The Importance of KPI’s in Omni-Channel Ecommerce

Ecommerce is an extremely competitive industry, but with nearly half of UK SME’s failing to identify any KPI’s (Key Performance Indicators) for their business it seems that there is an opportunity for many online sellers to be optimising their business and reaching new levels of growth. This article will show you how to go about setting appropriate goals for your business and then look at the KPI’s and metrics needed to measure your ongoing success against those goals.

Goal Setting

Ecommerce sellers can often experience significant growth in the early stages of business development. Scaling an online selling business can become quite a roller coaster ride and whilst new challenges seem to pop up on a daily basis it’s often easier to find and throw quick fixes at problems as a temporary solution. When you come to do a proper audit of your business you’ll soon find yourself relying on a range of ill-suited systems and processes. The issue is that as your business grows in size and complexity these processes become unfit for the job in hand. It is important to set your goals as a business as early on as possible, once you have defined what you’re setting out to do, you can then start to build smart systems and procedures using data and metrics to keep you on the right path. Most online businesses share the same key goal: increase revenue, but it’s also important to ensure that whilst revenue increases you are also maintaining good margins and are investing in scalable systems that support future growth. Put simply, you want your goals to look something like this:

  • Increase Revenue
  • Increase Margins
  • Improve Efficiency

Increase Revenue

There are many ways you can increase revenue, for a lot of online sellers the solution is to list a product multiple times on multiple marketplaces. While this is a tried and tested model, there are additional ways for increasing revenue by using the metrics and data that you have on hand.

Monthly Sales

  • You need to have this metric in place to be able to set sales targets, spot trends and analyse your sales in general.
  • A great tip is to break down the bottom 20% of your moving lines, see where you can improve their sales, or exchange poor selling lines with new potential lines.

Average Order Value

  • Knowing how much a typical customer spends with you is a great benchmark for creating a sales strategy. Your goal will be to increase this number.
  • By using your sales data you can see product relationships and what sells well together, use this to create kit/bundle listings on popular marketplaces or alternatively, use an upsell feature on your website.

Shipping Upgrade

  • How many of your customers pay for an upgraded shipping service, could you upsell this service and make it profitable?

Increase Margins

This is an area that a lot of SME’s struggle on, you can be great at getting good prices on packaging, software and overheads but there are other areas you should be monitoring to ensure your processes are optimised for the best margins.

Cost Per Pick & Pack

  • How much manpower does it cost you to pick and pack an order?
  • Are your warehouse team having to travel across the same area of the warehouse multiple times?
  • Are you using picking locations?
  • Ideally you want to optimize this process so that your popular moving lines are close to your packing station.

Average Advertising Cost Per Order

  • How much are you spending on advertising/boosting your listings?
  • Are you optimising adverts that aren’t doing so well?
  • Are you increasing budget into adverts that convert well?
  • Your aim here is to lower the average cost down by improving your overall conversion.

Improve Efficiency

Increasing your margins and the number of sales will allow you expand, hire more staff, invest in software and grow your business. But before you go for that next hire, ask yourself, could your current systems/team be improved?

Return Rates

  • With 23% of returns being down to the customer receiving the wrong items, this is a massive area in which you can reduce your customer service cost. By recording the percentage of returns and exchanges you will able to set goals and investigate their causes. Analysing the data is key to making improvements.

Average Order Processed Per Picker/Packer

  • This will depend on your warehouse setup and is very similar to Cost Per Pick & Pack metric. By seeing how many orders each individual can dispatch down to the hour, you can set realistic targets and investigate how you can optimise your warehouse process.

Average Customer Service Resolution Time

  • How long is your customer service team spending on solving issues?
  • Are there some common recurring queries like an invoice request?
  • This metric will allow you to set a goal and dive down further into optimising your customer service team, reducing their workload, improving processes and automating common tasks.

A final note on KPIs

There are a number of KPI’s you could put into place and each business will be different, but if you take one thing away from this article then please let it be this… Setting goals with measurable KPI’s will give you the valuable insights needed to grow your business in the most efficient ways possible, saving you both time and money and giving the added competitive advantage that all online sellers strive for.

I hope you found this article useful and I would love to hear from you on LinkedIn or Twitter.

Charlie McBroom — Ecommerce Expert

Co-Founder of Fitted Commerce — Presenter at SellerHub.TV

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