Data and Analytics in Multichannel eCommerce – Part 1

Tuesday February 18, 2020 | Posted at 10:17 am | By Paul Dicken
February 18, 2020 @ 10:17 am

In Part 1 of this series, we cover some of the areas of your ecommerce business driven by the need for data.

We’re willing to bet that in every single ecommerce business in the world there are people who have to spend an unhealthy amount of time in spreadsheets. Maybe they’re the finance experts, doing the business modelling or the financial reporting and compliance. Maybe they’re the listing experts, manipulating the data on thousands of SKUs a year to get them in the right format for their system and the systems of the channels they sell on. Maybe they’re the purchasing experts, keeping an eye on suppliers, stock levels and re-orders. Or maybe they’re us experts, because we need to report performance in a certain way for our Directors.

Here’s the critical thing: data shouldn’t be about experts. We shouldn’t need arduous number crunching to get a transparent view of what’s happening in our business. Online multichannel and multi-marketplace sellers need good data and good analytics to help them make the right decisions. This is the type of audience that works with us because they need to grow with scale and manage their costs across multiple channels. The type of audience that constantly has to fight the forces of complexity which threaten to engulf them on a daily basis.

The Areas of Your Business Driven by Data and Analytics

This could potentially have been a short post. Which areas of your business are driven by data and analytics? Answer: all of them. That’s not particularly useful, so we’ve broken down our analysis into a number of indicators of ecommerce success so we can understand how the right use of the right information can move each indicator in our favour.

Listing Quality

The better your products and their variations are listed, and the quicker you can list them, the more likely they will be found by buyers and the more they’re found, the more sales you’ll make. Order and sales data determines how well your items are selling, by product, over different time-frames, across regions and channels.  Poorly performing items may be down to the quality of information or language that is presented to the buyers, so you need to zero in on the areas where you can improve your listings, or indeed other determinants of success like price, and adjust your listings accordingly.

Inventory Breadth

You need to get the balance right between having enough stock so that you don’t run out, suffer a stock outage and oversell, and having too much stock so that your money is tied up, sitting there for too long and doing nothing except increasing your costs and killing your cash flow. You need to be aware of the time it takes to sell each item of inventory – from your physical or drop-ship warehouse – and the different lead times for ordering and reordering, down to a SKU level. You need to analyse your stock and your sales across a range of criteria, like marketplace or channel, region, SKU and supplier. Review your best sellers within the range and ensure that the popular variants such as colour and size are kept in stock and that the appropriate quantities are reordered.

A reduction in sales velocity can indicate that competitors have cut their prices and your pricing is no longer competitive. Or it may point to the end of a seasonality swing for a product that is subject to such fluctuations. Conversely, a rise in velocity may indicate that your pricing is too low and less competition may allow you to raise prices and drive better margins. These indicators will also help you decide to re-order or liquidate stock, depending on the circumstances.

A stock forecast report is a very valuable piece of intelligence. If you could see, down to the individual SKU level, how many days of stock you had left and the supplier lead time for reordering the stock, wouldn’t this be a great way of ensuring you always had the right stock levels – and avoid expensive stock outages – for your best sellers? Furthermore, a zero stock report showing you how long each item was out of stock for, combined with supplier lead times, helps figure out your total elapsed time without stock.

Channel Coverage

Your channel coverage strategy encompasses your website or websites, as well as the various different marketplaces around the world and myriad other channels like price comparison sites, daily deal aggregators and so on. It also includes the traditional avenues like a physical store, mail order and telephone order. The more places you can offer the same stock, the more potential customers see your listings and the more sales you make. Being able to analyse the performance of your products across the different channels – over different time periods and perhaps also by supplier and shipper – lets you see where the growth areas are, as well as the areas for improvement.

Promotions

The more promotions you do, the more you increase your sales, order values and customer loyalty. That said, promotions are only valuable if they wok, so understanding what works requires a real investment in analytics. Not every promotion will work for every product.Analysing your sales performance allows you to identify what the best promotions are and what products suit promotions better than others. For example, analysing the customers who bought a popular laptop but not the matching case allows you to make them an offer accordingly. Similarly, studying which SKUs sell well with other SKUs allows you to put together new ‘kits’ that you hadn’t thought of but that the market is effectively identifying and demanding from you. Furthermore, wouldn’t it be great to know who bought from you in 2015, but drifted away in 2016, or who bought from your eBay store, but hasn’t ventured to your web store?

International Sales

With every new region or country you offer your stock to, you open up a potential new bank of brand new customers that you can develop over time into repeat customers. Some of these regions will have more ‘price elasticity’, allowing you to command higher margins. If you could interrogate your performance across different countries, for specific time-frames and specific products, this would pay dividends. Suppose you identify some good sales in a number of emerging markets. You create a subset of those countries and further drill into performance to see what products, from which suppliers, through which channels, are accounting for the growth. Importantly, scaling the growth means knowing when you are better off shipping from home, and when it makes sense to start stocking locally

Margins

A crucially important commodity of your long-term success is margins and profit. If you focus all your efforts on driving sales volumes for products that yield very low profit, you need to rethink your strategy. A multitude of costs combines to turn your gross margin into the all-important net margin on the items you sell. You need a mechanism to define all of these charges, set targets and monitor performance against target across channels, suppliers, countries, SKUs and over time. For example, you can compare your margins for products below or over a certain price point. Alternatively, you can see how your margin performance is trending over time and make adjustments accordingly.

In the next post in this series we’ll cover the rest of the areas of ecommerce that data touches. If you’d like some more information on how Volo’s Vision reporting and analytics module provides insight across your business, please let us know.

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