Amazon KPI Examples For Optimizing Retail Operations On Seller Central
In today’s digital world, online business owners need to use every tool available to them by leveraging multiple channels to connect with targeted audiences. This requires seamless interaction between all channels and a strong understanding of the data analytics behind the success of each channel.
Key Performance Indicators, better know as KPIs, are quantifiable measures that help you understand how well your company is doing in different aspects of its operations within Amazon Seller Central. These indicators can measure almost any part of your business. They allow you to evaluate your business’s success and pinpoint areas that need improvement like customer service and driving sales velocity.
For example, we detailed Why Amazon Brand Analytics Fuels Growth which includes brand-level KPIs. In another article, Understanding Amazon MFN (Merchant Fulfilled Network), we detailed a collection of key metrics that are critical for anyone doing FBM.
As an Amazon Seller, you need to pay close attention to what your Amazon Key Performance Indicators tell you because the success of your business relies on you identifying them and taking action accordingly.
Types Of Amazon KPI
Many different types of metrics form the foundation for Seller KPIs, but three main classes are used for an Amazon business:
- Quantitative: Quantitative KPIs are all about numbers. These metrics tell you how many people placed an order, returned a product, viewed an ad, how many clicked through to your website, how many people bought your product, etc.
- Qualitative: Qualitative KPIs are all about impressions and engagement. They measure how people perceive your brand, how many people interacted with your ads, how long they spent looking at your ads, how often they engaged with your ads, and how likely they are to buy your products.
Both quantitative and qualitative KPIs are important to understand how business objectives are tracking to business goals, including how they should fit within a competitive landscape on Seller Central.
Benchmark Amazon KPIs For Sellers
Amazon KPIs are metrics that measure the performance of your business on Amazon. These seller metrics are essential because they help you understand how well you’re performing on Amazon and allow you to set goals for your business.
We have detailed a collection of Amazon KPIs considered necessary for retail operations. While additional metrics help provide a 360 view of seller performance, the list below is a starting point as you look to kickstart insights efforts needed to help your business grow.
Pick one, use all of them, or none of them. What is essential to any company’s ability to grow is a clear vision of what metrics mean, why to use them, and how they are socialized within the company so that everyone can work together to achieve the best possible results.
Sales Revenue
Sales revenue is the total amount of money Amazon makes from selling products via its online marketplace. Sales revenue includes advertising fees paid to Amazon by third-party sellers who list their products on the platform.
For example, if you sell shoes on Amazon and a customer purchases them for $100, you pay Amazon a percentage of this sale as your commission fee. This fee comes out of your pocket, so when calculating sales revenue for yourself and your team members at work (if applicable), it’s crucial to consider how much money these costs are subtracting from your total revenue numbers.
See Amazon Seller Central Sales Report Automation
Gross Profit
Understanding is vital because it’s the first profit metric you should look at when evaluating your business performance. Gross profit is the difference between revenue and the cost of goods sold. For example, let’s say that you sell books on Amazon. You buy books from publishers for $10 each and then resell them on Amazon for $20 each. Your gross profit is $10 per book.
Product Returns
A product return is when a customer requests to send back an item they purchased. The average number of products returned per 1,000 units sold in a given period. For example, if you sold 100 products and 40 customers requested to send their items back, your return rate would be 40%.
Backorders
Backorders are a good indicator of the demand for your product. Orders that haven’t been fulfilled yet can be used to predict future demand, revenue, and profit.
Let’s take the example of an online clothing retailer. If you’re selling shirts, back orders will tell you how many people want shirts like yours — it’s just a matter of fulfilling their orders. Once you’ve fulfilled all your back orders, though — and maybe even before — you’ll know how many shirts are going out into the world every month and what that means for your profits.
Amazon AOV (Average Order Value)
Amazon Average Order Value KPI (AOV) is a key performance indicator that measures the average amount of money spent by each customer.
The calculation for AOV is simply total revenue divided by the number of orders. It can estimate how much a company’s customers spend, purchasing habits, and loyalty.
