Online Marketplace Best Practice: Key Performance Metrics
Date: November 28, 2014
Category: Opinion piece
Author: David Smith
In the third of a series of best practice posts, GS1 UK offers Q&A guidance on some of the fundamental elements to help you trade on online marketplaces successfully.
The focus for this post: key performance metrics.
Most marketplaces operate some sort of Key Performance Metrics (also known as Key Performance Indicators, or KPIs) for their marketplace merchants, although this may not always be explicitly published. Typical metrics include:
- Sales value and order volume – while these values on their own will not affect your account standing, greater sales will make other KPIs less prone to spikes, and you may qualify for different fee tiers or be assigned an account manager as your sales grow.
- Feedback score and feedback ratings – obviously negative feedback is bad, but not receiving any feedback can indirectly count against you as any negatives will be proportional to a lower base. Do what you can to actively encourage buyers to leave positive feedback. If you resolve a dissatisfied customer’s complaint, you can request to have the negative feedback removed and even look to turn that feedback to positive through the provision of a quality resolution experience.
- Average dispatch time (sometimes known as Days Sales Outstanding / DSO) – the quicker the better but for most marketplaces you should try to keep this under 2 business days. If you are using a drop-shipper ensure that you know exactly what inventory is on-hand and ready to ship immediately.
- Refund rate – the percentage of your orders that have been refunded.
- Chargeback rate – the percentage of orders that a customer has disputed via their credit card provider.
- Claims rate – the percentage of orders that a customer has disputed by contacting the marketplace directly.
Top Tip: Most marketplaces can distinguish between a stock-out refund and a customer-requested refund. Often the latter will not count against you at all.
These metrics may be industry- or even category-specific and performance can often be judged relative to your peers within a particular sector. For example, clothing sellers may see higher return rates because of items not fitting.
Marketplaces such as Amazon, Tesco and Rakuten’s Play.com will often refer to a combination of these as your Order Defect Rate. Keeping this as low as possible will result in uninterrupted selling and access to the Buy Button where available. For full details on Order Defect Rates you should refer to the documentation supplied by your chosen marketplaces.
Top Tip: Amazon implements restrictions on which merchants can sell in Toys & Games during the Christmas period. Ensure your performance is good and plenty of sales have been made prior to Q4 to be eligible.
If you would like more information on selling on online marketplaces, GS1 UK recently published a guide to support small traders. You can download a copy here.
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