5 Reasons NOT to Ignore Your Amazon Seller Metrics
If you don’t stay on top of key seller metrics, you won’t just make Amazon mad. You could also damage your business health in one of these 5 key areas
Understanding Amazon’s seller metrics is a key component of success on their increasingly competitive marketplace. As the fastest growing Amazon brand management agency in North America, this is right in our wheelhouse. It’s a strategy that Canopy Management has used to help our partners become successful in their selling niches.
Canopy’s ecommerce experts study recent events and strategically mine data to find the most important metrics for our partners’ online business growth. That’s because, if you neglect your Amazon sales metrics, you’re courting disaster.
This post will explain five ecommerce risks that you could easily face if you ignore important Amazon seller metrics. But first, let’s take a closer look at the Amazon seller metrics you’ll want to focus your attention on . . .
Amazon Seller Metrics You Need to Know
To run a profitable Amazon business, understanding and monitoring your seller metrics is not just a good practice—it’s a necessity. By tracking these numbers, you can make smarter business choices, improve your processes, and increase your profits.
Amazon Sales Metrics
Sales metrics include the total units sold, gross sales, net sales, and average sales per order. These figures offer an accurate snapshot of your business’s overall health and profitability.
Amazon Conversion Rate
Your Amazon Conversion rate is the percentage of visitors to your product listing who make a purchase. A higher conversion rate often leads to a better ranking on Amazon’s search results, helping you sell more products.
With Amazon advertising an increasingly important aspect of online success, this metric has become even more critical. Click-through rate (CTR) is the measure of how many people clicked on your Amazon ad divided by the number of people who saw it. It’s most often expressed as a percentage.
CTR gives Amazon sellers the most clear picture of the overall effectiveness of their Amazon pay-per-click (PPC) ads’ messaging.
Order Defect Rate (ODR)
ODR is the percentage of orders that receive negative feedback, an A-to-Z guarantee claim, or a credit card chargeback. A lower ODR indicates a high level of customer satisfaction.
The sell-through rate represents the percentage of your inventory sold over a specific period. It’s crucial for inventory management and planning.
This metric indicates the percentage of sold items that customers return. A high return rate may suggest problems with product quality or listing accuracy.
While the direct costs of ignoring these metrics might not be immediately apparent, the indirect costs can accumulate stealthily. Over time, these costs can add up and cause big financial losses that you may not realize until it’s too late. When that happens, you’re putting your ecommerce business at risk.
In the fast-moving Amazon ecommerce world, knowing your seller metrics is crucial. It can be as important as the products you sell. Operating without knowing these metrics is like navigating without a compass. It will take much longer to reach your destination, and all that extra time is costing you money.
As an Amazon brand management agency, our job is to make sure that our partners know that we have eyes on these metrics so they don’t have to. Instead, our partners can take a step back, and make more broad, long range decisions with their brand.
But, not everyone has the luxury of a Full Service Amazon Management. That’s why it’s important that you’re paying close attention to these numbers. With that in mind, here are five ways in which the lack of insight into these critical metrics can directly impact your business success.
1. Poor Inventory Management
Amazon inventory management has become a crucial part of ecommerce success and your sell-through rate is central to this. Your Amazon sell through rate reflects the percentage of your inventory sold over a specific period. This critical metric can serve as your compass, guiding your purchasing decisions to ensure your stock levels align with demand.
Selling on Amazon requires attention to detail. When you neglect your sell-through rate, you run the risk of amassing excess inventory. Surplus stock can hinder the effective use of capital elsewhere in your business. That’s why inventory management systems are rapidly increasing in popularity.
Poor inventory management raises storage costs, which is important for sellers using Fulfillment by Amazon (FBA), where long-term storage fees can accumulate. At the same time, products sitting in storage are at risk of becoming outdated or obsolete, leading to more potential losses.
Conversely, a lack of attention to the sell-through rate may also result in frequent stockouts, which are equally problematic. Because Amazon customers expect your products to always be available, not having your product in stock can result in upset shoppers and lost sales.
This inconsistency can also lead to negative reviews and lower seller ratings, impacting your overall store’s credibility and reputation.
Remember that Amazon’s primary concern is for their customers’ experience on their platform. Frequent stockouts signal Amazon’s algorithm that you may not be a reliable seller. That could negatively affect your product listing rankings, and make your products less visible to potential buyers.
Both these scenarios – overstocking and stockouts – can lead to a decline in customer satisfaction. Consumers want smooth shopping. Delays or unavailability of favorite products are sure to make them unhappy. Over time, this can harm your brand’s reputation, affecting not just your current sales but also your future business growth potential.
2. Missed Ecommerce Growth Opportunities
Sales metrics are the heartbeat of your Amazon business, constantly feeding you with critical information about the performance of your products. They include figures such as total units sold, gross sales, net sales, and average sales per order.
Each one of these metrics paints a vivid picture of your business’s current status and trajectory, and helps indicate the best path forward.
Understanding these metrics allow you to spot emerging trends that could signal opportunities for growth. For example, a steady increase in the total units sold of a specific product could indicate a growing market demand for that product. Decreasing sales could mean a problem, like increased competition or changes in what customers want.
