In the bustling marketplace of Amazon, where countless products vie for visibility, simply listing your products and crossing your fingers won’t cut it. Achieving success on Amazon demands a keen grasp of various Amazon Seller Metrics and the skill to leverage them in crafting effective strategies.
These metrics impact every facet of a seller’s performance, influencing everything from product visibility to customer confidence. To excel in this digital marketplace, mastering these Amazon seller performance metrics is a must.
Let’s take an in-depth look at Amazon Seller Metrics and their potential to fuel the growth of your business and products.
Why are Amazon Metrics Vital?
Metrics are essential for Amazon sellers to monitor their performance, pinpoint areas for enhancement, and make informed decisions to improve their operations on Amazon. These metrics offer valuable insights into different aspects of an Amazon seller’s business, including:
Effectiveness of Advertising
Metrics related to advertising, such as Total Advertising Cost of Sales (TACoS), Return on Advertising Spend (RoAS), and Advertising Cost of Sales (ACoS), aid Amazon sellers in gauging the efficiency of their advertising initiatives. These metrics assist in refining keyword targeting and bids, ultimately maximizing the return on investment in advertising.
Sales and Profitability
Indicators such as conversion rate, sales velocity, and total sales enable sellers to evaluate their overall sales performance, pinpoint lucrative products, and assess the impact of their marketing endeavors.
Inventory Management
Metrics such as inventory turnover, stockout rate, and late shipment rate offer insights into how efficiently sellers handle their inventory, ensure sufficient stock to fulfill customer demands, and mitigate occurrences of stockouts and returns.
Amazon Account Health
The metrics concerning account health on Amazon, which include both the overall account health rating and specific performance indicators, show how well a seller follows Amazon’s rules and standards. These metrics have a substantial impact on a seller’s ability to operate on the platform and access essential seller resources.
Return Rate
Metrics such as return rate, return authorization request (RAR) rate, and return reason analysis offer valuable insights into product quality, customer satisfaction, and fulfillment practices. These metrics empower sellers to pinpoint and resolve issues that contribute to returns, ensuring better overall customer experiences.
Customer Satisfaction
Metrics such as product reviews, customer service response time, and order defect rate (ODR) serve as indicators of customer satisfaction for sellers. They aid in assessing customer sentiment, pinpointing areas for enhancement, and maintaining a positive seller reputation.
By monitoring and assessing Amazon metrics, sellers gain a comprehensive insight into their business performance. This enables them to recognize trends, spot patterns, and make well-informed decisions aimed at enhancing their sales, profitability, customer satisfaction, and overall success within the Amazon marketplace.
Key Amazon Metrics to Monitor
Now that you’re familiar with various Amazon metrics, let’s delve into some of the crucial ones you should keep an eye on:
ACOS (Advertising Cost of Sale):
In Amazon PPC, the Advertising Cost of Sales (ACoS) holds significant importance. It serves as a pivotal metric for shaping your Amazon advertising approach. The concept of ACoS is straightforward: it represents the amount spent on advertising per dollar of revenue generated.
Here’s the formula:
ACoS = Total Ad Spend/Sales Generated from Advertising
Here’s a practical illustration of an ACOS calculation: If your ACOS stands at 15%, it indicates that you spent $0.15 for every dollar made, or $15 for every $100 made. (Note: We’re only considering Ad Spend here, not production costs, Amazon fees, etc.).
TACOS (Total Advertising Cost of Sales)
TACOS is a metric that measures advertising spending in terms of total ad revenue (organic and PPC). It helps you view your overall ad performance and business profitability.
Here’s the formula:
TACoS = (Advertising Spend/Total Revenue) x 100
For example, let’s say your company made $400,000 in sales and you spent $40,000. You’d have a Total ACOS of 10%, regardless of your actual ACOS.
The ad spend to total sales ratio is the primary consideration in Total ACOS.
CTR (Click-Through Rate)
Click Through Rate (CTR) represents the proportion of shoppers who click on your ad compared to the total number of impressions. Both your campaigns and keywords have their individual CTRs, each serving as a gauge of the effectiveness of your ad relevance and placement.
Here’s the formula:
CTR = Number of Clicks/Number of Impressions
Having a high conversion rate can result in a lower cost per click, or CPC. Proactively taking measures to increase your CTR on Amazon can help increase sales and profits.
Conversion Rate
The Conversion Rate is among the most crucial metrics to monitor for every product you offer on Amazon. This metric indicates the percentage of ad clicks that result in sales. It’s determined by dividing the number of conversions by the number of clicks. A higher CVR signifies that your ad is effectively converting clicks into sales, demonstrating its success in generating revenue.
Here’s the formula:
CVR = Number of Orders / Number of Clicks
For example, if you had 70 conversions from 1,000 interactions, your conversion rate would be 7%, since 70 ÷ 1,000 = 7%.
Total Sales
All sales activities conducted on Amazon contribute to gross revenue, which is called total sales. This figure encompasses all orders, irrespective of discounts, returns, or refunds. It’s advisable to monitor total sales on a weekly and monthly basis. Ideally, you should observe consistent month-over-month growth, targeting a minimum increase of 5–10%.
Average Order Value (AOV)
The Average Order Value (AOV) represents the average amount spent by customers on a website or store per purchase. It is computed by dividing the total revenue generated by the total number of orders placed within a specific timeframe.
The formula is:
AOV = Total revenue/Number of Orders
When there is a higher average order value, it means that a business is promoting more expensive products or cross-selling to increase sales.
Inventory Performance Index (IPI)
If you are an FBA seller, you’ll be assigned an IPI score, which is an exclusive metric used by Amazon to evaluate how effectively you’re handling your FBA inventory. A high IPI indicates efficient and swift product sales, whereas a low IPI suggests excess inventory or sluggish sales performance. The key factors influencing your IPI score include:
- Excess Inventory
- Sell-through Rate
- In-stock Rate
- Stranded Inventory
Account Health
Monitoring your Amazon Seller account health is very important, as any discrepancies could lead to a possible account suspension. Account health comprises three main components:
- Customer Service Performance and Order Defect Rate
- Product Policy Compliance
- Shipping Performance
If one of those factors exceeds Amazon’s healthy target rate, it will be yellow or red, indicating it requires your attention and intervention.
Conclusion
Comprehending and efficiently handling Amazon seller metrics is paramount to thriving in the competitive e-commerce arena. These metrics impact your product visibility and are instrumental in establishing a favorable reputation, elevating customer satisfaction, and ultimately boosting sales. By continuously monitoring and refining these critical performance indicators, sellers can align with Amazon’s benchmarks and distinguish themselves in the marketplace, fostering sustained success and growth for their businesses.
A leading Amazon Agency like SalesDuo can be a one-stop solution to manage all aspects of the Amazon and eCommerce business. This makes it easy for retail brands of all sizes to focus on what matters most while we help them set up, manage, and grow their business on multiple marketplaces across various markets. For more information, visit salesduo.com
