In the vast and bustling landscape of e-commerce, Amazon stands as a vast marketplace that has redefined the way businesses reach customers. With its Fulfillment by Amazon (FBA) program, Amazon offers sellers the opportunity to tap into its vast customer base while leveraging its warehousing and shipping infrastructure.
By enrolling Fulfillment by Amazon (FBA) program, businesses can tap into Amazon’s huge customer network and optimize their operations with Amazon’s warehousing and shipping services. This program is a game-changer for businesses looking to connect with customers in the world of e-commerce. Additionally, FBA offers a more streamlined approach to shipping, so businesses can focus on what they do best.
However, navigating the intricate world of Amazon as an FBA seller can be a challenging endeavor. To thrive in this dynamic marketplace, sellers must not only offer quality products but also closely monitor and optimize their performance. This is where Amazon Seller Metrics come into play – these essential indicators act as the compass for FBA businesses, guiding them toward success amidst fierce competition.
In this article, we will delve into the eight most critical Amazon Seller Metrics that FBA businesses must master to flourish in this digital commerce ecosystem. From conversion rates to account health, we will uncover the insights and strategies that can propel your Amazon venture to new heights.
We will cover the below matrics-
- Conversion Rate
- Keyword Ranking
- Inventory Performance Index
- TACos
- RoAS
- ACoS
- Amazon Fees
- Account Health
Conversion Rate
The conversion rate is the most crucial metric to keep a close eye on for each product you sell on Amazon. It’s essentially the percentage of visitors who make a purchase after landing on your product page.
Conversion Rate = (Number of Purchases / Number of Visitors) x 100
For example,
Conversion Rate = (25/500) x 100 = 5%, which means the conversion rate is 5%.
The conversion rate is your compass for measuring the success of your Amazon product listings, helping you understand how well you’re turning product page visitors into satisfied customers.
Here’s how to find your Amazon conversion rate for each product in Seller Central:
We have already discussed in details about the conversion rate in our other blog. Please click the below link to learn more about the conversion rate.
Proven Strategy to Increase Conversion Rate for Amazon FBA & FBM
Keyword Ranking
Keyword ranking on Amazon signifies where your product lands in the search results when a customer looks for something specific. This prominent position can significantly increase the chances of your product being noticed and, ultimately, lead to more sales. These days, most shoppers don’t bother scrolling through pages of results. They usually pick something from the first page. So, it’s crucial to make sure your product ranks well, no matter how customers search.
The top four results for the keyword “lunch box” are represented by the products in brackets. These items above are Sponsored Product Ads that focus on that term.
Based on the research 90% of customers buy items from the 1st page and won’t scroll page after page, thus your products must appear higher in the search results for any particular phrase you’re aiming for.
Keyword ranking isn’t the same as your Best Sellers Rank (BSR), which tells you how well your product does compared to others in its category. Keyword ranking, on the other hand, is all about where your product appears when people look for it. The Best Seller rank is calculated by sales volume, not seller reviews or customer feedback. They are also updated hourly, so get selling.
Inventory Performance Index
As an FBA seller, your Inventory Performance Index (IPI) score is a special metric that evaluates how effectively you’re managing your inventory on Amazon. A high IPI reflects efficient and speedy product sales, while a low score may indicate excessive inventory or slow-selling products. Scores range from zero to 1,000. A score above 400 indicates that your business is excelling while a score below 350 indicates that there are issues and you should take action to improve your score.
The main factors that affect your IPI score on Amazon are:
- Excess inventory
- Sell-through rate
- In-stock rate
- Stranded inventory
If one of those factors exceeds Amazon’s healthy target rate, it will be yellow or red.
TACOS (Total Advertising Cost of Sales)
In Amazon FBA, TACOS is a vital metric that can make or break your advertising strategies. It helps you figure out how much you’re spending on ads compared to how much you’re making.
