Falcon Team

Essential eCommerce KPIs

Essential eCommerce KPIs: What they are and how to calculate them.

In the increasingly competitive landscape of eCommerce, successful businesses aren’t leaving crucial business decisions up to chance. They are committed to tracking and evaluating key performance indicators (KPIs) to measure the progress and profitability of vital business operations. Simply put, KPIs are metrics that help measure the performance of a specific area or activity within your business. By tracking a few essential eCommerce KPIs, you can gain valuable insights into your eCommerce business's performance and identify areas that need improvement. This post will take a closer look at the essential eCommerce KPIs and why they are important. 

Customer Acquisition Cost (CAC)

The customer acquisition cost KPI measures the amount of money you need to spend to acquire a single customer. The CAC metric evaluates the total sales, marketing, and overhead costs required to gain a new buyer during a specific time period. By tracking CAC, you can gain insight into how much you spend to attract new customers. How to calculate CAC:

Average Order Value (AOV)

AOV measures the average amount of money your customers spend when purchasing from your store. You can gain insight into how your pricing and promotions impact customer spending by tracking this KPI. You can also use this KPI to identify which products are most popular and which ones are not. How to calculate AOV:

Customer Lifetime Value (CLV)

CLV measures the total amount of money a customer will spend at your store throughout their lifetime. By tracking this KPI, you can gain insight into how valuable each customer is to your business. This can help you identify opportunities to increase customer loyalty and which customers are most valuable to your business. How to calculate CLV:

Conversion Rate

The eCommerce conversion rate is a metric used to measure the percentage of visitors to an online store that makes a purchase. This is an essential metric for any online business to track as it indicates how successful their website is in turning visitors into customers. The higher the conversion rate, the more effective the website is at converting visitors into customers.

To track the eCommerce conversion rate, you will need to set up a tracking system such as Google Analytics or use a third-party service such as HotJar or Crazy Egg. These tools will allow you to see valuable data such as the number of visitors, purchases, and the overall conversion rate. By tracking the eCommerce conversion rate, you can identify potential improvement areas and optimize your website to increase your sales. How to calculate conversion rate:

Net Profit

Net profit is one of the essential eCommerce KPIs to track and consists of the amount left over after all expenses are paid. It is the amount of money that a business has earned after all costs have been deducted from the total revenue. Net profit is one of the most critical metrics for a company to track, as it is the ultimate indicator of a business's overall financial health. Businesses that track their net profits over time better understand their overall financial performance. It is calculated by subtracting the total expenses from the total revenue to get the net profit.

Cost of Goods Sold (COGS)

The Cost of Goods Sold (COGS) is the total cost of inventory a business sells over a period of time. It includes the cost of materials, labor, and overhead associated with producing goods and services. Tracking COGS is important for businesses to accurately measure the profitability of their products or services. Companies should track COGS regularly to identify areas of improvement, such as reducing production costs or optimizing inventory levels. Additionally, tracking COGS can help businesses estimate their future expenses, such as anticipating future inventory needs or calculating expected profit margins. Check out this post by Investopedia for more information about how to calculate COGS.

Shopping Cart Abandonment Rate (SCAR)

The shopping cart abandonment rate (SCAR) is the percentage of users who add items to their shopping cart but fail to complete their purchase. This happens for various reasons, including slow loading times, a complicated checkout process, or a lack of trust in the website. Tracking SCAR is vital to understand customer behavior and finding ways to increase conversions. In any case, you can measure it using analytics tools like Google Analytics or setting up conversion pixels on the checkout page.

The Shopping Cart Abandonment Rate is calculated by dividing the total number of completed purchases by the number of shopping carts created. Subtract the result from one and then multiply by 100 for the abandonment rate. Analyzing the data and understanding the reasons behind the abandonment can help businesses identify the areas that need improvement and optimize their checkout process.

Customer Engagement

Customer engagement measures how engaged customers are with your store. You can measure it through metrics such as page views, time spent on site, and social media engagement. By tracking this KPI, you can gain insight into your marketing campaigns and how effective your customer service is. Calculating your customer engagement score includes many factors, so it will be a bit of trial and error but check out this post from Salesforce to get started.

