In our last post we talked about the ‘super lever’ of ecommerce reporting and analysis, and how it informs, drives and shapes the 5 growth levers of the Volo Levers framework. Having focused on your top line, we now turn to your bottom line. In this post we cover how ecommerce reporting & analysis gives you the knowledge to take actions which improve your efficiencies across marketplaces like Amazon, eBay and OnBuy, and webstore platforms like Magento and Shopify.
There’s a well know proverb, often attributed to Erasmus: “In the land of the blind, the one-eyed man is King.” If you can see what others can’t see, you have competitive advantage. You have an avenue to information that is unavailable to others. With this information you’ve priceless knowledge that allows you to make better decisions on ecommerce efficiency and profitability and be more successful than your competition.
In ecommerce, as with the one-eyed man example, data is also king. In any business, we all wish we had perfect knowledge of perfect data. 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 us money, what was breaking even, and what was losing us money. We would be able to make our money work harder with complete confidence.
Being able to analyse and report on how your business is doing 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 at a profit. 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. The urgent takes priority over the important. Time spent working in the business will also squeeze time left to work on the business.
But what is the important stuff? It’s knowing how efficiently you’re ordering products, how well you’re purchasing, how long the stock is sitting around before you sell it and convert it into cash. It’s knowing all your costs in your business so that you can improve on the areas where you’re doing less well than others. It’s knowing how much net profit you’re making after you’ve successfully delivered a package to a customer who’s satisfied with what they’ve received.
As we’ve said before in this series, 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 your productivity takes a similar dip.
Once you’ve decided your key metrics, you’re not finished. Can you actually collect this data within a reasonable time and in a format that you can analyse 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?
We’ve devoted a detailed post to each of the main levers of ecommerce efficiency, which are your keys to cutting costs and improving profitability. They’re inventory & stock control, warehousing & operations, fulfilment & dispatch, customer service and purchasing. 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. Let’s take a more detailed look at some of the ways reporting & analysis can help you improve ecommerce efficiency.
Inventory & stock control: Getting your inventory and stock levels right requires a fine balance of time and quantity. It’s also directly linked to how good you are at purchasing. You don’t want too much stock so that your money is tied up, sitting there for too long and doing nothing except increasing your costs. You need to be aware of the time it takes to move each item of inventory and the different lead times for ordering and reordering, down to a SKU level. Good reporting will allow you to balance your stock and your sales, sliced across a range of criteria, like marketplace or channel, region, SKU and supplier.
In a similar vein, dead stock is another drain on your profitability. Being able to see what stock has had no sales over the last 7, 30 or 60 days, for example, allows you to identify poorly selling items and see what the stock value is of those SKUs. Perhaps they’re seasonal SKUs, explaining the period of inactivity, in which case you could explore selling to countries where they are in season. If they’re not seasonal, you could bundle them into promotions to move the dead stock and recover some of your investment. Either way, reporting & analysis allows you to use the information as you see fit.
A stock forecast report lets you see, down to the individual SKU level, how many days of stock you have left, the supplier lead time for reordering the stock, and the days until you have to re-order the stock, so you can improve your efficiencies, especially for those items with long lead times. A zero stock report showing you how long each item is out of stock, combined with supplier lead times, helps figure out your total elapsed time without stock. Better still, a system like Volo allows you to set up automated email notification to let you know if a SKU’s stock level goes ‘amber’ or ‘red’, according to rules you put in place.
Warehousing & Operations: When it comes to the operational side of the business, you’re looking for maximum productivity with minimum errors. The better your productivity, the more efficient your operations, whereas every mistake in warehouse allocation eats directly into your hard-earned margins from the original sale. Accurate reporting lets you judge the relative performance of your warehouse staff in processing supplier deliveries, helping you pinpoint the problem areas and staff, so that you can provide more training or better deploy your resources to reduce the error count
Do you know your credit/refund percentages, by revenue and volume? A critical area for reducing costs is looking at your credits and refunds, since they impact both your customer service and purchasing areas. Interrogating your order data and splitting out the credit and refund elements lets you spot which suppliers – physical suppliers versus drop-shippers for example – and which SKUs or categories are causing more credit and refund problems and eroding your margins. High refund figures could be the end result of poor product quality or incorrect item descriptions.
Or perhaps it’s a specific channel, region or country that’s hurting your profitability? Being able to slice and dice your credit and refund data in lots of ways gives you the detail you need to identify and eradicate the excess time and costs spent on the worst offenders.
Fulfilment & Dispatch: similar to operations, with order processing, fulfilment & dispatch by couriers, you’re looking eradicate errors and establish an end-to-end process that’s as effective as possible. Mistakes in picking, packing and dispatching directly impact your profitability and strain your relationships with your customers. Being in possession of the right information helps you assess how good your staff members are at processing customer orders. With this information you know where and with whom you can make the appropriate improvements.
It’s a corresponding story and benefit in your courier dispatch areas. Great reporting & analysis allows you to see your courier spend, for example, and what you’re spending on different parcel types to different regions or countries. When you can report easily on courier usage you’re able to evaluate other courier options based on current and forecast volumes.
Customer Service: you can take the same approach when you look at your customer service centre and their service load. Being able to see the minority of products that takes up a disproportionate amount of customer service effort helps you make informed decisions on what you need to fix. Similarly, if you can analyse and report on the type of customer questions that crop up the most often, thereby taking up most service time, you can work to introduce more automated information and more answers to frequently asked questions to reduce the service overhead and the need for manual intervention.
Purchasing: better reporting and analysis helps you get better at purchasing and better manage your exposure to or risks with certain suppliers. You can buy more accurately and use the power of reporting intelligence to negotiate better prices from your suppliers. The best sellers get the best prices from their suppliers and derive the highest gross margin, gross margin being your revenues less your cost of goods sold.
If you can see your stock value by supplier and your sales by supplier, this allows you to match supply and demand more efficiently. For example, you wouldn’t want to see a high stock value for a supplier and low sales for that supplier. A ‘scatter plot’ chart allows you see your supply base at a glance and spot the problem areas where you’re holding too much stock from suppliers whose products aren’t bringing you high sales. Then you can drill into the individual supplier to see the stock value and sales across specific products or products lines.
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, whirring away in the background and collecting and crunching data while you keep things moving. Once you’ve set up your key performance indicators and targets across the important areas of the business, you can sit back and let a system like Volo take care of providing the reporting & analysis insight.
When you’re great at ecommerce reporting and analysis, you improve your efficiencies and margins and reduce your product-to-cash conversion cycle. Volo helps companies become more effective through dynamic, insightful reporting and automated processes like alert notifications and re-ordering. Volo Vision is a fully featured analytics environment that comes as part of your investment in Volo people and technology. It uses highly visual reports to provide high level dashboard metrics as well as detailed reports down to individual orders and SKUs. For Volo customers, having easy visibility into the performance of their business and seeing where they best move the efficiency levers is a strong advantage.
To talk with us about the ecommerce reporting & analytics super lever for efficiency, please contact us here.