The Key Amazon KPIs at a Glance: These Metrics Sellers Should Definitely Pay Attention To!
The myth persists: Amazon makes sellers rich. However, anyone who has dealt with this topic quickly realizes: Amazon can work well for sellers, but it is by no means a guaranteed success! Like any other business, entrepreneurs must also keep an eye on the important KPIs on Amazon.
The e-commerce giant quickly penalizes marketplace sellers who do not have their metrics under control. But first, we want to clarify what are known as Key Performance Indicators, or KPIs for short, and what they can be useful for. After that, we will delve into the Amazon KPIs.
What are KPIs and why are they useful?
“Key Performance Indicator” can be translated as “performance metric” and comes from business management. KPIs can measure the extent to which important objectives have been achieved or to what degree they have been reached. In manufacturing, an important KPI might be the average utilization of a machine compared to its maximum possible utilization.
The concept has also gained widespread use in the digital industry. Whether it’s a personal online shop or Amazon, an important KPI is, for example, the conversion rate. For advertisers, KPIs relate to the impressions of an advertisement and its click-through rate. B2B websites, on the other hand, often measure their success based on leads.
KPIs help to keep track of important performance metrics and systematically check critical success factors. Only those who measure their success or failure know where the issues lie in the machinery and what is already working well. This makes it possible to optimize with purpose and understanding.
Which KPIs are relevant for Amazon?
Unlike sellers with their own online shops, marketplace sellers face unique challenges. Relevant KPIs on Amazon are often set by the online giant itself. Those who do not pay attention to these performance metrics have no chance of ranking their products highly or winning the Buy Box. And those who fail to do so will hardly sell any products.
Additionally, many of the usual KPIs, such as impressions or click rates, cannot be measured or can only be estimated by the marketplace seller. Sellers have the best chance to influence click rates, conversion rates, and sales when they are aware of the KPI metrics set by Amazon and align their business optimization accordingly.
Penalty for Non-Compliance
There is another important reason why relevant Amazon KPIs should be closely monitored: Amazon does so as well. If sellers ignore the performance metrics, they risk failing to meet the required standards. Once this happens, Amazon is aware of it – and this can not only affect ranking or the chances of winning the Buy Box. Anyone who has ever had to create an action plan knows that this is not a desirable goal and only wastes time and money unnecessarily. In the worst case, the e-commerce giant may even suspend the entire seller account. For entrepreneurs whose core business is Amazon, this would be a disaster.
There is therefore a strong case for monitoring all performance metrics. If an Amazon KPI threatens to slip into a critical range, countermeasures can be taken early on to avoid account suspension.
Important KPIs: Seller Performance
It is now well known among marketplace sellers that shipping method and shipping duration play an important role. Amazon prefers it when sellers ship through the in-house program “Fulfillment by Amazon” (FBA). On one hand, this brings additional revenue to the platform provider, and on the other hand, it guarantees fast and hassle-free delivery, which ensures customer satisfaction. However, the shipping methods Prime by Seller or Fulfillment by Merchant also meet the standards.
Equally important as an Amazon KPI is the overall seller performance. This consists of various indicators:
| Amazon KPI | Description | Maximum Value / Ideal Value |
|---|---|---|
| Rate of Order Defects | Negative review, service-related credit card chargeback, A-to-Z Guarantee claim | below 1%, ideally 0% |
| Cancellation Rate | Seller Cancellations Before Order Fulfillment | below 2.5%, ideally 0% |
| Rate of Valid Tracking Numbers | Valid Tracking Numbers | at least 95%, ideally 100% |
| Rate of Late Deliveries | Late delivery = shipping confirmation after the expected shipping date has passed | below 4%, ideally 0% |
| Dissatisfaction with Returns | Return request with negative customer review, return inquiries not answered within 48 hours, incorrectly rejected return requests | below 10%, ideally 0% |
| Seller Ratings | Average Seller Rating and Number of Reviews | as positive as possible, as high as possible |
| Response Time | average time taken to respond to customer inquiries over the last 90 days | below 24 hours, ideally below 12 hours |
| Inventory | Out of stock, delivery difficulties | as rarely as possible |
| Dissatisfaction with Customer Service | Negative review from a customer regarding a response in the buyer-seller messaging system | as low as possible |
| Rate of Refunds | Ratio of refunds in the last 30 days to the total number of orders | as low as possible |
Other Relevant KPIs for Amazon
Professional sellers do not just list their products on Amazon, monitor important KPI metrics, and then call it a day. There is more to it. Especially private label sellers must also engage with the topic of advertising. The same performance metrics that are used as KPIs in marketing in general apply here as well.
Another important Amazon KPI is the ACoS, short for “Advertising Cost of Sale.” This indicator relates the costs of advertising campaigns to the revenue generated from that advertising: ACoS = Advertising Costs / Revenue.
With a revenue of €50,000 and advertising expenses of €3,000, the ACoS would be 6%. However, the maximum allowable ACoS varies from product to product. To determine this, all costs that the seller incurs in addition to the selling price must be deducted, such as manufacturing costs, VAT, or overhead costs. For example, if the seller makes a profit of 15% of the selling price with a coffee machine, the ACoS must not exceed 15%. Otherwise, it would result in a loss.
However, how high or low the ACoS can be as an Amazon KPI depends on many other factors that must be considered individually, such as the goal of the PPC campaigns, the margin, and the level of competitive pressure within the product category. Unlike Google Ads, Amazon Ads not only contribute to the sales of a product but also always have an impact on organic visibility.
Due to this more holistic effect, many sellers have started to increasingly focus on Cost per Order (CPO) as an Amazon KPI. This involves dividing the advertising expenses of a specific period by the total sales achieved in the same period. This accounts for the fact that Amazon Ads have a broader impact.
Conclusion: Those who do not monitor, lose!
Selling on Amazon without regularly checking important KPI metrics? You can try, but it’s pointless. Because those who do not know where the error in the system lies are hardly able to optimize their business in time. The consequences can include not only a downgrade in ranking or loss of the Buy Box – but also an account suspension is a very realistic prospect.
Therefore, Amazon sellers should always keep important KPI metrics in mind and respond promptly to any issues. The same applies to the performance of PPC campaigns in the Amazon ecosystem, even though the guidelines here are not as concrete as those for seller performance. ACoS and CPO should be monitored to assess whether a campaign is achieving its goals.
Image credits in the order of the images: © WrightStudio – stock.adobe.com
