eCommerce Benchmarking: The First-of-its-Kind Competitive Benchmarking Software

Understanding how your eCommerce store compares to competitors in your industry is the foundation of a solid marketing campaign. The best business models apply competitive benchmarking strategies to analyse key performance data. And, ultimately improve their performance across various digital platforms.

However, eCommerce benchmarking is easier said than done. Particularly when you sell across multiple marketplaces and platforms.

That is, until now.

Link My Books has developed a first-of-its-kind competitive benchmarking feature for eCommerce companies. This is integrated into our automated bookkeeping software for a comprehensive financial data management experience.

What is eCommerce Competitive Benchmarking?

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eCommerce competitive benchmarking is the process of measuring your eCommerce business's performance data against competitors in your industry. This is done by analysing a variety of data points, similar to key performance indicators.

Competitive benchmarking gives you important insights into how your eCommerce business stacks up compared to similar businesses. You can use tools like Link My Books to automate your eCommerce business benchmarking strategies.

What is the Difference Between KPIs and Competitive Benchmarks?

The two terms, KPIs and competitive benchmarks, are often used interchangeably. However, they are not the same thing. KPIs are metrics used to measure your business's performance against its objectives. For instance, sales growth targets or the time it takes to roll out a new product line. Your KPIs indicate the success of your eCommerce business compared to your goals.

Competitive benchmarks, on the other hand, are metrics used to measure actual performance against competitors. So taking the example of sales growth. Rather than measuring this metric against your company objectives, you would measure it against the sales growth of other eCommerce companies in your industry.

5 Competitive Benchmarking Metrics With Link My Books

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Link My Books is an automated bookkeeping software for eCommerce and multi-channel eCommerce sellers. Its brand new feature, Benchmarking, gives a cohort analysis of 5 critical metrics. This means that the data we provide is based on similar-sized companies to yours and selling on the same platform as you. Therefore, the results are truly comparable, enabling you to compose realistic goals for your business.

Here are the 5 specific metrics Link My Books measures:

1. Sales Growth Percentage Benchmark

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The Link My Books sales growth percentage benchmark feature tells you precisely where your business's sales growth stands over a set period of time in relation to competitors. It will either be presented as a positive (if your sales have increased) or a negative (if they have decreased). It is worked out by dividing your current number of sales by the number of sales from a previous period. This is then converted into a percentage.

Link My Books' eCommerce benchmarking feature also puts your business into a category:

• Top 25%
• Upper 50%
• Lower 50%
• Bottom 25%

Understanding where you come in relation to competitors will enable you to analyse the reasons behind your position. And, if applicable, improve your processes and conversion rate.

How to Increase Sales Growth and eCommerce Conversions

As well as giving you these vital stats, Link My Books Benchmarking shares practical steps you can take to increase sales growth and conversion rate. For example:

• Ensure your website is mobile-friendly: If you run an eCommerce store on a platform like Shopify (as opposed to a marketplace like Amazon), ensure your website is optimised for mobile devices. Your site's performance will impact its usability. Consumers shopping via mobile devices want a smooth browsing and checkout experience.
• Increase customer satisfaction: Ensuring happy customers will help encourage repeat purchases and customer loyalty. This opens up new marketing opportunities where you can tailor your efforts by marketing specific products your customers might be interested in.
• Optimise your website: Your website should be optimised for both people and search engines. Analyse SEO metrics to further its organic reach. And, ensure your website is quick to load, easy to navigate, and visually-appealing. A slow website will impact your SEO. If this is the case, you will need to look at ways to improve it. For example, checking your website hosting plan can accommodate your traffic volume.
• Social proof: This can come in the form of reviews and testimonials. Display these prominently on your website to increase confidence in your business. You can also add aspects like social media buttons that display your number of followers. Visitors can quickly follow you on social media and check out comments from other followers.
• Improve images and descriptions: Fine-tune your product descriptions so they accurately describe all the best features of your products. Consider what customers want to know about your products before committing to a purchase. Additionally, use high-quality images that show your products in a good light from multiple angles.
• Flash sales: Create special promotions and flash sales to encourage fast sales growth. Aim to create a positive shopping experience to retain customers. This is also a great way to build up your email list for future communication.

2. Fee Ratio Benchmark

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Your fee ratio is the ratio of your revenue that you spend on fees, such as Amazon fees or eBay fees. This ratio is given as a percentage. The higher your percentage, the more money you've spent on fees compared to your revenue for that sales period. This figure is calculated by dividing your total fees by your total revenue. And then, of course, it's converted to a percentage.

