Explaining ecommerce sales velocity in an everchanging environment

The global economic outlook is in flux, even as brands continue to search for growth and profitability. The supply chain issues still persist, but you need to ensure high product availability for your top sellers. Material shortages and labor scarcity are cementing the uncertainty of 2023, but you still need answers. 

Amazon's downstream changes due to slowing economic climate

With a heavy focus on profitability, Amazon is doing everything they can to conserve cash and keep the P&L where shareholders want to see it. On the other side, brands are experiencing a drop in 1P ordering and declining support for Vendor Central and Seller Central data availability and metrics. Brands can bet on many more Amazon curveballs this year.

 

Amazon recently overhauled its Retail Brand Analytics and deprecated critical datapoints that are making it difficult for brands to make informed decisions in the areas of demand planning, digital marketing, and marketplace monitoring. They have disrupted key metrics in Traffic Diagnostics, Forecast and Inventory Planning, and Net PPM that brands typically rely on to validate their projections. And don’t get us started on the departure of Lost Buy Box.

Disruption from Amazon's decline in 1P ordering and metrics

As 1P ordering volume declines, brands will pivot towards a hybrid strategy with multiple fulfillment options including direct and 3P fulfillment even as they compete for FBA storage space. They will need to churn out quicker and smaller shipments to meet consumer demand if sales remain steady—adding to already rising fulfillment costs. Paid media is also becoming more expensive in a space ridden with competing brands and unauthorized third-party resellers. Yet in the Year of Efficiency, budgets will be scrutinized more astringently and monitoring the factors that impact sales will be critical. Ecommerce operations will need to better attribute the root causes doing the most damage to Amazon sales. Teams often have to scramble to react to daily changes and the impact to cost is too expensive to ignore this year.

Bottom line? Brands will need more than data to win on Amazon.

Ecommerce teams need a better way to attribute causal changes in sales

In a workforce that’s now dominantly remote, it’s more difficult to connect the dots across all the teams such as channel ops, paid media, customer service, logistics, and content marketing. Teams spend too much time, effort, and scarce dollars on tactics that don’t move the needle or justify the effort. Without a way to identify the factors that are behind your sales velocity, there is high risk of ad dollars being wasted and promotions that miss the mark. There is an even bigger problem for brands that have a large catalog on Amazon and operate across multiple categories. 

 

Ecommerce teams often look at assortment performance from several angles including brand, category, or lifecycle stage. While this can lead to more targeted insights that will improve sales in a given area, it often requires spending lots of time delved into Amazon reports which are now missing core metrics that leave a gap in decision making. 

Every product and category has its own story on what is limiting performance—stories that may be impossible to glean from overall changes to sales velocity.

How i2o technology reduces the impact of Ecommerce challenges

Segmenting performance by brand or category is a starting point, yet we believe that the key to analyzing Amazon profitability is best approached by considering overall sales as an equation. 

 

The i2o Ecommerce Sales Equation (ESE) Navigator uses an effective and efficient methodology that helps you maximize ordered revenue because it segments sales into the key pillars of performance (Traffic, Conversion & ASP).

 

The i2o ESE Navigator demonstrates you the dollars you are either losing or gaining due because of very specific factors, so you can target your attention on the root causes that move the needle. 

Manual data analysis has a limit, even with a small catalog

No matter what size the assortment is, it’s nearly impossible to manually combine and analyze all the datapoints you need to make responsible decisions for your business. Connecting the dots across all teams requires a better way to align your decision making when evaluating all the factors.

 

  • Traffic: metrics include Ad Spend, Ad CTR, Ad Sales, Best Seller Ranking, Search Rank, any badges like Amazon Choice or Best Seller
  • Conversion: factors include product content, inventory, Buy Box, reviews, product quality
  • ASP: variables include promotional offers, MAP breaks, temporary price reductions

Meet the i2o Ecommerce Sales Equation Navigator

The i2o Ecommerce Sales Equation (ESE) Navigator is an automated methodology that works for both Amazon fulfillment strategies and saves you time with better performance evaluation. Brands can look at combined 1P and 3P sales, separate Vendor Central from Seller Central performance if they need to, and break down reporting into bite sized segments of brand, category, lifecycle stage, or even ASIN level drilldowns to identify problems.

The ESE Navigator allows you to:

  • Attribute changes in sales to specific problems by drilling down under each pillar
  • Take strategic actions justified by a quantifiable dollar impact to ordered revenue
  • Identify root cause factors with separate drill-downs of Traffic, Conversion & ASP
  • Discover how New/EOL products contribute to sales variance
  • Pinpoint where the maximum revenue variance is

What makes the ESE Navigator more effective than other BI approaches?

The ESE Navigator is such a versatile tool and serves the account manager all the way up to VP of Sales. It is powerful enough to take variances and boil them down to either traffic, conversion, or price issues. Its potential begins at the lowest level (ASIN) and goes all the way up to category, brand, or the entire business with the ability to customize time comparisons by week over week, T4 average, month over month, and year over year. This makes it a desirable tool across teams for both agencies and brands that need to look at performance from all lenses.

 

  • ASINs are segmented into a handful of buckets based on underlying root cause factors having the same issue
  • The variances are summed to reflect the total dollar impact to each segment, whether it’s positive or negative
  • Scale-based demonstration helps you focus on the problem segments dragging down your sales
  • Brands can take a single approach to solve the root cause that may impact multiple products (e.g. low weeks of coverage across several products)

Why is the ESE Navigator unique?

The ESE Navigator doesn’t try to boil the ocean and makes it easier for you to act on sales insights. Most BI tools are limited in what they can do and ultimately fracture your attention. They only tell you whether sales have increased or decreased and combine this into one lump, unusable sum. This limits your capability to truly analyze variances across periods, and the variances can point to positive or negative changes to your sales.

 

 

By applying automated approaches based on clustering and machine learning, the ESE methodology groups products based on similar factors which account for the biggest week to week or year over year changes.

 

The ESE Navigator is a dynamic solution with methodology based on Data Science and Machine Learning. Rather than regurgitating a bunch of datapoints or sharing high level sales trends without explanations, the ESE insights are far more usable and help to align teams on the same set of facts.

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