What Metrics Should I Keep an Eye on as an Amazon Seller
Table of Contents
Are you struggling to keep track of your Amazon business’s performance? With countless metric variables to monitor, many sellers find it overwhelming to identify what truly drives profitability and growth.
With years of experience in helping Amazon sellers navigate complex data, we understand the pain points and challenges sellers face. Leveraging tools like KwickMetrics, we have simplified metric tracking for countless sellers, ensuring they stay ahead in the competitive marketplace.
In this article, we’ll break down the essential metrics every Amazon seller must monitor to ensure sustained growth and profitability. With clear insights and actionable steps, you’ll be equipped to make smarter, data-driven decisions for your business. It’s essential to keep an eye on your store’s activity and the amazon profit app when you sell things on Amazon.
Why Monitoring Metrics Matters?
Metrics offer insights into your business’s health and potential. With millions of sellers on Amazon, staying ahead depends on understanding:
How your products are performing.
Where you can cut costs or optimize operations.
What strategies are driving sales.
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Essential Metrics Every Amazon Seller Should Track
1. Order Defect Rate (ODR)
Order Defect Rate (ODR) is a critical metric for Amazon sellers, representing the percentage of orders with issues such as negative feedback, A-to-Z guarantee claims, or chargebacks. Amazon uses this metric to evaluate a seller’s customer service standards and expects an ODR below 1%. Sellers with a higher ODR get penalties and risk account suspension, which can severely impact their business. Maintaining a low ODR is crucial to avoid penalties. To maintain a low ODR, sellers should focus on addressing customer complaints promptly, ensuring product quality, and providing excellent service to prevent negative experiences.
How do you calculate ODR?
To figure out the ODR, divide the number of defective orders by the total number of orders placed during a specific period.
Click here for more information on ODR.
2. Pre-fulfillment Cancellation Rate (CR)
The cancellation rate is all seller-cancelled orders represented as a percentage of total orders during a given 7-day time period. This Cancellation rate metric applies only to seller-fulfilled orders and reflects a seller’s reliability.
Amazon expects sellers to keep this rate below 2.5%. A cancellation rate above 2.5% may result in deactivation of seller-fulfilled offers. Frequent cancellations can signal unreliable operations, which may harm your seller performance metrics. To minimize cancellations, sellers should maintain accurate inventory records and review their listings for errors before launching products.
For more details, click here.
3. Late Shipment Rate (LSR)
What is Late Shipment Rate?
Late Shipment Rate, also referred to as LSR, is a metric that measures all orders with a ship confirmation that is completed after the expected ship date as a percentage of total orders over both a 10-day or 30-day period. Late Shipment Rate only applies to seller-fulfilled orders.
Selling Partners are required to maintain an LSR under 4% in order to sell in the Amazon Store.
Why is this metric important?
It’s important to confirm the shipment of orders by the expected ship date so that customers can see the status of their shipped orders online.
How can a Selling Partner maintain a healthy LSR?
A healthy LSR can be maintained by ensuring the following:
- Shipping orders on or before the expected ship date.
- Confirming orders as soon as you hand the package over to the carrier.
- Always monitor your late shipment score in the Account Health Dashboard
Please note that adjusting your handling time can help prevent late shipments.
- Keeping this rate low is critical for maintaining a positive account health.
- Late shipments can lead to negative customer experiences, increasing negative feedback and claims, which directly affect your ODR
- Amazon tracks the Late Shipment Rate (LSR) for sellers. An LSR above 4% may trigger warnings or penalties, such as account review or suspension.
- Consistently late shipments may make you ineligible for the Buy Box, directly reducing your visibility and sales.
- If customers request refunds due to late deliveries, you may bear the cost of these refunds, impacting profitability.
- Fulfilled by Merchant (FBM) sellers are responsible for timely shipments and face these risks more prominently.
- Fulfilled by Amazon (FBA) sellers delegate shipping responsibilities to Amazon, avoiding these issues.
How to Avoid Late Shipment Penalties?
- Adjust your shipping settings to reflect realistic handling and delivery times based on your capabilities.
- Partner with reliable carriers to ensure timely delivery.
-
Use tools like KwickMetrics
to track your LSR and other key performance indicators in real time. - Inform customers proactively about delays and offer solutions to maintain satisfaction.
- For sellers facing frequent shipping challenges, using FBA can offload logistics and ensure timely deliveries.
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4. Inventory Performance Index (IPI)
What is Inventory Performance Index (IPI)?
The Inventory Performance Index (IPI) is a key metric used by Amazon to evaluate how effectively a seller manages their inventory in Amazon’s Fulfillment by Amazon (FBA) program. It measures the balance between a seller’s inventory levels, storage efficiency, and sales performance, ensuring that stock is optimized for availability while minimizing costs.
What is a Good IPI Score?
