Google Analytics is a free to use Google Tool that you can install to measure and understand virtually all visitor behaviour on your website. It's most simple function is to measure the number of visitors.
Within Analytics, you can specify timespans with information you'd like to study, like to view where visitors came from, what they searched for in Google, how long they stayed on your webs tore, and what exactly they did. The tool is easy to install in almost every web store by adding a small script into the source code of the shop. Most SaaS or Open Source software will have a settings section, where you can put your Google Analytics Tag (looks something like: UA1234567-01).
With Analytics, you can also measure the performance of your e-commerce site and therefor indirectly also the output of your marketing efforts. Analytics allows you to see exactly how visitors entered your site: From Google search results, through Google Adwords, through links (and which) on other sites or, for example, a newsletter that you sent. If you commit a lot of time and effort in SEO, you can monitor Analytics whether it leads to better rankings and increase of visitors. It's also possible to see what these visitors are doing in your web store, whether they buy something, and even what they purchase.
With this information you can decide: Perhaps put more effort in SEO and cut your AdWords budget, or vice versa? Or does your affiliate 'traffic' gets you better customers who spend more? This also has to do with your navigation and UX: Can people actually find what they were looking for? You can analyse and optimise these aspects through the reports you see in Analytics.
Here, I would like to add that we recommend all store holders to link the Analytics account to your Google Adwords account and your Google Webmaster Tools account. This allows you to access all full visitor data in your own Analytics account. You'll also need to set up 'E-commerce tracking' so you can track what's purchased and what amount of money is paid per conversion.
Because Analytics gives you insight into how many visitors are accessing through each channel, what they bring and how this can be improved. For example: A shop has 500 visitors a day, of which 300 enter via paid channels and 200 via "free channels." The 300 visitors deliver averages 7 orders / day (7/300 = a 2.33% conversion) and the 200 visitors deliver 3 orders (3/200 = a 1.5% conversion). However, visitors who enter through paid channels cost a certain amount per conversion and while organic traffic is free.
Based on this information, you can determine where your time, energy and money should be spent. And for a future buyer of the web store: Where are the chances!
When you buy a web store, you can also determine what the dependencies of each source of visitors are. For example, suppose 80% of visitors are "direct" traffic (ie they go directly to your web store and do not enter via another channel like Google) and that this traffic has a great conversion, then third party dependence is small. This means that the value of the shop is higher than when 80% comes through a paid channel, like Google Shopping.
Then, click-path analyses show which path leads to most conversions or to purchases with the best margins. With this information you can improve your store: Ensure that visitors see what they are looking for and then need as few steps as possible.
Of course, many more elements play a role. Analytics can give you tons of data. In this article, we only want to highlight the most important aspects: As a web store owner, or as a future web store owner, you'll need data to value and improve: Analytics gives essential information for your valuation!