Your Amazon AOV KPI will often reflect the types of products you are selling. The more varied the inventory class, the more you may need to stratify this by Amazon Standard Identification Number (ASIN) and product category.
Late Shipment Rate
LSR stands for Lost Shipments Rate. You could lose money if you have a high LSR because you will not get paid on time for your shipments. To reduce your LSR, try to ship on time.
Days In Inventory
Inventory days refer to the number of days your inventory lasts before you need to restock it. Turnover refers to the years your inventory will sell at its current rate.
Amazon Inventory Performance (Inventory Performance Index or IPI)
Inventory Performance Index measures your ability to keep items in stock, maintain healthy inventories, and fix listing issues. Your score will help you understand whether you’re excelling at maintaining inventory or if any areas need improvement.
Invoice Defect Rate
If you don’t send an invoice (or receipt) to your business customer within 24 hours, you’ll receive a penalty against your Invoice Defect Rate.
To comply with this newly announced Amazon Business invoicing policies, what you need to do now is to enroll in either the VAT Calculation Service or the Automatic Receipt Generation service. If you don’t send an invoice (or receipt) to your business customer within 24 hours after placing their order, you’ll receive one point against your Invoice Defection Rate.
A-Z Guarantee
The following customer feedback scenarios can prove disastrous if left unchecked:
- A-Z Guarantee claims;
- Customer chargeback;
- Negative reviews;
- Late shipment (for FBM sellers);
- Rate (response 24 hours after a customer leaves a message).
If the percentage meter for any of these factors starts going up, Amazon will quickly hand out notices and might even end up suspending the account. A-Z reflects both perceived and actual customer experience people are having with your brand.
Customer Lifetime Value
Customer lifetime value (CLV) is a metric that measures the revenue generated by a customer throughout their relationship with the business. CLV is calculated by multiplying the average revenue generated by a customer by the number of periods they will remain a customer. This metric informs how you turn first-time customers into repeat purchasers.
A customer may purchase from your consistently as standalone purchases or a customer purchase based on various types of subscription models you have. For example, if your customers are paying each month for an Amazon Subscribe & Save product for access to your product. Customers would be considered active each month after signing up until they cancel their subscription or stop using your product altogether.
A component of CLV is customer satisfaction metrics. These reflect a customer experience with your company. They measure how happy your customers are with your service, how easy it was for them to get in touch with you, how satisfied they are with the quality of your services, and how willing they are to recommend your brand.
Percentage Of Revenue Retained Over Time
The percentage of revenue retained over time is calculated by dividing the revenue at the end of a period by the revenue at the beginning of that same period, then multiplying by 100.
For example, if you have a business that generates $10 million in sales in Year 1, then $5 million in Year 2 and $20 million in Year 3, your retained revenue is 50%.
Search Terms
The Amazon Search Terms Report shows the most popular search terms in the Amazon store during the specified period, the search frequency rank, sales rank for a keyword, and the number of times customers clicked on the top Amazon product ranking related to those performing searches. For each of the three leading products, the report also provides details of their click share and conversion share for each of the top three countries.
This data can provide metrics that fuel KPIs related to how your current inventory relates to search product rankings. You may identify opportunities for additional products, optimize organic sales through listing improvements, or identify potential customers in adjacent verticals.
See How to download the Amazon Search Terms report?
Sales Conversion Rates
One way to measure KPI is by measuring conversion rates — the percentage of visitors who purchase or sign up for an offer after visiting your product detail page. A common formula for calculating conversion rate is:
- Number of total customers/number of total orders = conversion rate
- Total number of visitors/number of conversions = conversion rate
- Total Page Visits / Total # of Sales = Sales Conversion Rate
Amazon’s search algorithm isn’t just looking for pages that get lots of views. It’s also looking for pages that convert well. That means getting people to view your listing is only half the fight in performing well on Amazon — the other half is making sure that when they click through to your listing, they end up buying something.
To achieve this, your listing needs to allow them to research the product and determine if it’s right for them. If there is nothing on your listing that helps potential buyers understand what the item is, why it’s great, or how it works, they will never buy it.