A good IPI score is generally above Amazon’s minimum threshold, which is currently set at 400. Sellers with scores above this level face no storage restrictions, while those with lower scores may encounter limitations on the amount of inventory they can send to fulfillment centers. A higher score indicates better inventory management practices, such as avoiding overstocking, reducing stranded inventory, and maintaining a high sell-through rate.
How to Check Amazon IPI Score?
Here’s how you can view your Amazon IPI score.
- Visit the Amazon Seller Central Website and sign into your Seller Central Account.
- Go to the ‘Inventory Tab’ and click on ‘Manage Inventory’ or ‘Manage FBA Inventory’.
- Open your Inventory Dashboard and go to the Performance window.
- View your IPI score and explore more details to get a complete breakdown of all factors contributing to your IPI score.
How Do the Different Influencing Factors Affect IPI Score?
- Excess Inventory: Large volumes of unsold inventory reduce your score as they consume storage inefficiently.
- Sell-Through Rate: A low sell-through rate suggests poor sales performance, negatively impacting your score.
- Stranded Inventory: Unsellable items lower your IPI, as they contribute to wasted storage space.
- FBA In-Stock Rate: High in-stock rates ensure you can meet customer demand, positively affecting your IPI.
How to Improve Your IPI Score
To maintain or improve your IPI score:
- Reduce Excess Inventory: Regularly analyze slow-moving items and consider promotions or price reductions to clear them.
- Optimize Sell-Through Rate: Ensure consistent sales by using data-driven insights for pricing and advertising.
- Fix Stranded Inventory: Resolve issues causing inventory to be unsellable, such as listing errors or expired ASINs.
- Replenish Strategically: Monitor stock levels to ensure high-demand items remain available while avoiding overstocking.
Using tools like KwickMetrics helps track these influencing factors in real-time, providing actionable steps to enhance your IPI score.
How Does Hiding Not Replenishable Items Affect the FBA In-Stock Rate and the IPI Score?
Hiding not replenishable items excludes them from the FBA in-stock rate calculation, helping sellers focus on items they can actively manage. While this strategy prevents these items from negatively affecting your in-stock rate, it does not directly impact the overall IPI score.
When Will I Find Out How Much My Storage Is Limited?
Amazon evaluates your IPI score quarterly. If your score is below the threshold during this evaluation period, storage limits for the upcoming quarter are communicated via Seller Central. Sellers are encouraged to monitor their IPI scores consistently to avoid surprises.
By focusing on these aspects, you can maintain a healthy IPI score, ensuring better storage flexibility and improved sales potential.
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5. Valid Tracking Rate (VTR)
The Valid Tracking Rate (VTR) measures the percentage of seller-fulfilled orders that have a valid tracking number, calculated over a 30-day period. This metric is important because Amazon customers rely on tracking information to monitor the status of their orders and estimate delivery timelines.
Amazon mandates a minimum VTR of 95% to maintain a high level of customer trust and account health. Falling below this threshold may result in account warnings, reduced visibility in search results, or even suspension of seller privileges for specific categories.
A high VTR reflects a seller’s commitment to providing transparency and reliability in the delivery process. To maintain or improve this metric, sellers should partner with reliable shipping carriers that consistently provide valid tracking numbers and ensure all shipments are updated promptly within Amazon’s system. Additionally, sellers should double-check shipping labels and avoid using carriers not recognized by Amazon to prevent invalid tracking entries.
There are some exemptions to the VTR requirement, including:
- Heavy or bulky items shipped by carriers not integrated with Amazon
- Small, low-value items ($10 or less) shipped via USPS standard or first-class mail
- Low-value ($5 or less) international shipments from China
- International shipments from outside the US and China
- Digital orders that cannot be physically shipped
Hitting the required VTR standard enhances customer satisfaction and protects your seller metrics, helping maintain competitive edge and fostering repeat business.
6. Conversion Rate
What is Conversion Rate(CVR)?
Conversion Rate is a vital metric that measures the percentage of visitors who make a purchase after viewing your product listings. It is a direct indicator of how effectively your product page engages potential buyers and drives sales. A high conversion rate signals strong product appeal, optimized listings, and a seamless shopping experience.
How to calculate Conversion Rate?
Conversion rate is a key metric that evaluates how effectively your Amazon listings are turning visitors into buyers. It is calculated using the formula:
Conversion rate = (conversions ÷ total audience) x 100
This metric is typically expressed as a percentage and helps sellers understand how well their listings are performing. For instance, if 1,000 visitors view your product and 100 make a purchase, your conversion rate is 10%.
What influences Conversion Rate?
Several factors influence your Conversion Rate. The quality of your product images plays a significant role, as visually appealing and professional images can attract and retain customer attention. Equally important is the product description—it should be clear, detailed, and persuasive, highlighting the benefits and unique selling points of your product. Including relevant keywords within the title, bullet points, and description ensures better visibility in Amazon search results, driving more targeted traffic to your listing.
Moreover, customer reviews and ratings greatly impact Conversion Rate. A high volume of positive reviews builds trust and credibility, encouraging potential buyers to make a purchase. Price competitiveness also affects this metric; customers are more likely to convert if your pricing aligns with market expectations.