How working with a 3PL can improve essential eCommerce KPIs

Working with a quality 3PL logistics company can improve several essential eCommerce KPIs. Specifically, a 3PL helps drive down margins, improving overall profits. While this directly affects net profit, it indirectly affects customer lifetime value, engagement, and cost of goods sold. Thus, working with a 3PL can lower your transportation costs, improve customer satisfaction, and gain time to focus on your business's core competencies. There are many benefits associated with working with a 3PL. 

Summing up, it is vital to track a few essential eCommerce KPIs. Regardless of the KPIs you use, monitoring and reviewing the data helps you gain valuable insights into how your eCommerce business is performing. This allows you to make informed decisions about optimizing your business for success. Talk to one of our agents today to learn more about how Falcon Fulfillment can improve your essential KPIs.

Get Started

by Falcon Team

6 Tips to Increase Average Order Value (AOV)

6 Tips to Increase Average Order Value 

Increasing average order values is an essential component of success for eCommerce businesses as it can significantly boost profitability. Not only does increasing the average order size mean more income for the company, but it also increases customer loyalty and satisfaction. Additionally, when customers spend more on one order, the shipping cost is spread out across more items, leading to reduced costs for the business. Accurately forecasting sales and revenue based on average order values improves inventory management and provides insight into crucial investment decisions. This post will discuss average order value (AOV), how to calculate it, and 6 tips to increase it.

Average Order Value (AOV) Definition

Average order value (AOV) is the average dollar amount spent each time a customer places an order. In other words, it is the average amount of money a consumer spends each time they visit the store.

Average Order Value Calculation

To calculate your company’s average order value, divide total revenue by the number of orders. 

AOV is a key performance metric that helps determine consumer purchasing habits. Knowing the AOV is important because it allows you to evaluate your sales and marketing efforts. For example, let’s say that in March, your web store’s sales were 20k, and you had a total of 1k orders. 20k divided by 1k = $20, so March’s monthly AOV was $20. Because of the high cost per acquisition for customers, it is in your best interest to generate the maximum revenue from the consumers visiting your store. This is why profitable businesses implement strategies to increase the AOV as much as possible.

Tips to Increase AOV 

There are several strategies to increase AOV and compel your customer to buy more products or more expensive products. Increasing the average order value occurs across the entire sales and marketing funnel. Any idea or promotion encouraging a higher dollar amount at checkout will increase AOV. Here are a few common tips to increase AOV. 

• Offer discounts for larger orders: By offering customers discounts for larger orders, customers are more likely to purchase more items at once to take advantage of the savings. 
• Cross-selling: promote additional product add-ons that are common with a specific purchase. For example, promote buying replacement bulbs for LED flashlights, batteries, etc. 
• Upsell items: Suggest more expensive items related to the primary items customers purchase. Highlighting best-selling items that are slightly more expensive is a great strategy to increase AOV. 
• Bundle items: Create packages of related products and offer them at a discounted rate. This encourages customers to purchase more items, providing value for their money. To implement this strategy, determine what products work together and create a bundle. Working with a quality 3PL can help you pick and pack effectively. 
• Offering Loyalty Discounts: If you have a rewards or loyalty program, offer those repeat customers better discounts for higher purchase amounts.
• Offer free shipping thresholds: Offer free shipping for customers who meet a minimum spending threshold. This is one of the most effective strategies for increasing AOV. You might think offering free shipping will cut your profit margins, which is possible if you don’t carefully calculate. Here is a formula to help bake the shipping costs into your product pricing, so you don’t lose money!

How working with a 3PL can help increase AOV.

Your shipping strategy will play a massive part in the success of increasing your AOV. Working with a quality 3PL can ensure your company offers the expedited shipping options that consumers desire. Additionally, you benefit from lower shipping costs due to their relationships with multiple carriers and high-volume discounts. Lastly, working with a 3PL with multiple distribution warehouses will allow your company to lower shipping costs because products travel shorter distances to customers. Talk to one of our agents today if you want to learn more about how Falcon Fulfillment can help your business grow. 

Get Started

by Falcon Team

5 Technologies to look for in a 3PL

5 Technologies to look for in a 3PL

Partnering with a tech-forward 3PL is vital for any business that wants to stay competitive in today’s ever-changing market. A tech-forward 3PL can provide companies with the latest technologies to remain efficient and successful. This can include cloud-based logistics management, automated inventory management, warehouse management systems, and more. Leveraging these technologies can help companies reduce costs, increase efficiency, and improve customer service. A tech-forward 3PL can also help companies scale their operations and make it easier to manage their supply chain. This post will discuss 5 essential technologies to look for in a 3PL.

