The art of managing your online store’s best sellers
Oh those best sellers are magical as they fly out of your online store’s virtual door. It is so exciting to see the number of products you have shipped in a week. You can hear the virtual cash registers go crazy as it keeps up. You feel richer just watching the number of items you have shipped. You are laughing all the way to the bank or are you????
Maybe you are but before you start planning your world dominance and an early retirement you need to know this. Not all products are your golden ticket.
What do we mean by this?
We working with clients we warn them against focusing on revenue and volume as this isn’t what keeps the doors open. We strongly recommend they focus on profit ($) and profit margins (%) as this is what keeps the ‘virtual’ door open, staff paid and budget available for marketing.
To focus our clients attention we recommend they use the following report:
The above are the minimal columns we recommend you use when analysing your best sellers to increase your online store’s profit margins. The columns we are using are:
- Product name – is self explanatory
- Sold [#] – the total number of units you have sold
- Sold [$] – the total amount in dollars you have sold
- Profit [$] – the total profit your online store has made when you have taken off costs (how much the product cost you, tax, shipping etc)
- Profit margin [%] – is calculated by (unit cost – unit price) / unit price
- Gross margin [%] – is calculated by (unit cost – unit price) / (unit price + tax)
- Stock level – is how much of this product you have left in stock
- Forecasted sales [#] – based on previous sales this is the number of units you are forecasted to sale in the next 14 days
- Unit cover weeks – based on the forecasted sales and stock levels how many weeks of stock you have before you run out
In the above report you will see we have highlighted two products. These products have the highest profit margin. Basically this online retailer made a 78.14% profit on top of what they paid for the product. That is brilliant!!!! If you were the retailer you would want that to continue.
However if you look at the stock level there it is returning zero. Therefore this retailer can’t take advantage of knowing the profits attached to this product and increase its marketing. This is a lost opportunity.
The inclusion of the Forecasted [#] and Cover unit weeks column would have alerted the retailer earlier on they were running out of stock and given them the opportunity to order more.
So what key business questions does the report answer that Magento’s standard Magento reports can’t:
1. What products should we put on the key pages on our Magento store?
The profit and profit margin column identifies which product are generating the most profit for your business. This highlights you need to give this products prime real estate.
Magento only should you volume and total sales.
2. Do I have enough of my best sellers in stock?
The forecasted sales and Cover unit weeks quickly shows you whether you have enough stock on hand. This allows you to better plan your merchandising so you don’t miss out on potential sales.
3. Which products should I put in my email newsletter this week?
Using the Profit, Profit Margin, Forecasted sales and Cover unit weeks will quickly show your marketing team what they should focus on. By having the report set up and updated in real time your marketing team don’t need to be a merchandise specialist to understand what they should be promoting.
If you are using a fully customisable Magento reporting extension, your marketing team will be able to filter the results by location and gender and then craft emails to these customer segments.
So our advice is create a report that allows you to focus on your best sellers that are making you the most profit. The report should identify the product and if you have enough stock to take advantage of this customer purchasing spree.