However, your response to these metrics shouldn’t be only reactive; they can also serve as proactive tools to shape your business strategy. Monitoring sales metrics can help you identify the perfect moment to expand your product range.
By spotting which products are consistently performing well, you can leverage this information to introduce related items or variations, capitalizing on your established customer base.
Similarly, sales metrics can provide valuable insights that allow you to identify opportunities to break into new markets. An unexpected uptick in orders from a specific geographic region could indicate an untapped market with potential for growth.
Knowing the sales numbers for different products can help you find areas where there is more demand than supply. This can give you an opportunity to expand your business and serve customers who are not being well served.
Sales metrics can also be instrumental in shaping your pricing strategy. By monitoring net sales and average sales per order, you can understand how price changes affect your total sales and profits. If lowering prices leads to a significant increase in the volume of units sold, it could mean that your pricing strategy needs adjustment. If raising prices doesn’t decrease sales much, it indicates a path forward to making more money without impacting your sales volume.
Not keeping an eye on important metrics can cause missed chances and possible problems. Not knowing your sales trends can lead to missing opportunities to introduce new products, enter growing markets, or misjudge pricing strategy. In the highly competitive Amazon marketplace, these oversights can mean the difference between growth and stagnation.
3. Damage to Your Seller Reputation
The importance of maintaining a sparkling seller reputation on Amazon cannot be overstated. Two metrics that serve as significant determinants of your reputation are the Order Defect Rate (ODR) and the Return Rate. Ignoring either of these crucial figures can quickly point your ecommerce business in the wrong direction.
The ODR is a reflection of the number of orders that have resulted in negative feedback, an A-to-Z guarantee claim, or a credit card chargeback. Similarly, the Return Rate is a measure of the number of sold items that customers send back. Both these metrics are vital barometers of customer satisfaction and the quality of the customer experience you’re providing.
Each instance of negative feedback, or product return tells the story of a customer who was disappointed with their purchase for one reason or another. As these stories accumulate they shape the narrative of your brand in the minds of both prospective customers and with Amazon itself.
Ignoring these metrics means missing out on critical opportunities to address issues and make necessary improvements. It could be a problem with a supplier causing more returns, or unclear product descriptions leading to higher return rates. By failing to monitor and respond to these metrics, you allow these issues to persist, which could lead to a continuous cycle of poor customer experiences.
Amazon’s A10 algorithm takes these metrics into account when ranking products. A high ODR or Return Rate can lower your product’s visibility on the platform, thereby reducing the likelihood of your products being found by potential customers. Even worse, consistently poor performance on these metrics can lead to your selling privileges being revoked by Amazon.
4. Lowered Visibility
Amazon’s A10 algorithm, which powers the site’s search functionality, is a complex machine that takes multiple factors into account. One of the most impactful is the conversion rate. This metric represents the percentage of visitors to your product listing who make a purchase. Essentially, it’s a measure of how effectively your product page convinces potential buyers to become actual customers.
Amazon’s algorithm interprets a high conversion rate as an indication that shoppers find your product relevant and attractive. Listings with high conversion rates rank higher in search term results. That in turn results in an increase in your overall Amazon account health.
Ignoring or underestimating the importance of your conversion rate could have considerable drawbacks. If your conversion rate is low, your product’s search ranking may suffer. This decrease in ranking could significantly reduce your product’s visibility on the platform.
Amazon is a busy place. If your product has a low search ranking, it may get lost among other products. This can make it harder for customers to find, and makes winning Amazon’s Buy Box an impossibility.
The consequences don’t stop at visibility. When your product is less visible, it tends to attract fewer clicks, and, subsequently, fewer sales. This reduction can start a negative feedback loop: fewer sales can lead to an even lower conversion rate, which can result in an even lower search ranking, creating a cycle that’s difficult to break.
5. Reduced Profitability
All the numbers and rates in your Amazon seller dashboard are connected and affect each other. This includes sales, conversion rates, ODR, and return rates. And, they all have one thing in common: they directly or indirectly affect your bottom line. Ignoring these metrics, therefore, can have serious financial implications for your business.
Without tracking sales metrics, you might miss important trends and make bad financial choices for your products. For example, overinvestment in low-selling products or underinvestment in high-demand ones can both result in reduced profitability.
Failure to monitor your ODR or return rate can damage your seller reputation, leading to fewer sales and, in severe cases, suspension of your selling privileges. This damage can mean lost revenue, and the costs of reinstatement, if even possible, can be substantial.
Without keeping an eye on your sell-through rate, you might mismanage your inventory. Overstocking leads to increased storage costs and potential obsolescence, while understocking results in missed sales opportunities. Both scenarios can erode your profitability.
Get Expert Help with Your Amazon Seller Metrics from Canopy Management
Even with a strong internal team, not everyone has the bandwidth to keep track of every metric that Amazon throws at you, let alone respond to each of them with an effective strategy. That’s why many brands end up outsourcing the management of Amazon-specific issues to an agency that specializes in Amazon.
With over $2.2 billion in managed Amazon agency revenue behind us, we’re always happy to help you keep track of what Amazon sends your way. To get personalized help with managing your Amazon seller metrics (and much more), talk to one of our Amazon specialists.
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