Just like with sales growth percentage, your fee ratio is allocated to one of four brackets in comparison to competitors; Top, Upper, Lower, and Bottom.

How to Lower Your Fee Ratio

There are plenty of things you can do to lower your fee ratio. To that end, you might consider devising an internal benchmarking (comparing different processes within your company) or a process benchmarking (comparing your processes to other businesses) plan to optimise efficiency while lowering your fee ratio.

Here are some ways to improve fee ratio:

• Cost-effective fulfilment: Look into different fulfilment options. Consider the costs and efficiency of different fulfilment companies in comparison to marketplace fulfilment services. This is one area where your internal benchmarks will come in handy.
• Look at your inventory: If your high fees are a result of old stock sitting in a warehouse, take steps to shift it and cut storage fees. Think about special offers, creating bundles, or even moving it somewhere cheaper.
• Packaging: Heavy and bulky packaging might increase your fees. Therefore, it's worth looking into viable lightweight packaging alternatives to bring costs down.
• Get your website out there: If you optimise your website, you can benefit from direct customers rather than relying solely on marketplaces. Promote your website with loyalty programs and special discounts to encourage website orders.
• Sell more: Devise a marketing plan to sell more products and boost your average conversion rate. You might also consider ways to increase your average order value, such as bundling products together. Some marketplaces award fee discounts to higher-volume sellers.

3. Advertising Fee Ratio Benchmark

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Your advertising fee ratio is the percentage of your revenue that you spend on advertising fees. This is calculated by dividing your advertising fees by your revenue for a set time period. Ideally, you want your advertising fee ratio to be as low as possible. You can achieve this either by increasing your revenue or reducing your advertising fees. Or both of course.

With the Link My Books Benchmark feature, your advertising fee ratio will be placed into a category based on your data and the data of similar companies. Our software will tell you whether your eCommerce business falls into the Top, Upper, Lower, or Bottom percentage amongst competitors.

How to Lower Your Advertising Fee Ratio

You need a carefully-planned strategy when you're working on lowering your advertising fee ratio. After all, simply scaling back your ad campaigns might be counter-productive to your marketing efforts. Here are some ways to optimise your ad campaign success while lowering that ratio:

• Hone in on your target audience: You need to target the right audience to avoid wasting money advertising to the wrong people. Define your customer persona, covering as many details as possible using analytical tools, campaign data, and data gathered from previous customer interactions and conversions. Most platforms have tools that enable you to tailor your ads to specific audiences.
• Define your objectives: Clear objectives for your ad campaigns, both long-term and short term, will enable you to focus on important aspects and fine-tune the details. Consider where your audience are in the marketing funnel. And, whether each campaign is aiming for the highest conversion rates, greater brand awareness, or customer retention, to name just a few possibilities. You might need to evaluate your existing key performance indicators too to ensure they align with your objectives.
• Utilise lower-cost options: Explore different low-cost advertising options. You can look into strategies such as sending out press releases, extending your organic reach on search engines and social media platforms, and creating partnerships with others in your industry. Additionally, compare advertising costs and results across different platforms to identify where your money is best spent.
• Automate bids: Use software to automate bids. These tools adjust your bids automatically to get you the best ROI. They analyse data at a granular level to target the right demographic, as well as adjusting bids according to devices. Bid management software can save you considerable time and enhance the success of your ad campaigns.
• Improve ad copy: If your ad click-through rate and conversion rate are both low, you might want to look at overall ad improvement. This includes refining your ad copy. Copy should be both compelling and informative. Compare your CTR with your conversion rate. If you're getting lots of clicks but no conversions, your copy might not accurately reflect what you're offering.

4. Refund Ratio Benchmark

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Another one of our competitive benchmark metrics is refund ratio. This provides vital insights into customer satisfaction compared to other businesses. High refund ratio wastes both time and money. Additionally, it can damage brand reputation and trust.

Link My Books calculate refund ratios automatically by dividing refunds by sales. It uses this to determine which quartile (Top, Upper, Lower, Bottom) your eCommerce store falls into compared to similar businesses.

