Key Performance Indicators, or KPIs, are exactly that. Metrics that measure how well your Amazon business is performing. There is actually a range of KPIs, including obvious metrics such as profit. But just because there might be 18 defined KPIs (and there could actually be even more), doesn’t mean you need to be looking at all of them. In fact, it’s really up to you to define the KPIs that are more relevant to your business as an Amazon Seller.
Equally important to understanding KPIs is that they mean more than just what they measure. For example, it’s great to have a high order rate, which obviously results in higher revenues. But you need to look at why you have a high order rate. Is it because you have great five-star product reviews or high ranking in product searches or high conversion rates? Understanding those factors, which are KPIs in and of themselves, helps you understand what you need to do keep your order rate high and, the ultimate KPI of all, be profitable. Of course, the reverse is also true. If your order rate is low, you need to look at KPIs that might explain why.
Let’s cut to the chase and look at the KPIs that are particularly relevant to Amazon sellers.
It’s hard to sell anything if you aren’t drawing attention to what you want to sell. The Sessions KPI shows the number of visits to your Amazon listing. These are all potential buyers. Emphasis on potential.
So maybe you’ve got some spikes. Great. Maybe you’ve also got some dips. Not so great. More spikes than dips is good though, right?
This metric is useless without context. Sure, getting more attention than not is great. But not getting attention can also tell you something just as useful. You want to track both to figure out what might be causing an upsurge during some periods and down swings in others. Is it seasonal? What are you competitors during high or low trends? What are you doing, or not doing, to promote your listings during periods of high and low activity?
Moreover, if you can see a pattern and/or an emerging trend based on historical behavior, you need to jump on it. If sessions typically spike in early summer, that’s when you need to gear up promotions, freshen your listings, check out competitive pricing.
Most importantly, you need to consider sessions in relation to the next KPI.
It doesn’t really matter how many sessions you are experiencing if you aren’t getting conversions. In fact, lower sessions that have higher conversions are better than high sessions with low conversions.
The conversion KPI is what Amazon calls the Unit Session Percentage. It takes the number of units sold, divided by the number of shopper sessions on your product listing. So if your conversion KPI (i.e., Unit Session Percentage) is 15 percent, then you sold 15 units for every 100 shopper views. You can find this percentage in your Amazon Seller Central account.
Let’s say you did have a 15 percent conversion rate. Is that good or bad?
As pointed out on Sellbrite, “Healthy benchmarks for sales and traffic are difficult to pinpoint since they’re pretty relative to the individual seller and their products. For example, $10,000 in monthly Amazon revenue with 2,000 sessions may be great for one merchant and disappointing for another. Instead, it makes sense to start with conversion rate benchmarks and use those reference points to understand your sales and traffic.”
It’s always an objective to increase sales, i.e., increase conversions. While a high conversion rate is certainly good if you’re only getting 10 sessions but 9 conversions, you just can’t sit back and think you’re doing great because the KPI is 90 percent. What you want to do is consider how you increase your sessions so you are likely to generate more conversions.
Prospective buyers read customer reviews. Your average review rating has a direct effect on your conversions. Amazon calculates an average reviews rating, but it’s not just a simple ratio of five starts versus four or less. It weighs the age of the reviews, whether the reviews are from verified purchases, as well as how many others rate the review as helpful. Regardless of the exact mathematics, if your Amazon review ratings average is going down, it’s time to look at what the problem is.
Here’s where product review monitoring is important. They can help you identify the cause of negative reviews and, perhaps more importantly, takes steps to correct it.
Well, duh, right? Yet a lot of Amazon sellers confuse profit with sales. But you could have a high sales volume, but low profitability if your cost of sales is too high. In that case, the KPIs you want to look at why it is costing you so much to achieve the volume you have, and what can you do to reduce those costs without impairing your sales volume.
Measuring the Health of Your Business
The takeaway here is the KPIs tell you a lot about your business. They help you spot potential problems you might not otherwise know you even had. The flip side is they can mislead you to think things are going better than they actually are. KPIs help you see the big picture. It’s up to you to get into the details of how that picture is formed.