Only change is constant. Amazon is always evolving, and in the fast-paced world of eCommerce, staying one step ahead and identifying opportunities for growth is crucial. This has never been more important for Amazon sellers, where the competition continues to sharpen by the day. To achieve sustainable growth, sellers need to track and analyse key metrics for their business. While general KPIs (key performance indicators) like customer acquisition or lifetime value are important, Amazon is a specific ecosystem that differs from other industries and channels.
Amazon, with its seemingly limitless cloud-based storage offers a wealth of data for sellers right at your fingertips. These metrics are baked into everything you do as a seller on Amazon, so you should take advantage. This blog will help provide insights into performance and potential areas for improvement for Amazon in particular. Let’s explore some essential metrics that sellers should monitor to identify growth opportunities and make informed decisions.
Sales and revenue
While your specific business goals should shape your KPIs, this top-line metric is always going to be king. Tracking your Amazon sales and revenue is the foundation for evaluating overall performance. This metric will also help you analyse trends and patterns in your sales data to identify high-performing products, peak seasons, and emerging market trends. Perhaps you have a SKU that makes a lot of revenue but only at Christmas, or maybe your revenue jumps if you increase the price on a SKU, even if you drop in unit sales. Any way you slice it, it’s good information to know.
Digging into Amazon revenue is easy in the Business Reports section of Seller Central. Here, you can isolate Ordered Product Sales (OPS) and compare it to other data, like units sold, sessions, or B2B sales. You can refine by dates going back to your first sale on Amazon. Track revenue first and foremost. When you understand your revenue sources and growth rates, you can allocate resources effectively and identify opportunities for expanding product lines or spot issues before they become giant, business-killing problems.
ACoS and RoAS
You can’t succeed on Amazon without driving shoppers to your products. More than half of customers find items they ultimately purchase through search. And according to JungleScout, Amazon’s advertising revenues reached $37.7B in 2022. It’s clear that marketing spend (even when it’s done effectively) will cut into your margins, so tracking the return on advertising spend and making it as efficient as possible is absolutely crucial.
Industry-wide, the metric of ROAS (Return on Ad Spend) helps assess the effectiveness of your advertising efforts. For every dollar or pound you spend on ads, what is the return? A ROAS of 3x should be a starting line, but this may vary depending on if it’s a new product, brand builder, loss leader, or other factors. On Amazon, ACoS (Advertising Cost of Sale) is essentially the inverse of ROAS, helping you assess what percentage of your sales paid for your PPC cost.
ACoS = Ad Spending / Ad Revenue * 100.
By monitoring ACOS, you can identify which campaigns and products are generating the best return on investment and allocate your advertising budget accordingly.
Example data showing spend, sales, ROAS, and ACOS from Amazon Advertising.
If you do not optimise your paid marketing strategies for growth, you can end up in an endless cycle of spending to break even. No profit, no bueno. Ensure you are monitoring ACOS and/or ROAS closely with data from Amazon Advertising. If ROAS isn’t going up or ACOS isn’t going down over time, you’re in trouble. Remember, Amazon Ads data only goes back 3 months, so download and track this regularly.
Inventory management
You can’t sell to customers if your items aren’t in-stock and available. And unfortunately, excess or poorly managed inventory can cost you both on and off Amazon. Excess inventory will incur storage fees (especially during Q4 or if your items have been stored in Amazon warehouses longer than 180 days). If you’re working with Amazon FBA, you must meet certain guidelines to win the Buy Box, and frequent out-of-stocks can hurt you. Efficient inventory management on Amazon is essential for meeting customer demand but also for managing costs.
Sellers should monitor metrics such as sell-through rate, inventory turnover, and inventory age to ensure they have the right amount of inventory on hand for the moment and the future. Amazon provides a lot of great data on ideal replenishment amounts, cadence, fees, and sell-through (all mathematically forecasted using real-time Amazon data) on the FBA Inventory page in any Seller Central account.
Example data from an FBA Inventory reports page on Seller Central.
Lastly, if you have a lot of SKUs or volatile SKUs, you need to monitor these metrics even more carefully. Items that expire (like food, cosmetics, or supplements) can be tricky when you account for optimising storage and seasonality. Accurate forecasting and understanding lead times can help identify opportunities to optimise inventory levels, reduce holding costs, and avoid sell-outs, enabling smoother operations and growth.
Conversion rates
Conversion rates provide insights into the effectiveness of your product listings and overall customer experience on Amazon. What is the point of listing a product and paying for customers to click on it if it’s not going to sell?
It’s important to track conversion rates at various stages of the sales funnel, including product views, add-to-cart rates, and checkout completion rates. This stream can identify areas where customers may be dropping off. This may mean you need to optimise your listings. If customers click on your product, the title and main image may be solid, but if customers bounce from the detail page and don’t complete checkout, you may need to answer more customer questions. Looking at this data from a variety of sources, such as Business Reports, Amazon Advertising CTR, and conversion, can improve your sell-through and ensure you grow at a sustainable rate.
Amazon Seller Central performance metrics
Amazon provides metrics in Seller Central specifically so you can monitor them. These allow you to pay attention to the KPIs that Amazon feels sellers should be looking at and can affect your long-term success on the platform. These metrics include seller feedback ratings, order defect rate, late shipment rate, and customer response time. The customer comes first on Amazon! Maintaining high performance levels not only enhances customer trust but also qualifies you for programs like Amazon Prime or Buy Box eligibility, marketing opportunities for events like Prime Day, and overall, an increased visibility for customers resulting in potential sales growth.
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Continuously tracking and optimising these metrics will help you stay competitive, adapt to market changes, and unlock the potential for growth and success as an Amazon seller. If you manage Amazon as part of an omnichannel business, we know how hard it can be to do it successfully. This is because the KPIs for Amazon don’t always align with the KPIs you use for brick-and-mortar or other channels. If it’s too complex or overwhelming, eCommerce Nurse is here to help. Whether you need a few tweaks to your Amazon Ads strategy, a bit of magic for your content, or full account management, contact us for packages and information.
