KPI’s for Ecommerce: Setting Yourself Apart from the Competitors
There are more eCommerce companies for consumers to choose from than ever before. How is your eCommerce business standing out and staying ahead of the competition?
Ecommerce sales have continued to skyrocket due to the pandemic and thus have increased strain on fulfillment cycles worldwide. This unprecedented growth has led to merchants vying to supply the perfect customer experience in a less than ideal environment.
So how are ecommerce businesses not only surviving but thriving this year, and perhaps for years to come?
In the wise words of esteemed business consultant Peter Drucker, “If you can’t measure it, you can’t manage it.” Now more than ever, this statement is true for ecommerce business owners. Creating key performance indicators for your ecommerce business is not only crucial for staying ahead of your competition, but it can make or break your business.
Like many, you may wonder what a key performance indicator even is, let alone where to begin. Don’t worry; we are here to help walk you through what a key performance indicator is, how to measure it, and where to start so that this holiday season, you can look ahead to a more abundant new year!
What is a KPI?
A Key Performance Indicator or KPI is a value composed of two or more metrics used to evaluate an organization’s success, individual, or product in meeting performance objectives.
KPI’s are essential as they provide an objective way to make key decisions based on timely data and measurements of what is and isn’t working. A KPI should inspire action and be reflective of the individual business goals it represents.
A great way to evaluate if a KPI is the right KPI for your business is by looking at SMART criteria. SMART criteria answer the following questions:
- Is your objective specific?
- Can you effectively measure progress towards the end goal?
- Is the goal attainable and realistic?
- How relevant is the goal?
- What is the time frame for achieving the goal?
The KPI’s that you establish in your business help you stop relying on luck, help you build a more sustainable business, and ultimately help you measure your business’s health.
How to measure a KPI?
All KPIs are not the same and therefore are not measured the same way. In addition to using SMART criteria to evaluate your business goals, you will also want to assess your KPI’s by asking the following questions:
- Are your KPI’s quantifiable and very well defined?
- Are the results providing an actionable outcome?
- Are the metrics you are using timely? i.e., relevant, not utilizing old data, evolving and edited over time
- Does your KPI impact your bottom line?
For example, in a fulfillment center, you might look at the following KPI Measurements:
- Inbound Inventory
- Are your products received in a timely matter? How about the accuracy of receiving versus ordering? The KPI would be the percentage between ordering and what was received.
- Order Processing
- How fast is the product picked, packed, and shipped to the customer? Is it the most efficient workflow compared to other warehouse workflows? The KPI would be the difference in value between these two metrics.
- Are all of your orders going out correctly and on time? The KPI might look like shipping audits, or they may look like the number of complaints you received from customers receiving late or incorrect orders.
All of these measurements impact the bottom line of the business. Remember catching discrepancies early on helps mitigate further problems down the line and it also alleviates making decisions based on perception rather than facts. Additionally, regularly measuring your KPIs allows your employees to be more engaged and work towards being more efficient.
KPI’s Help Build A Better Team & Better Bottom Line
We all know that hiring employees is expensive. Marketing the job, training, and the time to acquire efficiency all costs money and ultimately can make your business go from thriving to just surviving. So KPIs help build a better team and help your bottom line as well.
KPI’s help your staff remain engaged in the business and their roles. They help employees work towards the business’s purpose, identify the employee’s impact from their daily effort, and help the employee understand the business’s broader strategic goals, increasing communication. Gallup reports that organizations with highly engaged workforces see an increase of 20% in sales on average.
Even if getting your staff more engaged isn’t a priority or issue for you at this time, KPI’s allow companies to begin to assess where their inventory management is falling apart and ultimately costing them customers.
KPI’s & an Inventory Management System is fertilizer for your budding business
You may be thinking that all of this sounds great but are wondering where to start. We recommend looking at your business’s inventory management system. Is it still on a spreadsheet? If so, KPI’s will be more time-intensive and less accurate.
Now is the time to get on an inventory management software system. Not only will you be able to effortlessly look at all aspects of your business from a holistic perspective, but you will be able to measure KPIs more accurately, efficiently, and ultimately effectively.
Inventory management software systems, or an IMS System, allow all departments to get on the same page and share data points. In essence, an IMS system is the fertilizer for your growing business. It enables you to accelerate your business health by looking at all the moving factors in one centralized place backed up by the cloud, so nothing ever gets lost.
Have you have struggled with out of stock statuses, rotating employees, warehouse mistakes, and less than stellar customer satisfaction ratings? Clearinity is confident that by adopting an inventory management software system and allowing your employees to visually assess and keep up with their KPI’s you will come out ahead of the competition this season and have an abundant future ahead.