How to track the performance of a multichannel business
26 Dec 2020
For you, as a small business owner, there are many issues to think about on the way to growth. Analytics and measurements should be the components of primary importance here. And the same works for multichannel as well. You should know multichannel e-commerce KPIs so that to understand both the advantages of your multichannel business and the drawbacks. So you’d better bring all your channels together and keep track of them all. It is a crucial step towards an effective and successful business formulation. First, let’s see what multichannel business (retail) is, business performance metrics and then how to keep track of your business performance.
What is a multichannel business and how to track its performance?
Multichannel retail is one of the business strategies that suggest customers buy from you but on different places (platforms). The areas can be both online (Shopify, Amazon, etc.) and offline (physical stores). And of course for getting a better result it should be constantly tracked. Keep on going and you’ll see how to keep track of your business.
Example: Apple runs a multichannel business both online (third-party marketplaces (eBay, Amazon, platforms in different countries websites). And offline (Apple stores and other outlets).
Important KPI for multichannel businesses
Gross vs Net Profit
Multichannel e-commerce not only gives more profitable opportunities and possibilities to get a higher number of customers but also brings more costs. Net profit, including shipping fees and overhead costs, will show profitability better.
Net Profit = Total Revenue – Total Expenses
Average Order Value
This is an e-commerce metric that counts the total cost of each order. This number can be increased by personalizing offers, selling in bundles, including free shipment and other methods.
Average Order Value = Revenue/Number of orders
Customer Lifetime Value
This metrics shows the whole amount of money that you expect in your product, business to be spent by one customer during his life. The value is significant because it helps you as a business owner to know how much money to invest in bringing one customer. The notions of Average Purchase Value, Customer Value, Average Purchase Frequency Rate, and Average Customer Lifespan are needed to find out Customer Lifetime Value.
Average Purchase Value = Total Revenue/ Number of Orders.
Average Purchase Frequency Rate = Number of Purchases/ Number of Customers.
Customer Value = Average Purchase Value/ Average Purchase Frequency Rate.
Average Customer Lifespan = Sum of Customer Lifespans/ Number of Customers
Customer Value = Customer Value*Average Customer Lifespan
Net Promoter Score
Customer Service, fulfilment, the brand are all covered by NPS. It gives broad information on how your brand is doing and most importantly, on customers’ loyalty. It is an index that varies from -100 to 100 and shows how much your customers are willing to recommend and share your product/service. You as a seller can easily find it out only by asking your customer how likely they are to recommend you (from 0-10).
NPS = %promoters – %detractors
Cost of Goods Sold
Cost of Goods Sold (COGS) is a metric crucial to pay attention to. It is the cost of one product to the manufacturer, retailer or distributor. You can easily find out what products are in vain, and what products are of more importance for your business.
Cost of Goods Sold = (Beginning Inventory + Cost of Goods) – Ending Inventory
Cost Per Order
This is about measuring total cost that was spent on advertising for generating one purchase. It helps to measure the cost-effectiveness of marketing campaigns and to find out whether the efforts were worth it or no.
Cost per order = Advertising cost / Orders placed
Segmented Conversion Rates
Conversion rate is the amount of your website (e-commerce store) visitors who helped you reach your desired goal expressed in percents. It is another key component that helps to track the performance of a multichannel business.
Conversion rate = (conversions / total visitors) * 100%
Customer Acquisition Cost
This is the metrics that show the cost of getting a customer that will make a sale. It is the most related to Customer Lifetime Value. You can calculate it dividing the marketing costs (the costs that you spent on obtaining customers) by the number of customers of that period time.
Example: 100USD spent in 1 year/ 100 customers acquired = 1 USD CAC
Retention Rate is also a type of rate that is connected to the Customer Lifetime Value. It gives valuable data regarding buyer personas. This is not that much about numbers, but about customers that return. And also about finding out what channels brought them back.
This point analysis gives a detailed picture of how and why your customers left off and didn’t reach the point of making a purchase. How can you make them come back, and what channels can you use?
Of course, when running a business (especially e-commerce retail), one should keep all the metrics in attention. Even in the multichannel system, you should keep the business performance management no matter the number of different platforms used. All the relevant information should be combined and analyzed not only separately, but more importantly, together. The metrics for business performance listed above are all of the great importance, and following the main steps to track your business performance gets way much more comfortable.
As for your multichannel business management, eSwap is here to be a helping hand in inventory management. Our single dashboard makes your workflow more comfortable and smoother.