How to improve Conversion Rate?
To improve Conversion Rate, sellers should focus on A/B testing different elements of their product listings, such as titles, images, and pricing strategies, to identify what resonates best with their audience. Offering promotions or discounts, optimizing for mobile viewing, and ensuring fast delivery options can further enhance this metric.
7. Return on Ad Spend (ROAS)
Return on Ad Spend (ROAS) is a crucial metric that evaluates the efficiency of your advertising efforts by calculating the revenue generated for every dollar spent on ads. The formula for ROAS is simple:
ROAS = Total Revenue from Ads ÷ Total Ad Spend
A high ROAS indicates that your ad campaigns are performing well, delivering substantial revenue for the amount invested. Conversely, a low ROAS highlights inefficiencies in your ad strategy, signaling a need for optimization.
To maximize ROAS, it’s essential to refine your ad targeting. Focus on high-performing keywords that align with your audience’s search intent and avoid wasting budget on irrelevant traffic by using negative keywords. Additionally, testing and optimizing ad creatives, such as imagery, copy, and call-to-action buttons, can significantly enhance performance.
Another strategy to improve ROAS is prioritizing top-performing products with proven demand. Allocating more budget to these products can increase returns while minimizing risks. It’s also vital to monitor ad performance consistently and make data-driven adjustments to bidding strategies and campaign structures.
Tools like KwickMetrics provide granular insights into your ad performance, helping you analyze ROAS in real time and identify areas for improvement. By leveraging these insights, you can ensure your advertising investments deliver maximum profitability, ultimately driving long-term growth for your Amazon business.
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8. Advertising Cost of Sales (ACos)
Advertising Cost of Sales (ACoS) is a critical metric that measures the efficiency of your advertising spend. It is calculated using the formula:
ACoS = (Ad Spend ÷ Sales from Ads) × 100
This percentage indicates how much of your revenue from ads is being spent on advertising itself. A lower ACoS represents higher profitability, as you are spending less to generate sales. However, the ideal ACoS varies depending on your business goals. For instance, a higher ACoS might be acceptable during a product launch to maximize visibility, whereas established products should aim for a lower ACoS to improve profit margins.
To optimize ACoS, focus on refining your ad targeting by leveraging high-performing keywords and eliminating underperforming ones through negative keywords. Regularly analyze your campaign performance to identify areas for improvement and adjust your bidding strategy accordingly. Additionally, using Amazon’s Sponsored Ads reports can provide insights into which campaigns are driving the best results.
Balancing ACoS effectively ensures your advertising efforts contribute positively to your bottom line. Tools like KwickMetrics offer comprehensive analytics to help track and optimize ACoS in real-time, empowering sellers to make informed decisions that align with their profitability goals.
9. Feedback Score
Feedback Score is an essential measure of customer satisfaction. This metric is based on the ratings provided by customers after their purchases. Positive feedback not only enhances a seller’s reputation but also improves the chances of winning the Buy Box, which drives higher sales. Sellers can improve their feedback score by packaging items securely, responding quickly to customer queries, and following up with buyers to encourage reviews.
10. Buybox Percentage
The Buy Box is a coveted spot for sellers, as it significantly boosts sales. The Buy Box Percentage measures how often your product appears in this prominent position. To win the Buy Box more frequently, sellers need competitive pricing, excellent customer service, and low ODR and LSR metrics. Winning the Buy Box consistently is a sign of a well-managed Amazon business.
Tools to Simplify Metric Tracking
Manually tracking these metrics can be overwhelming. Tools like KwickMetrics simplify the process, providing real-time insights into sales, profitability, inventory, and advertising performance. By centralizing your data, you can make data-driven decisions with ease.
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Actionable Steps to Optimize Metrics
1. What qualifies as “manufacturing cost”?
Manufacturing cost includes the price to source a product from a manufacturer, wholesaler, or reseller. It excludes shipping, handling, and other logistical expenses.
2. Can I adjust my manufacturing cost later?
Yes, sellers can update their manufacturing costs at any time using the Manage Your Manufacturing Cost page in Seller Central.
3. Will Amazon’s estimate always match my actual costs?
Amazon’s estimates are based on comparable products and may not always align with your actual costs. Providing your own manufacturing costs ensures more accurate reimbursements.
4. What happens if an item is lost after a customer order?
For items lost or damaged after a customer order, Amazon will continue reimbursing the sales price of the order minus fees.
5. Do I still need to file claims for lost inventory?
No, Amazon will automatically process reimbursements for inventory lost in fulfillment centers. However, manual claims are required for other cases, such as removal orders.
Conclusion
Success on Amazon isn’t just about selling great products; it’s about understanding the numbers behind your business. By focusing on the right metrics and leveraging tools like KwickMetrics, you can drive growth, increase profitability, and stay ahead in a competitive marketplace.
