Do you ever wonder if your Amazon business is firing on all cylinders? Are you on the right track to hit your monthly sales goals? Are your customers happy and satisfied? The answer lies in Key Performance Indicators, popularly known as KPIs. But with so many KPIs to track on Amazon, it can become overwhelming.
Our article cuts through the clutter and gives you a set of the most important KPIs you need to religiously track to keep your Amazon business in check. We’ll not only explain why these KPIs are crucial, but also provide actionable tips on how to improve them and propel your Amazon business in the right direction.
First things first, why are KPIs crucial?
Everyone knows the concept of KPIs but they don’t fully know their importance. By keeping a watchful eye on your KPIs and creating your strategy around them, brands and Amazon consulting experts can make data-driven decisions and stay ahead of the competition.
- KPIs keep you focused: Without clear goals, it’s easy to get lost in the day-to-day tasks of running your Amazon business. KPIs guide your efforts towards what truly matters. Are you aiming for higher sales? Better customer satisfaction? Increased profitability?
- KPIs help you make data-driven decisions: Important decisions cannot be made based on “gut feelings.” KPIs give you hard data to analyze. Are your advertising campaigns generating sales? Is your inventory management keeping up with demand? By tracking these metrics, you can make informed decisions based on what’s actually happening, not just what you think might be working.
- KPI gives you direction: Imagine driving a car without a speedometer. You wouldn’t know how fast you’re going or if you need to adjust your speed. KPIs act as a speedometer. If your sales numbers are dropping, or your advertising costs are climbing, these red flags signal a need to adjust your strategy.
Categories of KPIs
To make it simple for you, we’re going to divide KPIs into three types:
1) Sales related KPIs
These KPIs tell you how much money your products are bringing in. We’ll focus on metrics like sales growth, conversion rates (turning website visitors into paying customers), and profitability. By tracking these, you’ll know if your products are selling well and if you’re making a healthy profit.
2) Ads related KPIs
These KPIs show you how your ads are actually performing. Are your advertising efforts bringing in sales? If yes, are those sales profitable? Are you bidding your advertising budget on the wrong keywords? By understanding these metrics, you can ask your Amazon marketing consultants to optimize your advertising campaigns to get the most bang for your buck.
3) Account health related KPIs
Unlike the sales or ad KPIs, these don’t directly translate to money, but they’re absolutely essential to maintain a good standing with Amazon. Metrics like order defect rate (percentage of orders with issues), late shipment rate, and customer cancellation rate directly impact your account health on Seller Central. If these fall below Amazon’s standards, your selling privileges could be suspended, meaning your listings disappear and your business comes to a screeching halt.
Sales related KPIs
1) Total sales
Total sales represent the overall revenue generated from your Amazon products.
How to find this metric on Seller Central?
Go to the Reports tab and click on Business Reports. You’ll be redirected to your Sales Dashboard where you will get a quick overview of your total sales on Amazon. You can choose to view today’s sales, week to date, month to date, year to date, or a custom date range.
Actionable tips to improve
- Hire Amazon SEO experts to optimize product listings with clear titles, descriptions, and high-quality images
- Offer competitive pricing to attract more buyers
- Expand product selection to cater to a wider audience
- Implement promotional strategies such as coupons or virtual bundles offers to stimulate sales
2) Conversion rate
Conversion rate tells you the percentage of people who visit your product page and then actually buy something. For instance, if 100 people visit your page and 10 of them buy your product, your conversion rate is 10%.
How to find this metric on Seller Central?
Go to the Reports tab. Select Business Reports. Now click on Detail Page Sales and Traffic By Child Item and find the row labeled Unit Session Percentage.
Actionable tips to improve
- Enhance product images to meet Amazon’s standards. Use infographics and lifestyle images to highlight key features
- Utilize A+ Content to provide additional product information and images. According to Amazon, A+ Content can increase conversion rate by 10%
- Offer competitive pricing and utilize Amazon’s algorithm-driven pricing tools to remain competitive
3) Return rate
This measures the percentage of products that customers return after purchasing. Return rate is important because it shows how satisfied customers are with your products. A high return rate might indicate issues with product quality or description.
How to find this metric on Seller Central?
Go to the Reports tab. Click Return Reports from the drop-down menu and select Fulfillment from the drop-down menu. Go to Customer Concessions and select FBA Customer Returns. Enter a timeframe.
Actionable tips to improve
- Ensure accurate product descriptions and sizing information to minimize buyer uncertainty
- Use high-quality images and detailed product videos to provide a clear representation of the product
- Implement stringent quality control measures to minimize the likelihood of receiving defective products
Ads related KPIs
4) Ad sales
Ad sales is the total amount of sales generated directly from your Amazon advertising campaigns. It helps you understand how effective your ads are in driving purchases.
How to find this metric on Seller Central?
Log in to your Amazon Advertising account to track ad performance. You can see the number of clicks, impressions, and estimated total sales for your ads.
Actionable tips to improve
- Utilize Amazon Sponsored Products, Sponsored Brands, and Sponsored Display ads to increase product visibility
- Optimize ad campaigns by targeting relevant keywords and refining ad copy based on performance data
- Utilize Amazon’s advertising analytics to identify top-performing products and allocate ad spend accordingly
5) ACoS
ACoS tells you how much money you’re spending on advertising for every dollar of sales generated. Lower ACoS is better because it means you’re spending less on ads to make a sale.
How to find this metric on Seller Central?
Go to the Reports tab. Select the Advertising report. Click the ACoS tab. You can find the ACoS column on the right side of the dashboard, next to Sales.
Actionable tips to improve
- Continuously monitor and adjust keyword bids to achieve a balance between ad visibility and cost-effectiveness
- Utilize negative keywords to prevent ad spend on irrelevant or low-converting search terms
- Test different ad formats and targeting options to identify the most cost-efficient advertising strategies
6) TACoS
TACoS measures the total advertising spend across all advertising campaigns compared to total sales. It helps you see the overall impact of advertising expenses on your business.
How to find this metric on Seller Central?
You can calculate TACoS by dividing your ad spend by your total sales revenue and multiplying that number by 100. For example, if your monthly ad spend is $3,000 and your total sales are $30,000, your TACoS is 30%.
Actionable tips to improve
- Monitor overall advertising spend and adjust budgets based on the performance of individual campaigns
- Utilize Amazon’s advertising reporting tools to analyze the impact of advertising spend on total sales
- Implement campaign-level budget caps to prevent overspending on underperforming campaigns
7) RoAS
RoAS shows you how much revenue you’re earning for every dollar spent on advertising. For example, if you spent $100 on ads and made $500 in sales, your RoAS would be 5.
How to find this metric on Seller Central?
Go to Advertising > Campaign Manager. When you first get into your dashboard, you’ll be able to see the totals of all your advertising campaigns.
Actionable tips to improve
- Focus on optimizing ad campaigns to maximize return on investment (ROI) rather than simply increasing ad spend
- Utilize Amazon’s advertising reporting tools to measure the effectiveness of ad campaigns and adjust strategies accordingly
- Test different ad creatives, targeting options, and bidding strategies to identify the most profitable approaches
Account health related KPIs
8) Inventory performance index (IPI)
IPI measures how well you manage your inventory. It considers factors like excess inventory, out-of-stock products, and sales velocity. Maintaining a high IPI helps ensure you have the right amount of stock to meet customer demand without overstocking. As of October 24, 2023, a good IPI score is 400 or higher. The average IPI score is between 400 and 800, but a good score is generally considered to be 550 or higher.
How to find this metric on Seller Central?
In your Seller Central, go to on Inventory and select Inventory Planning from the menu. Click on the Performance tab to view your IPI score.
Actionable tips to improve
- Utilize Amazon’s inventory management tools to monitor inventory levels and sales velocity
- Optimize product listings to improve search visibility and drive sales velocity
- Minimize excess inventory and slow-moving SKUs to maintain a high IPI score
9) Order defect rate (ODR)
ODR tracks the percentage of orders that have defects, such as late shipments, cancellations, or products arriving damaged. Keeping your ODR low is important for maintaining a positive reputation and avoiding penalties from Amazon. To avoid suspension of your Amazon seller account, you must maintain an ODR of less than 1%.
How to find this metric on Seller Central?
In your Seller Central account, go to the Performance tab. Select Account Health from the menu. Under Customer Service Performance, click Order Defect Rate.
Actionable tips to improve
- Implement quality control measures to ensure accurate order fulfillment and minimize errors
- Monitor order fulfillment metrics closely and address any issues promptly to prevent negative feedback
- Utilize Amazon’s order defect rate dashboard to identify and resolve potential issues affecting order quality
10) Late shipment rate
This rate measures the percentage of orders that you ship after the expected ship date. It’s crucial to deliver orders on time to keep customers happy and maintain a good seller rating. Amazon sellers should maintain a late shipment rate (LSR) of less than 4% to avoid the risk of account deactivation.
How to find this metric on Seller Central?
To calculate LSR, divide the number of orders shipped after the “ship by” date by the total number of orders in a 10 or 30 day period, and then multiply by 100 to get a percentage.
Actionable tips to improve
- Utilize Amazon’s shipping services or third-party logistics providers to ensure timely order fulfillment
- Monitor order processing times closely and address any delays promptly to prevent late shipments
- Implement automated order processing workflows to streamline fulfillment and reduce the risk of late shipments
11) Cancellation rate
Cancellation rate shows the percentage of orders that you cancel before shipping them. High cancellation rates can indicate issues with inventory management or inaccurate product listings. Amazon’s policy recommends sellers to maintain a cancellation rate under 2.5% in order to sell on Amazon.
How to find this metric on Seller Central?
To calculate a cancellation rate, divide the number of orders canceled by the number of transactions, then multiply by 100 to express as a percentage.
Actionable tips to improve
- Monitor inventory levels closely and update product listings to accurately reflect availability
- Implement inventory management tools to prevent overselling and minimize the risk of order cancellations
- Provide proactive communication with customers regarding order status and shipping updates to minimize cancellations
Remember, keeping a pulse on your key metrics is an ongoing process. However, you don’t have to go it alone. A professional Amazon agency like SIPRANSH ECOMMGROWTH specialize in helping sellers like you navigate the complexities of the Amazon marketplace. With our data-driven approach and expert guidance, you can focus on what you do best – building your brand and selling amazing products – while they handle the nitty-gritty of optimization.
