Mastering the top 10 KPIs is essential for Amazon FBA owners looking to optimise profitability and growth in the competitive marketplace. From understanding profit margins to enhancing customer satisfaction, these metrics guide the decisions for operational excellence. Our comprehensive guide offers insights into leveraging these indicators for Amazon FBA success in 2024.
Top 10 KPIs Every Amazon FBA Owner Should Track
Mastering the Amazon FBA Terrain: A Closer Look at Key Metrics
1. Profit (also called “Seller Discretionary Earnings” (SDE) & Profit Margin
Definition: The amount of money a seller retains after deducting all costs associated with running their Amazon business, including cost of goods sold, Amazon fees, shipping expenses, marketing expenses, and other overhead costs.
Calculation: Net Revenue - COGS - Amazon Fees - Advertising Costs - Overhead Costs = Profit (SDE). To calculate your profit margin, simply divide Profit (SDE) / Net Revenue
Why Track It: Tracking profit is crucial for assessing the financial health and success of your Amazon business. It provides insights into whether your business is generating enough revenue to cover expenses and generate a profit. Understanding profit margins helps you make informed decisions about pricing strategies, budget allocation, and overall business growth.
How to Improve: There are only two ways to improve profits: (i) either you increase your revenue or (ii) you decrease your costs. In the ideal world, you do both at the same time. To increase your revenue, consider optimizing product listings, expanding product offerings, implementing effective marketing campaigns, and exploring other opportunities for sales growth. When it comes to cost cutting, your biggest opportunity will be to negotiate better terms with your suppliers and optimize shipping to decrease your COGS. However, you can also optimize your product design & packaging to reduce your FBA fulfillment fees and storage costs, make your advertising campaigns more efficient to decrease your TACOS and minimize other overhead costs. Check out our article on how to
2. Shipped Product Sales
Definition: The total value of products sold and shipped to customers during a specific period. This metric includes the sales revenue generated from products that have been successfully delivered to customers.
Calculation: Shipped Product Sales = Total Quantity of Products Shipped * Average Selling Price per Product
Why Track It: Tracking Shipped Product Sales is essential for evaluating the performance and growth of your Amazon business. It provides insights into the demand for the your products, revenue generated from actual sales, and overall sales effectiveness. Understanding this metric helps sellers gauge the success of their product offerings and sales strategies.
How to Improve: Enhance product visibility through SEO and PPC campaigns, and refine your product portfolio based on performance analytics.
3. Units Ordered
Definition: The total number of units customers have ordered in a given period.
Why Track It: Helps forecast future sales and inventory needs.
How to Improve: Implement promotional strategies like discounts or bundles to increase order volume and use data to forecast future sales trends accurately.
4. Sessions
Definition: The total number of unique visits or interactions initiated by users on an Amazon seller's storefront or product listings within a specific timeframe. Sessions include both organic and PPC sessions
Why Track It: Sessions indicate the effectiveness of your traffic-driving efforts.
How to Improve: Optimise listings with high-quality images and SEO-friendly descriptions. Utilise external traffic sources like social media to drive traffic to your Amazon listings.
5. Conversion Rate
Definition: The percentage of sessions that result in a sale.
Calculation: (Total Orders / Total Sessions) * 100
Why Track It: Indicates how effectively your listings convert interest into sales.
How to Improve: A/B test different aspects of your listings, including price, images, and descriptions. Ensure your customer reviews are positive to build trust.
6. Total Advertising Cost of Sales (TACoS)
Definition: The proportion of your total sales revenue spent on advertising.
Calculation: (Advertising Spend / Shipped Product Sales) * 100.
Why Track It: Measures the efficiency and impact of your advertising spend.
How to Improve: Regularly review and adjust your ad campaigns, focusing on high-performing keywords and ad placements, finding long-tail keywords with lower bids and good conversion is recommended. Consider seasonal trends in your advertising strategy.
7. Average Selling Price (ASP)
Definition: The average price at which your products are sold over a specific period.
Calculation: Shipped Product Sales / Shipped Units.
Why Track It: Tracking ASP is essential to understand the pricing dynamics of a your products and evaluate the overall revenue performance. ASP provides insights into your pricing strategy's effectiveness, customer preferences for certain price points, and the potential for maximizing revenue.
How to Improve: Test different pricing strategies, keeping an eye on competitor pricing and market demand. Consider bundling products to increase perceived value. It is important to note that this ASP calculation does not include any promotions which lower your ASP. To take promotions and other deals into account, you should calculate your Net ASP as [Shipped Product Sales - Promotions] / Units Shipped.
8. Sales Velocity
Definition: The rate at which your inventory is sold. Often expressed in units per day or units per week.
Why Track It: Essential for effective inventory management and forecasting.
How to Improve: Analyse sales trends and seasonality to adjust stocking levels. Use promotions to move slow-selling stock and maintain a balanced inventory.
9. Refund Rate
Definition: The percentage of sales that result in refunds. Returns can be do to different reasons such as product defects, customer dissatisfaction, or shipping issues.
Calculation: (Number of Units Refunded / Units Shipped) * 100.
Why Track It: High refund rates can indicate issues with product quality or customer satisfaction. Not only will it impact your Amazon product and seller ratings, it will also cost you more money and ultimately lower your profitability.
How to Improve: Analyse reasons for returns and address underlying issues. Improve product quality and ensure accurate product descriptions.
10.Ratings & Reviews
Definition: Customer feedback in the form of ratings and written reviews.
Why Track It: Directly influences buyer decisions and product visibility.
How to Improve: Encourage satisfied customers to leave reviews. Regularly monitor and respond to reviews, addressing any issues raised.
Bonus metrics
1. Best Seller Rank (BSR)
Definition: The rank given to products based on sales performance in their category.
Why Track It: Indicates your product’s popularity and sales performance relative to competitors.
How to Improve: Focus on driving more sales through effective marketing, advertising, and pricing strategies. Monitor changes in BSR for insights into market trends.
2. Subscribe and Save (SnS)
Definition: A program offered by Amazon that allows customers to subscribe to regular deliveries of certain products and receive discounts on those recurring orders. Customers can choose the frequency of delivery (e.g., monthly, bi-monthly) and enjoy the convenience of automatic deliveries without the need to reorder each time.
Why Track It: Participating in the Subscribe and Save program can potentially increase customer loyalty, encourage repeat purchases, and boost overall sales volume. Monitoring the adoption rate of Subscribe and Save among customers can provide insights into the effectiveness of this program in driving sales and improving customer retention.
How to Improve: Promote the SnS option to customers, highlighting convenience and discounts. Analyse customer retention and adjust offerings based on feedback.
3. Buy Box Win Percentage
Definition: The frequency at which your product listing appears in the Buy Box.
Why Track It: Winning the Buy Box significantly increases the likelihood of sales.
How to Improve: Maintain competitive pricing, high seller ratings, and adequate stock levels. Ensure your shipping performance is top-notch.
Elevate Your Amazon FBA Strategy
For an in-depth exploration and tracking of these KPIs and tailored strategies to leverage them for your Amazon FBA business, book a demo with us to see how 3fin can help you make informed decisions and achieve sustainable growth.
