What a time to run an ecommerce business. 💃🏽
Peak shopping seasons like Black Friday Cyber Monday (BFCM) get bigger every year and customer average order value is steadily increasing too. In the US alone, ecommerce sales grew from $35 billion in Q1 2009 to a jaw-dropping $215 billion in Q1 2021.
And even with the recent year-on-year dip in Q4 sales, the industry is predicted to continue booming well into 2022.
But as the online shopping landscape expands, competition is getting stiffer — especially when holidays and other peak shopping days roll around.
Keeping your store on the cutting edge during peak season can take a lot of time, energy, and of course, the capital. And it can be challenging to know when to take the right risks to optimize your store and take advantage of sales surges.
Thankfully, there’s now an easy way to break it down. In this post, we’ll show you how to understand your store’s numbers so you can come out on top during the next peak shopping season.
How to run your store’s numbers for a money-making shopping season
How you manage your store’s finances can make or break your Q4. So, it pays to build a solid foundation you can benchmark against year after year.
Let’s take a look at some key numbers to hone in on to make sure your next peak shopping and/or holiday season is a winner.
Zoom in on your profits and losses
To make the most of big-ticket shopping seasons, it’s important to know how your company is performing financially. That’s where your profit and loss statements come in. Your P&L gives you the big picture of how much cash you’re spending and making so you know exactly how much profit you have.
Monitor all your key P&L metrics, including:
- Gross Sales
- Net Sales
To really harness the power of a profitable peak season, try diving deeper into the business areas that most impact your margins, like returns and shipping costs.
If there are any holes in the bucket, you’ll be able to take fast action to plug those leaks before peak season hits.
Forecast demand for products in peak seasons (and beyond)
One thing’s for sure, demand for products will rocket during times like BFCM and other peak seasons. 🚀
To get your store ready to capitalize on the increased sales volume, you need to know your inventory requirements. Take a good look at your past holiday and peak shopping sales so you can get a clear picture of your inventory needs.
Then use the forecasts to zoom in closer and gain clarity on the stock you’ll need month by month, or for the entire final quarter.
Don’t forget to consider how any new marketing initiatives and promotions may affect your sales and factor these into your inventory buffer so you can stay in stock no matter what.
Also, if you’ve got sales targets for Q4 or other times of the year, now’s the time to verify those and make sure they’re both ambitious and realistic considering your store’s past and current performance.
Use customer review data to give shoppers what they want
Nothing lets you know whether you’re really giving customers what they want better than reviews.
Customers’ opinions become even more important as peak seasons like the holidays approach, especially when you sell on marketplaces like Amazon. They can give you the pointers needed to improve your store’s products and service so you can close the year stronger than ever.
For example, say you have multiple negative reviews stating your response time to customer questions is slow. You could look into onboarding a seasonal customer service rep or ticketing solution with monitoring features so no query slips the net.
Here are some of the customer review touchpoints to watch as you get ready for the rush.
- Track the number of reviews your store has received.
- Break down the percentage of positive and negative reviews you’ve had each month.
- Compare past reviews to current reviews to visualise your progress.
Shine the spotlight on your best products to refine your budget
As the next big holiday or shopping day gets near, it’s important to know how much profit each product is contributing to your business so you can accurately budget for your other marketing initiatives.
Knowing your products’ profit numbers will also help you make informed decisions on where to allocate resources in your product portfolio.
First, take a close look at the margins for each of your products individually. Then decide which products deserve more investment during this shopping season, and which need to be reduced or cut in order to maximize your returns.
Be objective and avoid becoming emotionally attached to items. Instead, focus on the numbers and the financial impact the product will have in this current quarter and beyond to decide what place it should have in your store.
These key metrics will help you take an objective look at your product offering:
- Net Sales: your gross sales minus Amazon fees, advertising fees, and other discounts.
- Return on Investment (ROI): money you get back from an investment relative to the amount you put in. Calculate ROI by dividing net sales by the cost of investment.
- Margin per Unit: the difference between the product’s gross and net sales divided by units sold.
- AVG Income per Unit: the item’s net sales divided by units sold.
Make every ad dollar worth it
As the peak shopping seasons and holidays roll in, advertising can get extra pricey. So, it’s important to really know your ad costs and make sure your brand is positioned to get maximum bang for your buck.
If you’re an Amazon seller, you can link your Amazon ad account to Sellers Signals to track how well your marketing investment is doing through the product page.
But no matter where you’re tracking your numbers, you’ll want to analyze the sales funnel containing your store’s impressions, clicks, and sales to work out which ads you can continue to develop vs. where you might be leaking cash.
Don’t forget to track these essential metrics to confirm your campaigns’ profitability:
- Advertising Cost of Sale (ACOS): Your ad spend divided by ad revenue. The lower your ACOS the better.
- Cost per Click (CPC): Your ad spend divided by the clicks generated by the ad. The lower your CPC, the better.
- Return over Ad Spent (RoAS): The amount of revenue generated for each dollar spent on advertising. The higher your RoAS the better.
- Total Advertising Cost of Sales (TACOS): Measures the advertising spend relative to the total revenue generated.
- Attributed Sales: Shows the total sales generated by the ads that occurred within 30 days. It adapts to the product selected on the products grid.
Keep an eye on your store’s health throughout the holiday season
From restocking to paying suppliers in multiple countries, you’re bound to have plenty of spinning plates this holiday season. To make sure you capture as many sales as possible, it’s important to get your financial house in order.
Be sure to check in on your core metrics regularly to uncover areas where you can improve to get even better results.
At SellersFunding, we help keep this process simple with what we call the Visinger Score. The Visinger Score works a lot like a credit score, but instead of measuring your debt profile, it measures the complete health of your online store by measuring all your core metrics and assigning it a simple letter grade from A to E.
So don’t go it alone. Let your numbers be your guide and make the right adjustments to get ahead of your goals and competition for the next big shopping day or holiday season. Soon you’ll be growing exponentially and maximizing all your profit-making opportunities.