A typical Amazon seller performance metrics report for sales conversions is the Detail Page Sales and Traffic Business Reports. The Traffic Report summarizes your product sales, including sessions, average conversion rate, sales ranks, click-through rate, and other performance metrics to help you get insights into sales velocity (or lack thereof).
If you are not getting enough conversions, it may mean that your product content does not match what customers need to know about your product. Ensure your content provides everything the consumer needs to know to purchase. Answer any common questions or concerns customers might have, and explain how your product compares to its competitors in price, features, and quality.
Optimizing KPIs for product listings often will fall under the topic of Amazon Search Engine Optimization or “Amazon SEO.” If you are working with an Amazon SEO Consultant or do it yourself, establishing basic metrics for your digital storefront performance can leverage the Sales and Traffic reports for the foundation of your KPIs.
What happens if you ignore KPIs?
Amazon has a system of penalties for sellers who fail to meet the company’s performance standards. If a seller falls below the minimum requirements, Amazon might restrict or prohibit that seller from selling certain products or even close their account outright. You now have a choice: monitor Amazon’s KPIs or face the consequences later.
This can be very serious if you depend on Amazon for your income. Account suspension can even lead to account cancellations. Therefore, you must take every step possible to ensure you never get suspended.
Sellers who ignore Amazon KPI risk losing access to the platform. Anyone who has ever worked on an action plan understands that missing Amazon KPIs can significantly impact your business and only wastes your time and money that can be better spent driving business growth and profit. If you aren’t monitoring your Amazon KPIs regularly, you could lose access to the platform entirely. And if you are running a business that relies heavily on Amazon, that would be disastrous.
Getting Started with Amazon KPIs
Your team spends hours looking for the right data, downloading it, and copy-pasting that data on a spreadsheet. That type of manual data wrangling is slow, messy, and expensive.
There is no need to hire a Seller Partner API developer or register as a developer to build a custom application. If you do not have the technical knowledge or desire to construct custom data workflows, Openbridge can help with code-free Amazon data automation.
Openbridge offers a type of connector for various Seller services;
- Amazon Inventory: Get FBA Inventory Reports data for the listing, condition, disposition, and quantity to help with day-to-day inventory.
- Amazon Fulfillment: Get complete, product-level detail on inbound shipments, shipped FBA orders, quantity, tracking, and shipping with FBA Fulfillment Reports and Inbound Fulfillment API.
- Amazon Orders: Order and item information for both FBA and seller-fulfilled orders, including order status, fulfillment and sales channel information, and item details with Order API and FBA Orders Reports.
- Amazon Finance: Balances, payouts, estimated and actual selling, storage, and fulfillment fee data with FBA Settlement Reports, FBA Fees, and Finance API
- Detail Sales & Traffic: Business level Sales and Traffic reports offer performance metrics for product sales, revenue, units ordered, and page traffic metrics such as page views and buy box.
- Vendor Central: Manage retail business operations with automated integration so vendors can improve and maintain performance at scale while growing business.
- Retail Analytics: Vendor Retail Analytics delivers ordered revenue, glance views, conversion, replenishable out-of-stock, lost buy box, returns, replacements, and many more.
- Brand Analytics: Brand Analytics offers sellers and vendors market basket analysis, search terms, repeat purchases, alternate purchases, item comparisons, and more.
Unlock Amazon Seller Central and Vendor Central data silos securely into your private data lake or cloud warehouse technologies like Amazon Redshift, Amazon Redshift Spectrum, Google BigQuery, Snowflake, Azure Data Lake, Ahana, and Amazon Athena.
With your Amazon Seller Central and Amazon Vendor Central data unlocked, you can turbocharge reporting, analytics, and insights tools like Google Data Studio, Tableau, Microsoft Power BI, Looker, Amazon QuickSight, SAP, Alteryx, dbt, Azure Data Factory, Qlik Sense, and many others.
Fuel forecasting, analysis, reporting, and marketing efforts using KPIs that matter most to you. Create a new custom dashboard, enhance an existing dashboard, or perform a breakdown of sales; data automation will get you what you need.
Get a 30-day free trial, so you can try Amazon SP-API automation for yourself.
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