Benefits of partnering with a tech-forward 3PL:

1. Reduce errors and save time
2. Make data-driven decisions vs. gut feelings
3. Improve customer satisfaction

5 types of technologies to look for in a 3PL:

Omnichannel eCommerce Integrations

 3PL partners with robust integrations offer your customers an authentic omnichannel fulfillment experience. Having a partner with a genuine omnichannel approach will ensure your clients have a seamless purchasing experience no matter where they decide to buy. Investigate which platforms and marketplaces have turnkey integrations or provide a dedicated account specialist to link all sales, delivery, and customer service programs.

Warehouse management systems

A warehouse management system (WMS) is essential for 3PLs (third-party logistics providers) to manage their day-to-day operations. It tracks inventory, optimizes the warehouse layout, and provides real-time visibility into order and shipment status. WMS simplifies 3PLs' supply chain operations and enables them to deliver goods and services faster, improve customer service, and reduce overall costs. It also helps gain visibility into inventory and warehouse operations, allowing customers to make informed decisions quickly. Furthermore, WMS provides 3PLs with the necessary tools to keep up with ever-evolving customer demands and remain competitive in the logistics industry.

Automated inventory management systems

Of the 5 technologies to look for in a 3PL, an automated inventory management system is the most essential. This system can streamline the inventory tracking process, providing real-time updates on stock levels, estimated delivery times, and other important information. Additionally, it can help to keep track of orders, ensuring that customers receive their orders in a timely fashion and that the inventory is managed correctly. Automated inventory management systems can also help reduce stock-outs risk, leading to lost revenue, frustrated customers, and inefficiency. By partnering with a 3PL that uses an automated inventory management system, an e-Commerce business can ensure that they always have the right amount of stock on hand to meet customer demand.

Automated order fulfillment system

Utilizing automation in order fulfillment helps eliminate costly errors and delays associated with manual processes, resulting in improved customer service and satisfaction. Automated order fulfillment also increases scalability and flexibility, allowing 3PLs to manage and process orders more efficiently and cost-effectively. The system can be multifaceted with several integrated technologies or a singular system managing multiple aspects of the fulfillment journey. Whether it is a proprietary system or several integrated programs, automation technology like this is an essential component of tech-forward 3PLs.

Returns management technology

Leveraging returns management technology to streamline returns and exchanges has become vital to eCommerce operations. This technology is essential for ensuring customers are satisfied, and their returns are handled quickly and efficiently. By leveraging automation and tracking systems, retailers can manage their returns and reduce their associated costs. Furthermore, retailers can track and analyze their return policies, allowing them to make informed decisions.

Technology is the future of eCommerce, and brands that effectively utilize it will surpass their competition. Partnering with technologically savvy 3PLs can help eCommerce brands leverage the best programs in the industry without directly investing in the infrastructure. Not only does partnering with a 3PL save money, but it will also improve customer satisfaction, order fulfillment speed, and inventory management accuracy. Falcon Fulfillment specializes in omnichannel fulfillment with a tech-forward approach. Talk to one of our specialists today if you want to learn more about how we can help your brand streamline order fulfillment.

Get Started

by Falcon Team

How to Find a U.S. Manufacturer to Diversify Your Supply Chain

How to Find a U.S. Manufacturer to Diversify Your Supply Chain 

Most eCommerce businesses have suffered with the supply chain in the last few years. With the surge of online orders during the height of the COVID pandemic, many companies had severely delayed or non-existent shipments. Brands that had established relationships with US manufacturers survived and thrived because they could pivot production to a domestic provider quickly. Those without established relationships were at the mercy of an unpredictable transportation industry and gridlocked supply chain. If 2020 taught us anything, it was to diversify our supply chain to include US manufacturing, if only to ensure production in an emergency. This post will discuss how to find a US manufacturer to diversify your supply chain.  

PROS of U.S. Manufacturing

• American manufacturing and labor standards are higher
• No language barrier
• Marketing appeal of being made in North America
• Easier to verify reputable manufacturers
• Faster shipping time
• High intellectual property rights protection
• