Selling on Amazon is no easy task, especially when you’re striving to optimise performance metrics to reach your goals. Navigating the complexities of the platform and knowing which data too analyse can be overwhelming. However, understanding the importance of metrics and statistics is crucial for achieving success as an Amazon seller. In this article, we’ll explore the significance of various key metrics and how they can help you make more informed decisions to generate greater profits.
Why Metrics and Statistics Matter
When it comes to Amazon selling, metrics and statistics serve as invaluable tools to measure performance, identify areas of improvement, and achieve your business objectives. However, it can be difficult to determine which metrics to focus on and how to interpret the data effectively.
Certain categories are highly competitive, but you can still be successful if you know what to look at and which relevant levers to pull to better align your performance with your goals.
Am I looking at the right stuff?
Sales and ACoS (Advertising Cost of Sales) are familiar data points that even newcomers to the platform recognise. Countless resources emphasize the importance of controlling costs to safeguard profits, with numerous courses and videos dedicated to the topic. However, to truly understand your metrics, you need to go beyond these common data points.
1 - TACoS
TACoS (Total Advertising Cost of Sales) emerges as a more critical metric than ACoS alone. ACoS only considers advertising metrics, ignoring the potential impact on organic sales. TACoS, on the other hand, accounts for both advertising and organic sales, offering a more comprehensive view of your overall performance.
For instance, a low ACoS may seem ideal, but it might not account for a high volume of organic sales that can still lead to a healthy profit. By focusing on TACoS, you gain a better understanding of how advertising spend relates to total sales, offering valuable insights for your business.
The Problem of Missing Metrics:
Amazon’s Campaign Manager provides an abundance of data, including various ad types and targeting options. However, certain metrics, such as TACoS, are notably absent from Amazon’s direct reports. TACoS, which divides your Ad Spend by Total Sales, provides vital information to gauge advertising effectiveness.
To unlock the full potential of your Amazon seller account, you should compare TACoS with additional statistics. Analyse TACoS for specific campaigns over different time periods to understand its impact on Sales and Organic Sales and how it correlates with changes in ACoS.
While Amazon doesn’t factor in CoGS (Cost of Goods Sold), every seller soon realises that gross profit and net profit are crucial for business success. Combining Amazon’s reports with fields for CoGS allows you to assess potential profit margins and identify areas needing attention.
To calculate your Gross Profit Percentage, subtract CoGS and Amazon fees from product revenue and divide the result by the original revenue figure, then multiply by 100. This percentage represents the maximum potential profit applicable to that product.
As you review potential profits, additional costs like storage fees and returns must be considered. Advertising Spend is another factor that impacts gross profit. Deducting these costs will give you your Net Profit, at least from your Amazon Store perspective.
4 - Conversion Rate
Conversion Rate (CVR) is not easily accessible, but it can be more critical than CTR (click-through-rate) or CPC (cost-per-click). CVR shows the percentage of clicks that result in sales, providing essential insights into campaign and ASIN performance.
5 - Organic Sales Percentage
Calculating your Organic Sales Percentage allows you to gauge the non-advertised portion of your revenue. While a higher organic percentage seems promising, it’s essential to monitor overall sales figures. A larger organic percentage paired with a decrease in total sales could still lead to diminished profits.
When you take your Total Sales and deduct your Ad Sales figure from it, you are left with the organic or non-advertised portion of your revenue. Also referred to as Organic Sales.
Following the same logic mentioned earlier you can turn any number into a percentage value easily, in this case:
(Total Sales – Ad Sales)/Total Sales * 100 = Organic Sales Percentage
Selling on Amazon offers tremendous opportunities for building a successful and profitable business. With the right strategies and tools at your disposal, you can navigate the platform’s challenges and leverage Amazon’s growing dominance in the online market. Regardless of whether you’re an experienced seller or just starting out, by concentrating on the right metrics, you can uncover the hidden potential of your Amazon seller account and pave the way for even greater profits.
If you have any questions regarding these metrics and how you can apply these to your brand, feel free to reach out.
