Key Performance Indicators. KPIs. Sometimes, they’re like Donald Trump’s current US presidential run poll numbers. You don’t want to stop and really analyze the figures because they will reveal the bleak reality of the situation.
Unlike Trump’s polls, knowing these numbers will make you a better wholesaler. Metrics and KPIs are an important indication of the state of your business - where you’ve been and where you’re going.
We’ve been talking about moving to wholesaling online a lot, and why B2B eCommerce is the future of the industry. What we haven’t touched on is yet another aspect of your operations that will get easier and more accurate when you move online: metrics, KPIs, and measuring performance.
As a successful wholesaler, you probably have already developed several metrics and KPIs that you use often to measure the state of your operations and overall success. These metrics usually fall into one of three categories: quality, service, and business operations.
Here are a few sample metrics that are especially relevant to wholesalers:
Ship to Promise
This is a quality metric that measures the timeliness of how quickly you fill the order and ship it, as promised.
A quality metric from the customer’s perspective, a measure of the accuracy of shipping/order fulfillment.
On Time in Full
A service metric, OTIF measures, from the customer’s perspective, if you were able to deliver on time, in terms of the product itself and quantities ordered.
Service metrics that encompass calculations that measure the way you use your assets and liabilities and if you’re using them in the most efficient manner. This includes sales to inventory ratios, fixed asset turnover, and liability repayment.
Return on equity
A business operations metric, ROE measures profitability, as a percentage of the equity of shareholders.
Return on assets
Another business operations metric, ROA measures how efficiently you use your assets to generate profit.
Metrics to really pay attention to
Of all the metrics and KPIs a wholesale business can track, there are two in particular that stand out. They are very important to your operations, a good indicator of some key aspects of your workflows, and are pretty easy to improve by moving your store and operations online. These two metrics are:
Customer Lifetime Value (CLV or LTV)
This is the total value a customer will bring to your business over the course of their lifetime, which is while they are your customer.
This measure is significant, because it helps you see not only what customers buy the first time, but whether you are able to get them to return, multiple times.
You want this LTV to be as high. As high as it can possibly get.
Going online can increase the LTV because you will be simplifying the order process, making it easier for customers to order from you and making it easier to research your product. They will be more likely to return if they find a quick and easy ordering process.
According to a report by Accenture, in which they surveyed companies that moved to B2B eCommerce, the data backs up this likely increase in LTV.
- 64% of respondents saw an increase in customer retention after moving the business online. Customer retention is a key aspect of increasing LTV.
- 78% improved customer awareness of new products. A customer will be more likely to return if they see that your product base is constantly updating and changing.
- 48% saw increased revenue per customer - a number that only makes the LTV go up.
And 100%* of those who were wholesaling online and responded in this survey had quick and easy access to the data that helped them reach these conclusions.
*ok we’re assuming on this one, but the likelihood is severely high.
Visit to Order Time
This is the time it takes from the point that your customer first considers placing an order to the time that order reaches your fulfillment center.
With a B2B eCommerce store, this metric will improve a lot: placing the order itself is simply faster, and the overall sales process is streamlined. With customers able to access details for research and place their order at any time, the visit to order should also decrease.
With a shorter visit to order time, you can also increase a customer’s lifetime value, and overall profits.
Measuring online vs offline
Measuring the state of your operations will become easier when you move online, especially if you’re using an online platform like TradeGecko. For example, we have a sales intelligence section that helps you access data about the overall state of your business in a few clicks.
TradeGecko sales intelligence generates reports that let you see overall profit, potential profit, and Cost of Goods sold for any given time period. It also lets you break sales down by customer and track their behavior - allowing you to understand your customer behavior better.
Understanding that behavior gives you insights that can be turned into actionable steps that will improve the metrics mentioned above such as Customer Lifetime Value.
Moving online not only gives you access to this data quickly. You can be sure that the data you’re working from is up-to-date and realistic, giving you more accurate calculations with much less time spent on them.
Take a comprehensive look at things
Moreover, being able to simply find sales data in a certain time period helps you spot-check the state of your business, without having to take a lot of time out of your day to do manual calculations and updates. Tracking these numbers immediately becomes quicker, easier and more efficient.
Moving online will take a process like measuring and calculating metrics and KPIs and simplify it, making it more accurate and relevant to your day-to-day operations, but that’s not all. The insights you find will also help strategic decisions simpler too: marketing, pricing, increasing that all-important LTV, and more.
What are some other metrics that your wholesale business tracks regularly? Let us know what those are and how you measure them in the comments!