TACoS (%) = (Total Ad Spend / Total Sales) x 100
After calculating the TACoS using this formula, you’ll get a percentage that reflects how much of your total sales revenue is spent on advertising. A lower TACoS percentage indicates more efficient advertising, which means you’re spending less on ads to generate each dollar of sales revenue. Conversely, a higher TACoS percentage suggests that a larger portion of your sales revenue is going toward advertising costs.
Analyzing your TACoS regularly helps you gauge the efficiency of your advertising campaigns and make informed decisions about your Amazon advertising budget.
RoAS (Return on Advertising Spend)
RoAS is a crucial metric that can be your guiding star when it comes to advertising. RoAS helps you determine the effectiveness of your advertising campaigns by measuring how much revenue you earn for every dollar spent on advertising.
When your RoAS is greater than 1, it means your advertising efforts are profitable, bringing in more revenue than you spend on ads. This is the golden zone. If your RoAS is below 1, it indicates that your advertising is not delivering a positive return on investment.
You can find your RoAs in your “Campaign Manager” in Seller Central.
By regularly assessing your RoAS, you can fine-tune your advertising strategy, allocate your budget wisely, and ensure that your advertising efforts are driving real profits for your FBA business.
ACoS (Advertising Cost of Sale)
ACoS, or Advertising Cost of Sales, plays a pivotal role in the world of Amazon FBA. It’s the metric that reveals the efficiency of your advertising spend. Simply put, ACoS shows how much you’re investing in advertising to generate your sales revenue. To calculate ACoS,
ACoS (%) = (Total Ad Spend / Total Sales) x 100
If your ACoS is lower, it means you’re spending less on advertising for every dollar of sales, a sign of a healthy ad campaign. On the flip side, a higher ACoS suggests that a significant portion of your sales revenue is going toward advertising costs. However, your ideal ACoS will vary depending on your product costs, advertising goals, and budget.
By keeping a close eye on your ACoS and making adjustments as needed, you can optimize your advertising strategy to maximize profits, making ACoS your trusted ally in navigating the complexities of Amazon advertising and ensuring success for your FBA business.
Amazon Fees
Amazon fees are not an important metric for sellers. If you are selling on Amazon via FBA or FBM you need to pay referral fees, which depend on the category and item’s sale price; fulfillment fees for Amazon’s storage and shipping services; storage fees for inventory kept in Amazon’s warehouses; and long-term storage fees for items unsold over an extended period.
Keeping an eye on these fees is crucial to make sure you’re making a profit on each sale. It’s also a smart way to double-check that Amazon isn’t charging you too much for their services.
Account health
In the Amazon seller universe, your account health is akin to a lifeline, and monitoring it closely is absolutely essential. This metric reflects the overall health of your Amazon business and plays a critical role in safeguarding your account from potential suspensions.
Account health generally consists of three primary factors:
- Customer service performance and order defect rate
- Product policy compliance
- Shipping performance
If you’re handling your own shipping as an FBM (Fulfillment by Merchant) seller, staying on top of customer service and shipping performance is vital. By doing so, you not only preserve your account’s good standing but also cultivate trust and longevity in the highly competitive Amazon marketplace.
To check your Account Health, go to the Performance page and select Account Health under Seller Central.
In conclusion, the world of Amazon FBA selling is a dynamic and ever-evolving arena where success hinges on the ability to adapt, analyze, and optimize. The 8 key Amazon Seller Metrics we’ve explored in this article – conversion rate, keyword ranking, Inventory Performance Index, TACos, RoAS, ACoS, Amazon fees, and account health – serve as the North Star for FBA businesses.
These metrics provide invaluable insights into customer behavior, advertising effectiveness, operational efficiency, and overall account health. By meticulously monitoring and fine-tuning these metrics, sellers can make data-driven decisions that lead to increased sales, reduced costs, and improved profitability.
In the constantly shifting landscape of Amazon, mastering these metrics is not just an option; it’s a necessity for those looking to thrive and remain competitive in this online retail juggernaut.
If you have any confusion or queries, feel free to let us know in the comment box or email us at the following email address: info@ecomclips.com
To know more about Amazon, please check out our other blog. Also, you can check out YouTube videos related to Amazon.
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