eCommerce Key Performance Indicators for Online Retailers

By Ralf VonSosen (the vice president of marketing for Infopia, a leading provider of multi-channel online selling solutions.)
EcommerceBytes.com

Gone are the days of selling through only a single online sales channel, such as eBay or your website. Here are the days of multi-channel online selling via a sophisticated collection of e-marketplaces and website stores.

For today's multi-channel online retailer, this multiplies the complexity of analyzing business performance. First, you would need to gather data from each one of your online channels. Next, you face the daunting task of not only analyzing a massive amount of data, but first stitching this data together for a unified view of your operations across all online channels. Without visibility into how these moving parts fit together, it's hard to see what your business is doing right, why, and where it can improve.

So how do you turn this chaotic jumble of performance data into actionable insights? Luckily, the field of analytics or business intelligence has also improved alongside the evolution of eCommerce. From our years of work with online retailers, here are a few steps in building a solid foundation for an analytics initiative, starting specifically with key performance indicators (KPIs) - the all-important dashboard needed to drive your business.

1. Define the Right KPIs.
Key Performance Indicators (KPIs) are quantifiable metrics that tie directly to a strategic objective your business wants to achieve, such as revenue growth, profitability, market expansion, cost reduction, and so on. Without measuring and analyzing performance, business strategy is a guessing game.
The trick, of course, is to first measure the right thing or create the right KPIs, and to do this, you need to answer two key questions: (1) what is my business trying to accomplish, and (2) what defines success for my online selling efforts? Our experience has enabled us to identify the most critical KPIs that online retailers typically need:

Measured Area	Best-Practice KPIs
Overall Business Performance	Most Profitable Products, Most Profitable Marketplaces, New vs. Returning Customers, Most Profitable Listings, Most Profitable Coupons
Online Sales Activity	Visitors & Conversions, Page and Listing Views, Orders, Shopping Carts, Up-sell Orders
Product Performance	Product Profitability, Top Sales Revenue, Top Close Rates
Listings Performance	Listing Turnover, Listing Profitability, Listing by Marketplace, Duration View
Marketplace Performance	Marketplace Sales Activity, Marketplace Profitability, Average Cost per Order, Marketplace Listing Turnover
Customer Insight	Customer Scorecard, Geographic View, Marketplace View, Lifetime Value
Campaign & Coupons Performance	Campaign Conversion Percentage, Campaign Activity - number of clicks, orders, Coupon Conversion Percentage, Coupon Activity - number of clicks, orders

2. Know How to Read Your KPIs.
Numbers don't tell you anything by themselves - they require context and interpretation. For instance, to determine whether it was a good year for a company with $10 million in revenue, you would also have to know how it performed in previous years, what the corporate goal was, how competitor companies of the same size or in the same geographical market had performed, and so on.
As with any other numbers, KPIs need interpretation too: Are they at acceptable levels? How are they trending? Are they going up or down? When read correctly, KPIs can answer questions such as:

• Revenues: Are they increasing at the rate you expect?
• Profitability: Are you making a good margin?
• Customer Growth: How many new verses existing customers?
• Product Turnover: How quickly are you moving inventory?

3. Diagnose Cause and Effect.
Now comes the hard part: determining the driving factors for a KPI's performance. Some causes for online selling KPI performance might include:

• Wrong Product: Is your product not wanted? Is it presented poorly?
• Right Marketplace: Are you focusing on the wrong marketplaces? Are you paying too much in fees?
• Ineffective Promotion: Are your promotions reaching the target audiences? Are they utilized in the buying process?
• Order Execution: Do customers abandon their shopping cart in the checkout process?

4. Take Action!
Ok, you have the right KPIs in place, you know what they mean, and you know what makes them go up and down...so now what? This is where the rubber meets the road, the raison d'etre for any analytics system: the ability to take needed action on the right information. Depending on your goals and evaluation of your KPIs, there are many possible actions you could take, such as:

• Marketplaces: Change your mix of marketplaces.
• Listings: Use different products and price mixes.
• Customer Service: Create better checkout processes and customer communication.
• Website: Coordinate your website in conjunction with other marketplaces.

With this basic understanding of KPIs, you will be better prepared to design and implement an effective analytics system to drive your business. Other considerations include the ability to: present data to different users in an easy-to-understand format, use both real-time and historical data, and pull data from all business processes, from inventory to cash. Online selling analytics is both an art and science: with some guidance, discipline, and vigilance, you can better compete in today's brave, new eCommerce world.