It’s not always easy to get the hang of Amazon’s internal algorithms. As a general rule, products that have a better selling history will rank higher in Amazon’s search results. However, selling history isn’t the only factor to consider, and a good selling history still won’t guarantee that your products get seen ahead of the products of your competitors. This is why it is so important to analyze up-to-date and accurate data when you want to make more sales, create more opportunities, and ultimately scale your Amazon business.
But if you’ve never really worked with your business data before, you probably have a lot of questions. For example, how can you use sales and expense data to improve your business? What are the best ways to ensure data accuracy? What kind of metrics do you need to focus on? Finally, is there software that can help you reconcile the numbers and ensure that your bookkeeping is airtight?
In today’s guide, we will answer all of these questions and more, but first, let’s look at why data-driven decisions are so important when you want to grow your Amazon business:
Making decisions for your eCommerce business requires information. If you start making changes to your products, selling channels, marketing, operations, or any other aspect of your business without being informed about the potential outcomes, the results could be disastrous.
Here are just a few reasons why making informed, data-driven decisions is essential for business growth:
● Consumer Insights - Do you ever feel detached from consumers or unable to define or parse your primary base of customers? If you answered “yes,” you’ll want to take a deep dive into your customer data to understand their interests, behaviors, and defining characteristics. This will ultimately help you make decisions to target your ideal customer and improve your conversion rates.
● Inventory Management - One of the most important aspects of building an Amazon business is managing a healthy balance for your inventory. You always want to make sure that your customers can order the products they want without delay, but you’ll also want to ensure that you’re not spending unnecessary funds to store items that simply aren’t moving. To maintain this balance, you need to analyze sales data and even work with projections data whenever you’re ordering new inventory.
● Enhanced Marketing - Once you know more about your ideal customers, you can create marketing campaigns that actually make sense for your customers and your business. What your marketing looks like will depend a lot on your niche, but whether you want to advertise products through Amazon or market your business through another avenue, you’ll need the underlying data to know how to find your target audience.
● Making & Meeting Goals - Every eCommerce business needs to set goals so that it can have a sense of direction. Whether you want to double your sales by the end of the fiscal year or branch out into new product types, you need to be able to define your goals and understand how you’re going to meet them. Data analytics can not only let you track your progress, but also help you set realistic goals that you can work to achieve.
Simply saying that you need to focus on the “data” is not enough to really build a strong Amazon business. You also need to know which data points really matter and how you can analyze those key metrics for the betterment of your Amazon store. While there are dozens of metrics that you may want to consider, and there could be a learning curve to get the hang of data analytics, here are some of the most important data points for Amazon business growth:
● Sales Forecasting - It goes without saying that you’ll need accurate data related to your sales and transactions, but it’s also important to be able to use this data to forecast future sales periods. For example, if you want to estimate how many sales you’ll make in the coming year, you can use historical data to forecast this information.
● Cash Flow - Poor cash flow can even make a healthy business struggle to maintain its profitability. Your cash flow will tell you exactly how much money you have coming in and how much you have going toward business expenses and other costs. Keeping a healthy cash flow is the only way to ensure that your business remains viable, even when sales are down or expenses are up.
● True Profit Margin - Few metrics are more important than profit margin. You may have a general idea of your profitability based on general sales figures, but you’ll need to make sure that you’re accounting for all possible expenses and costs so that you can see your business’s actual profits.
● Inventory - Whether you use Amazon FBA or you manage inventory on your own, you need to know what you have in stock, where it’s located, how quickly it’s moving (i.e. selling), and how much it’s costing you to store or ship it. These are actually a lot of different metrics rolled into one, but they can often be found in comprehensive inventory reports.
● Profitability per SKU - Your SKU helps you keep track of every single item you have in stock, and knowing how profitable these items are is vital for growing your business. This is important for inventory management, as it can help you make important decisions related to ordering, but it can also affect your branding and marketing. For example, if you have one product that far outsells everything else in your store, you’ll likely want to highlight that product and promote it to your customers.
● Fees & Expenses - Amazon fees can definitely eat into your profits, as well as other expenses related to storage, shipping, marketing, and general operations. Having a breakdown of all of your fees can help you understand where your business is spending the most, and potentially allow you to cut down on unnecessary expenditures in the future.
● Ad ROI - For marketing and financial purposes, ROI for PPC ad spend is extremely important. It’s easy to spend money on ads, but you need to know that those ads are actually bringing something back to your business. While you could try to calculate this information on your own, it’s much easier and more efficient to have software that can do it automatically.
At this point, you’re probably wondering how you could possibly have access to all of the necessary data to grow your Amazon business, and have the data presented in a way that is digestible and organized. Fortunately, ConnectBooks makes it easier than ever to sync your Amazon data into QuickBooks or the accounting software of your choice and see all of your analytics in one dashboard. From stock alerts to profitability per SKU, ConnectBooks offers complete and accurate reports to give you all the information you need. This way, you can build an eCommerce business that can grow and remain profitable for years to come.
Do you want to learn more about how to scale your Amazon business with data? If so, reach out to the experts at ConnectBooks today!
