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Business Intelligence? More like Business Sanity.

Thursday July 13, 2017 | By Ethan Morgan


Einstein defined insanity as repeating the same action and expecting different results. Most business owners and ecommerce decision makers definitely aren’t insane, yet many admit to going through the motions and making the same decisions about their business again and again.

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How many times have these questions been asked in the business:

 What to buy?

How much to buy?

Who to buy from?

Where to sell it?

What channels to sell it on?

How much to sell it for?

 Compare that to how many times these get asked:

What metrics should I report on?

How do we know what works?

The first set of core business questions don’t change, but the answers do. eCommerce is a fast-moving industry and to get the right results and fuel your ecommerce decision making, you’ve got to have the data to work with – that’s why it’s so important to ask the second set of questions.

Here’s how we move towards business sanity. First, take stock: ask some questions, get some answers within your business. At a high level, this is going to depend on the strategy and intent of the business. Then you need to dig into the data, and ask: what do I measure, to ensure we’re keeping on track? When you’ve got the metrics arranged and the data is flowing, where do you apply it and start making an impact?

For ecommerce businesses looking to scale up and develop, here are a couple of business sanity checks. They feature the question to ask, the strategic purpose of doing so, the metrics you’ll need to report on, and where doing so can make a real impact.

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Which are your best products?

The answer to this one is going to depend on your aims in the market. If you’re looking to build a presence and grow your market share, your bestsellers are also your best products for this purpose. If you’re looking to generate profits, the best products are those where sales velocity multiplied by margin is highest.

Figuring out margin means factoring in shipping, varied by courier, service and destination. For this reason, true margins can be difficult to work out. If this is too complex to be practicable, a less inclusive, basic version of margin is still a useful metric.

All of this information should inform your purchasing, warehousing and fulfilment decisions. Rapidly selling items need to be easily accessible to pick and pack to save unnecessary warehouse miles walked. If your product range varies in shape and weight, you’ll need to work these into your courier and last-mile provision choice.

Metrics to report on: sales velocity, margin, and profits, all on per-SKU basis.

Which sales channel are you most reliant upon?

Data on your sales channels cuts both ways. It’s great to know that you’re doing well with a particular product on a particular channel – let’s say your range of garden tools are doing brilliantly on Amazon US.

If you’re thinking about selling cross-border, for example, this tried and tested combination of product and sales channel is a good base for testing the geography variable. Reporting can then assess the new market independently of the product and channel, to see how viable it is for the business.

But if 70% of your revenue is from selling gardening tools on Amazon, you should be concerned. Reliance on any single sales channel makes you vulnerable – to changes in fees or policies, or to suspensions et cetera. Ideally, any business should have multiple sales channels to improve resilience.

Metrics to report on: Revenue by sales channel, broken down by country and SKU.

How much product should you purchase, and when?

Dead stock ties up cash. Overselling reduces your seller metrics on marketplaces and tarnishes your reputation anywhere. To find the middle ground, you have to be able to understand lead times – how long it will take for new stock to arrive, and how quickly existing stock will sell.

If you get it right, your cash flow becomes smoother, which means reinvestment happens faster, and the flywheel of business growth and development starts to spin. Once the data comes in and you start to see how slowly some stock sells versus other SKUs, you’ll be able to make better purchasing decisions.

Metrics to report on: Lead time, sales velocity, stock value, dead stock, out-of-stock, cash reserves.

When are you selling the most, on which channels, to which countries?

Truly crossborder ecommerce is an incredibly powerful force for growth, but it can also result in confusion when it comes to business intelligence. Separating out where the seasonal or peak opportunities are in the tangle of geographies and channels can be a challenge.

What you need is a heatmap showing stronger and weaker days on a calendar, which you can then apply filters to for country and channel. With this granular approach, you’ll be able to identify previously unseen sales opportunities. From there, you can apply this data to develop a cohesive product, marketing and sales strategy to really win that prize.

Metrics to report on: revenue over time, by channel, category and country.

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