The Importance of Metrics and Reporting in eCommerce

The Importance of Metrics and Reporting in eCommerce

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Reporting and effective metrics are the pulse of your eCommerce business; without data, any purchasing, marketing, design, etc. decisions you make are shots in the dark. Metrics allow you to make informed decisions, to help you spot trends, and to ensure that your company’s on the right track.

Conversion Rate (CR)

Once your store gets going, you need to learn how many visitors are actually committing to buy, and the conversion rate reveals just that. Conversion rate is defined as the percentage of visitors who end up buying from your store, and so you obviously always want your conversion rate to increase. Affiliate programs, social campaigns, and reviews are just some of the efforts you spend on driving traffic to your store. But if those visitors don’t end up buying, then all those efforts will have been wasted. It’s important to track your conversion rate at all times – this’ll help you measure which methods of driving traffic to your site lead to the most sales, which will help you to determine how, when, and where to best invest in marketing.

Smart Inventory Management

Tracking your inventory is vital. Obviously there will be some items that will be slow going whereas some items will sell rapidly. Suppose you realize that your Notebook collection’s much more popular with your customers than your Laptops. There’s no point in stacking up your warehouse with Laptops – get more Notebooks! The rate at which a particular item is being bought by visitors will vary depending on size, color, type, and model. If for instance blue Notebooks are outselling the red ones, then why waste the warehouse space on something that’s not selling? Ditch the red and buy more blue. An inventory management system (ahem) compiles all this data and provides you with accurate reporting to make more informed decisions when it comes to purchasing.

Inventory Errors

Similarly to tracking what inventory sells, you should use an inventory management system to track and prevent inventory errors. Inventory errors include:

  • Out of stocks (aka oversells, aka stockouts), when an item is sold on one of your online channels even though you don’t actually have any in stock.
  • Mis-picks, when the incorrect item is picked on an order.
  • Mis-ships, when an oder is shipped to an incorrect address.
  • Undersells, when an item languishes in your warehouse without being listed for sale on one of your online channels.

The effects of inventory errors are diverse and far-reaching: angry customers, negative marketplace feedback, lower search engine rankings, and, ultimately, lost and/or fewer sales. Tracking your inventory error metrics is the first step to remedying them.

Cost of Acquiring Customers (CAC)

Before you start seeing orders coming in, you’ll need to drive traffic to your store. Often this involves offering incentives to your potential customers to make a purchase, and that costs you money. This “CAC” metric reveals how much money you spend in this endeavor – specifically, it’s the amount you have to spend to get one customer. The lower the cost of acquisition – you guessed it – the better. You can employ different techniques to bring in those visitors, such as SEO, paid ad campaigns, and social media. All of them cost you either in terms of money or time. In addition, you may offer some discounts, free shipping, etc. which will again cost you money. Some sort of CAC is certainly expected – tracking this metric, especially in conjunction with your conversion rate, will reveal to you what’s working the best for the least amount of money.

Continuous Improvement: “Kaizen”

In your warehouse, it ought to be customary to establish quality goals and standards, and measure them on an ongoing basis. What gets measured gets managed, and then improved. Advanced reporting data and analysis options facilitate measurement of your overall quality, performance for the entire workflow and supports reviewing your fulfillment process. Once you have measured these performance metrics, opt for the Kaizen approach. “Kaizen” means continuous improvement, or good change, and it’s a methodology that strives for greatness. The kaizen approach encourages an increase in your warehouse’s internal competitiveness on an ongoing basis through a series of small, gradual improvements. If part of the process can be improved every week, then the accumulated gains can be substantial.

Average Order Value (AOV)

It is important to monitor how much money each order brings in to see how much revenue you can generate. That’s what AOV indicates – this is the average size of an order on your store. The higher the average order value, the better. By monitoring AOV, you can figure out how much revenue you can generate from the current traffic and conversion rate. Being able to predict revenue is a huge deal for your business, as it allows you to have a greater level of control over every aspect of your business, from marketing, to purchasing, to customer service. If most of your orders are really small, then you have to get more people to buy in order to achieve your target – and vice versa. It’s important to have at least a few high value orders so that your overall average is on the higher side.

Shopping Cart Abandonment

When your conversion rate is low, you need to understand how many visitors at least had an inclination to buy. To find this out, you need to look at cart abandonment. This is the percentage of visitors who have added products to their shopping cart, but didn’t, for whatever reason, complete the checkout process. The lower the cart abandonment rate, the better: i.e., you want your cart abandonment rate to keep reducing. Cart abandonment is the closest you come to losing real customers. Adding to the cart typically indicates intent to purchase. It gets especially bad if you paid a lot of money to get these visitors on to your store. Making sure your cart abandonment is low is essential to improving your conversion rate, and can be pretty simple to achieve with simple automated cart abandonment emails.

What does this all boil down to? To make effective decisions in your eCommerce business, you need data. Collect it, learn from it, and act on it.

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