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How Analytics Can Help E-Commerce Companies To Achieve Compounding Growth

It is not about being the best in the business. It’s about being better than you were yesterday. E-commerce firms don’t have to outsell their competitors right now. Instead, they must work to outsell themselves in the future.

How Analytics Can Help E-Commerce Companies To Achieve Compounding Growth

Monday May 27, 2019,

7 min Read

To achieve this, analytics can help. Analytics are essentially early warning indicators that predict outcomes and enable e-commerce companies to achieve compounding growth.

 Given that rapid but short-term profits are not a virtue in the e-commerce industry, while steady long-term growth is, gauging progress is of the utmost importance. E-commerce analytics reflect the outcome of efforts and make it incredibly easy for online brands to thrive.

Why Analytics Matters and Metrics Count?

#1 Resources are Finite:

To understand what is working is as essential as understanding what is not. Analytics helps in revealing critical signals to prevent e-commerce companies from wasting money and time.

#2 Knowledge Empowers E-Commerce Businesses:

Access to statistical knowledge yields a competitive edge, because understanding which trends are no longer profitable permit the business landscape to be navigated effectively.

#3 Boost Your Conversion:

A business that wants to raise profits must know how to approach the target audience. Online analytics can be the gateway to faster conversions and more ROI from every cent of your ad spend.

Thus, analytics can provide the following deep insights.

a. Customer Behavior

Understanding customer journeys inside out is the key to successful e-commerce businesses.

Top retailers in the industry use data analytics to read customers better. Even big brands like Walmart deploy analytics to understand how customers shop online. By mapping digital customer journeys, Walmart, has attained growth rate hike of over 29% in the United States alone.

Cracking the digital shopper genome, according to McKinsey, needs to focus on understanding where shoppers come from, how they browse and search or make purchases. Online review responses, shopping cart abandonment rates and customer preferences are the key to understanding what your e-commerce shopper wants.

 Tracking metrics like conversion rates can help e-commerce stores to answer critical questions about customer behavior across platforms and iterate a business model based on solid data. To be successful, you have to understand local markets.

Even e-commerce giant Amazon failed in China due to this very reason.

With correct analytics in place, e-commerce companies won’t have to play the guessing game as they can zero in on order completions, product reviews, cart additions and more to see how target customers are responding.

Diagnosing where potential clients drop off in the e-commerce checkout flow can boost sales. Sales per category of products, visit to sales or how many visits does it take to finalize the purchase and percentage of mobile visits are some other important metrics and KPIs for gauging customer behavior.

b. Inventory Forecasting & Supply-chain management

Inventory and supply chain metrics serve to quantify and define supply chain performance. Metrics can be utilized for assessing inventory forecasting accuracy. Through curation, collection , and analysis of critical supply chain issues, metrics help to spot inefficiencies in the ecosystem while working on current strengths and establishing goals to support supply chain scales with company success. Key metrics for inventory forecasting and supply chain management are discussed below:

●       Cash to Cash Time Cycle : This invaluable supply chain metric helps in calculating the length of time needed for transforming the resources into cash flows that are reliable. Shorter conversion cycles ensue as this invaluable supply metric ensures the right measures are in place to run businesses with less cash tied in operations.

●       Perfect Order Rate: This remains a critical supply chain KPI for businesses working in multitudinous sectors. The order rate measures the success of the ability to deliver orders incident-free. This helps to iron out issues such as delays, damage and inventory losses. The higher the perfect order rate is, the better is the KPI as it directly impacts loyalty levels and customer retention.

●       Inventory Turnover: One of the most helpful supply chain and inventory management KPIs is the inventory turnover which helps businesses understand the number of times complete inventories have been sold over a certain period or duration. Efficient production planning, fulfillment abilities, process strategies or marketing and sales management are possible through this inventory forecasting KPI.

c. Marketing Performance

Analytics for marketing or critical/key performance indicators indicate if campaigns are meeting marketing and advertising objectives. These KPIs can be deployed analyze the products sold, how the products are purchased, the purchase mode, and purchase reasons. This helps in strategic marketing of e-commerce products or services. Some marketing metrics we see as important include:


●       Social media mentions, follows, shares and comments: These are a useful KPI for evaluating whether brand awareness among target audiences is high. It is the very core of digital marketing analytics for e-commerce businesses.

●        Click-Through Rate and Traffic Volume: Your e-commerce website is a potent marketing tool; this analytic indicates the extent to which users are clicking on a company or product link and whether the site and other marketing collateral are drawing in traffic.

●       Count and quality of product reviews: Product reviews are excellent for numerous reasons. For an e-commerce business or portal, they offer valuable feedback, social proof and help with SEO. Content of product reviews range across KPIs for tracking e-commerce businesses.

●       Customer satisfaction or CSAT score & Net promoter or NPS score: Customer satisfaction and net promoter scores measure customer responses to e-commerce brands. NPS scores offer insights into whether the customer would recommend the brand to others in the network.

d. Cash Flow & Financial Health

Fiscal accounting health is a very important measure of e-commerce success, whether you’re a Fortune 500 firm or a startup looking to learn the strategies to thrive. Success depends on generating revenue, profits, ROI and growth. Stockholders, investors and customers also rely on financial data to see how viable your business is. Cash flow and financial health analytics evaluate the fiscal health of business.

Gross profit margin assesses financial health by revealing the revenue left over after cost of goods sold are accounted for. It offers an overview of current revenue serving the rest of the business and whether profit or loss is attained. This impacts strategic and tactical operations for running the business.

ROE/Return on Equity: This measures net income against each unit of shareholder net worth or equity. ROE reveals if the net income for companies is comparable to overall business wealth.

Debt to Equity Ratio: How effectively an e-commerce business is funding growth and using shareholder investments is calculated through this ratio. It compares company liabilities against shareholder equity or net worth.

Accounts Payable Turnover & Accounts Receivable Turnover: These ratios show the rate at which companies pay suppliers and collecting dues, respectively. A low accounts payable turnover means companies are taking time to pay off suppliers, and for an e-commerce business, it can damage your prospects for growth. This KPI alerts financial teams regarding efficiency of payment collections and outstanding payments.

Net Profit Margin: Against every dollar of revenue made, this KPI calculates business effectiveness for generating profits.

e. Product Insights

Product insights stem from analytics that serve to create a deeper understanding of repeat purchases, order gaps, revenue churn and product return, or replacements. Key metrics like repeat purchases rate show repeat customers from clientele in the form of a percentage. These are critical for product insights, regarding viability, uniqueness and value of the e-commerce offering with respect to target audiences. Order gap analysis displays the average time lapse between purchases across customers.

Final Word

The former CEO of HP, Carly Fiorina once remarked that, “The goal is focused on turning data into information. And ultimately, turning information into insight.” If you need to explain e-commerce processes and procedures, these KPIs and metrics can help you, along with a skilled retail consultant and e-commerce specialist like Your Retail Coach. So remember that analytics has the power to transform an e-commerce company. The true value of these numbers lies in implementing these actionable insights with the help of a strategic specialist at YRC.