your Shopify store in a given period.
For example, although there are multiple products in this shopper’s cart, this is considered a single order.
But, why is this number (orders) more than just line items? Orders form the foundation of your ecommerce business—and they provide you with more insight than you might think.
Understanding how orders impact your conversion rate, average order value (AOV), order fulfillment processes, and inventory management helps you see what’s working, what’s not working, and where there’s room for growth.
Whether you’re looking to improve workflows or grow your business, looking at ecommerce orders is a good place to start.
How is an order calculated?
Orders = Number of transactions
Data source: Shopify
Important note: At Tydo, we exclude test orders from this calculation.
Example
Let’s imagine you run an ecommerce stationery store. Today, Sam buys 2 pencils, Katie buys a journaling kit (2 notebooks, 2 pens), Ryan buys 3 notebooks, and Casey buys 3 ink refills. The total number of orders for the day = 4.
Takeaway
An order is like a jigsaw puzzle piece. You want to get to know each piece. You also want to understand how each piece fits into the larger picture.
Looking at the number of Shopify orders your business gets is an indicator of what’s working and what needs adjustment. A high number of orders is great news. It means that people are making purchases and that you have a strong conversion rate. Yippee!
But, the volume of orders you get also speaks to other factors at play. For example, the number of orders your store has impacts how much you put toward your marketing spend. It also impacts how you go about inventory management planning and building an effective fulfillment process. Another reason to track orders? It allows you to better forecast and accommodate your customer’s shopping needs.
Bottom line: Your orders impact other key metrics. Remember that number of orders is an input to the AOV and conversion rate calculations. Knowing this, you can start to see where to optimize—think about creating bundles to increase average order value (AOV) or writing clearer CTAs and homepage messaging to increase your conversion rate.
Ready to level up your learning?
Read more about Orders
Why should you look at orders by customer type?
At a high level, you want to know and understand how many orders are being placed on your Shopify store. Additionally, there’s added value in using a filtering function and segmenting orders to learn more about customer behavior. For example, you can dive into the percentage of orders placed by new customers vs. the percentage placed by existing (or returning) customers.
By doing so, you can answer: Where are new customer orders coming from? Is it social media advertising? Is it affiliate links? Is it organic traffic? Is it Amazon?
Monitoring orders can help you answer even more key questions:
- Which product(s) do first-time customers buy most?
- Is there a product that’s better suited for acquisition (a starter kit, for example) and a product that works better for retention (refills or add-ons)?
- Which items are your bestsellers?
- What SKU moves slowly or goes unfulfilled?
- How long does it take for a placed order to go from fulfillment status to shipping?
- How is your order fulfillment process? Are orders delayed? Are they sitting in your warehouse?
- Is there space to add new product variants?
- What method of payment do customers use to create orders? Do they use a credit card or prefer installment options like Shop Pay?
Additionally, don’t skip over returns or refunds! These orders can give you even more insight into your business. You might notice that one of your products is always getting returned. Find out why! Talk to your customers. Ask for feedback. It might be that your sizing chart needs to be updated or that the product isn’t performing in the way you thought it would.
As a Shopify admin, tracking orders is an essential part of understanding and growing your business.
Why do orders matter?
Monitoring orders is a small part of the business; however, when orders increase or decrease, it impacts other essential metrics, such as AOV and conversion rate.
Take this scenario as an example:
If 500 users visited your Shopify store and 15 of those users placed orders, your conversion rate would be 3% [at Tydo, we calculate conversion rates like this: (15/500) x 100 = 3%]. Now, suppose, there were 50 orders placed from 500 visitors. The conversion rate (using the above formula) would be 10%, which is a much better metric!
Orders show you more than just how much revenue is coming into your online store. It explains why things are improving or why you might be seeing a slowdown.
Make sure you have a strong order management system in place. You want to provide efficient order processing and order details to your customers (i.e. tracking numbers and order statuses) so that customers have a good shopping experience. These factors will increase the likelihood that they return to your ecommerce site and buy again!
Finally, a strong order fulfillment service, a good relationship with shipping providers, and clear post-purchase communication can all make operations run smoother. To prevent “Where’s my stuff?” tickets, consider downloading Wonderment (an order tracking and communications platform) from the Shopify App Store. It’s a great tool, and you can get a free two-week Wonderment trial with the help of Tydo.
Above all else, remember that your orders aren’t just line orders. They tell a greater story about your business and your customers.
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