Top 5 KPIs to Analyze & Improve Your ECommerce Store Performance

You as the business owner or advisor can adopt any popularly known KPI (Key Performace Indicators) to analyze and improve the performance of your eCommerce store.

As analyzing, extracting, and monitoring the relevant ratio of your store can lead to the improvement of your business performance. Not only that but doing all this stuff with the help of best inventory management KPI can also let your business provide a better cash flow. 

Things didn’t end here but using this can also succor you with the maximum profitability. 

Now, let’s figure out some of the well-known WooCommerce inventory management KPIs. 

To this article, we have explored 5 ratios and KPIs which will let you know what KPIs are, how to calculate each of them, what they say, how they help you, and what not to your business inventory management. 

1: Turnover Ratio

Turnover ratio; a measure to the number of inventories sold and replaced over a time period. We calculate this ratio by dividing sales by inventory. The time period is usually one year but maybe shorter sometimes.

Inventory churn analysis helps a business to plan at all levels of its income statement. This allows a better forecast of the cash needed to realign inventory in the coming months based on past performance.

This allows one to identify underperforming sales lines and products so that those products can be moved more quickly, either through specials or focusing on products that have previously been neglected.

2: Write-OFF The Inventory

Inventory represents a write-off inventory that no longer has any value in business (as opposed to writing, where inventory value is depleted). Inventories can be written off due to technical obsolescence, theft, or damage. Inventory write-offs are only to be written off the dollar value of the stock. This can be allocated towards the cost of the Goods Sold Account, but it will distort the gross margin percentage. My priority is to separate it by allocating it to the write-off account.

Inventory write-off value shows how expensive business is becoming by writing inventory. If related to the level, further investigation into why write-off is necessary and corrective action can be taken.

It is important to have a process to do this from time to time. The last thing you want is to find out that sometime in the future, your inventory is not the value recorded in the balance sheet, which means that you will have to do a major write-off in the profit and loss statement.

3: Costs Possession

There are different types of inventory costs. Some include the cost of placing an order, the cost of holding, and the low cost. Once you understand that each of these costs applies to your business, the next step is to determine the best way to value your list. An evaluation method is used to determine the profit of your business.

So how do you decide which cost method is most appropriate for your business model?

The manner to do so is here. Have a look;

Possessioning costs (sometimes referred to as costs) are costs in storing and maintaining inventory. They may include insurance, costs associated with space housing stock, security and related equipment, and labor costs.

An example of a holding cost might be the forklift truck needed to move stock to the warehouse. Holding costs are simply the cumulative dollar value of these various costs. Typically, they are accounted for separately, but when reporting, they can be grouped together.

If, for example, inventory levels fall due to seasonal fluctuations, it may be worth considering renting additional storage space to help cover holding costs.

You can engage a business to manage inventory for you, and understanding your holding costs will help you evaluate your options and decide on a business model suitable for inventory management.

4: Inventory Average

inventory average; the average value of inventory over a set time period. The average inventory ratio increases seasonal fluctuations, effectively normalizing the data.

This is indicative of how fast the inventory is selling, and the average volume on hand. A fluctuation can highlight issues with a purchase or sale.

5: Days to Sell Inventory Average

Day to sell inventory average; a measure of how long a company takes to buy or build inventory and convert it into sales. Average days to sell inventory multiplied by the number of days of the year are calculated as (inventory divided by the cost of sales).

The average day to sell inventory ratio informs the business owner how long it takes to sell each item of inventory, on average, over the days.

Afterward

Several other ratios and KPIs are related to the movement of inventory, such as order accuracy, fulfillment cycle time, timely delivery, and cost per order. 

Regarding your business model, embrace the optimal combination of inventory management KPIs to analyze. Well, for that, a simple well-know WooCommerce inventory management plugin will work out for you in the best manner.

Work with your accounting and order management system so that you can easily extract the main data needed to calculate this information.

Last but not least, if you find the blog informative then do share and comment.