How to Lower Your Refund Ratio

You can improve your refund ratio by both increasing sales revenue and reducing your number of refunds. A good strategy will work on both of these aspects simultaneously. Let's look at some ways to achieve this:

• Give accurate information: The easiest and most effective way to lower your refunds is to let customers know exactly what they're buying beforehand. Focus on writing accurate descriptions. Explain product features clearly, along with their benefits. Ensure all measurements are correct. If you sell clothing, consider including a size chart so customers can make an informed decision about what size to order without having to try things on first.
• Package properly: Proper packaging is not just for fragile items. All products need to be protected for transit. Implement a robust inspection process to minimise damage during shipping. Consider weatherproof packaging, packing peanuts, and bubble wrap. Buying high quality packaging in bulk can reduce the cost too.
• Inspect products: Always inspect product samples before selling them. Create a quality control checklist to ensure they meets your standards. For instance, if you sell clothes, you can run them through the wash according to the label instructions to check how they hold up. Look for damages to products after using them and also make sure the quality of the items reflect the cost.
• Take feedback on board: Don't be afraid to ask customers for feedback. Use this feedback to improve each process, both before and after completed purchases. One of the simplest ways to use feedback to your advantage is to ask why each customer returns an item. Use these insights to solve any issues that are within your control.
• Give accurate shipping times: Setting unrealistic shipping times will lead to disappointments. Be honest about how long it will take for products to be delivered. You can research the market average to compare different time-scales. But ultimately, you need to be realistic in regards to both time and cost.

5. Refund Ratio Growth Trend Benchmark

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Link My Books Benchmarking allows you to analyse your refund growth trend compared to competitors'. It looks at your current refund percentage and your refund percentage from a prior period to calculate your refund growth trend as a percentage. This tells you whether your number of refunds is increasing or decreasing, and whether or not the trend is market-wide. The calculation looks like this:

Refunds/sales for current period minus refunds/sales for previous period.

How to Lower Your Refund Ratio Growth Trend Percentage

Our tips for lowering your refund ratio growth trend percentage are the same as above. You ultimately need to lower the number of refunds you submit while increasing your revenue. Consider the time it takes for an average order to arrive at its destination, the quality of your products and packaging, as well as your product descriptions and images.

Why Should You do Competitive Benchmarking Analysis?

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Let's take a look at why you should incorporate benchmarking analysis into your marketing plan:

Stay on Top of eCommerce Trends

Trends change quickly online. You only need to look at social media metrics for the past twelve months to identify fluctuations in public opinions and preferences. eCommerce trends are no exception. You might experience an overall boost in sales on a particular channel or you might notice a slump in sales across all channels.

Either way, competitive benchmarking can tell you exactly how your business fares in comparison to others. This data will tell you whether there is a general eCommerce trend or whether there is something you can do to keep up with competitors.

Quickly Identify Issues

Benchmarking tools will help you quickly identify issues within your business processes. With a strategic benchmarking tool, you can see where your eCommerce business is lacking and where it's exceling.

If your performance is significantly worse than competitors, learning this quickly is crucial for identifying and rectifying issues. In turn, this will help ensure you don't unwittingly fall even further behind, which could have a detrimental impact on your business.

Understand Your Potential

By looking at industry growth and performance stats, you can understand the potential of your own eCommerce business. For example, look at competitive data, such as advertising fee ratio, to see how it aligns with sales growth. You can use performance benchmarking to see what is possible for you to achieve. And, give you some definitive ideas as to how to achieve it.

Adjust Your Outgoings Accordingly

Benchmarking will tell you if you're paying above average in certain areas of your eCommerce business, such as platform fees. If this is the case, you can look into ways to improve your ratio and cut back on expenditure without harming business growth.

Additionally, if you're advertising fees are above average but your sales figures are average, this would indicate your advertising isn't bringing in the best results. In this case, you can either adjust your ad spend or improve your ad campaigns.

How Does Link My Books Handle Private Data?

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Link My Books takes data protection and security very seriously. We have a responsibility to keep private data secure. As such, Benchmarking ensures complete confidentiality and anonymity amongst businesses by pooling data anonymously and grouping it together. No data is connected to any one business and so all businesses taking advantage of Benchmarking receive the same level of insight.

Link My Books: The Best Tool for Competitive Benchmarking

Competitive benchmarking in the eCommerce sector can give you valuable insights into how your business compares with industry norms. However, without the right tools, consistently and accurately analysing each benchmark takes considerable time and effort.

Link My Books simplifies this process. Incorporate our feature into your overall business strategy to understand when you need to boost sales growth, lower your refunds, and decrease your fees.

Get your free Link My Books trial today and see how Benchmarking can enhance your business.

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