<img height="1" width="1" src="https://www.facebook.com/tr?id=1269148126497016&amp;ev=PageView &amp;noscript=1">

Reporting & Analysis - Part 1: Ecommerce Efficiency and Profits

“In the land of the blind, the one-eyed man is King.” So goes the proverb, usually attributed to Erasmus. If you can see what others can’t see, you have an unassailable advantage. You have an avenue to information that is unavailable to others. From this information you have priceless knowledge that allows you to make better decisions on ecommerce efficiency and be more successful than your competition.

 

Making your money work harder

In ecommerce, as with the one-eye man, 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 money and what wasn’t. 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. 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.

 

Measuring to Manage

But what is the important stuff? The important is 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. The important is knowing all your costs in your business so that you can improve on the areas where you're doing less well than others. The important is knowing how much net profit you’re making after you’ve successfully delivered a package to a customer who’s satisfied with what they’re received.

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 downturn.

Once you’ve decided your key metrics, you’re not finished. Can you actually collect this data in a way that you can analyse it 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?

 

The 5 levers of efficiency

At Volo we see 5 main levers of ecommerce efficiency, which are your 5 keys to cutting costs and improving profitability. These are inventory & stock control, warehousing & operations, fulfilment & dispatch, purchasing and customer service.  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.

So, by having the metrics and resources available for you to analyse your product and customer data, you'll be able to successfully improve your overall ecommerce efficiency. This will eventually enable you to make better decisions around your business. You can read back this week to find out best practices on reporting and analysis for efficiency.

Learn more about the Reporting & Efficiency lever in our next blog.