Partner article by Ethan Morgan from Volo Commerce
If we knew everything we needed to know about our business, we could spot the trends, see the opportunities and anticipate the problems.
We would have a perfect window on our sales, and we would have total transparency on our costs, our efficiencies and our profit margins. We would know what was making money and what wasn’t. We would be able to make our money work harder with complete confidence.
Being able to analyse and report on how your business is performing can be challenge. Many people running an eCommerce business are simply too stuck in the day-to-day operations to be able to do this.
There’s too much to get done, and there are only so many hours in the day and so many people they can afford to pay to keep the business going. It becomes a struggle to think more than a few days ahead, especially when there are the daily headaches to solve and fires to fight.
This is doubly the case when your business is trading on multiple channels and managing separate inventories. The urgent takes priority over the important.
Decide What You Need to See
And what is the really important stuff?
What’s important is knowing how efficiently you are ordering products, how well you are purchasing, how long the stock is sitting around before you sell it and convert it into cash.
What’s important is knowing all your costs in your business so that you can improve on the areas where you’re doing less well than others.
What’s important is knowing which channel you see the best returns on – and where you’re not getting a good enough return for your money and time.
Choose Key Performance Indicators
If you can’t measure your business, you can’t manage it. In order to measure it, you have to decide what are the key indicators of performance, on both the revenue and cost sides, that you should track.
If you select too few data points, you don’t have enough of a handle on how your business is doing and miss chances to reduce your costs and improve your efficiency. Too many data points and you spend so much time analysing that your productivity takes a similar downturn.
Once you’ve decided your key metrics, you’re not finished.
Can you collect this data in a way that you can analyse it and produce meaningful reports to help you see what’s happening? How accurate is the information? How up-to-date is it? How often should you analyse it? What will you do with the insights you get from the data?
The 5 Levers of Efficiency
There are 5 main levers of eCommerce efficiency, which are your 5 keys to cutting costs and improving profitability. These are inventory & stock control, warehousing & operations, fulfilment & despatch, purchasing and customer service.
The better you are at managing these areas, the more profitable your business. You can only get better at managing them when you have easy access to the right data about how they’re performing.
So, by having the metrics and resources available for you to analyse your product and customer data, you’ll be able to successfully improve your overall eCommerce efficiency. This will eventually enable you to make better decisions around your business.
Let the Reporting do the Work, not You
If you’re running your business and stuck in the day-to-day activities, maybe you don’t have enough time to constantly assess how you’re really doing.
This is where technology can come to your rescue and do the heavy lifting for you. By automating your labour-intensive processes, you free up your time. If the solution you use has data collection and reporting capacity as well, even better.
Once you have set up your key performance indicators, targets and automation across the important areas of the business, you can start to take action and direct your business towards growth.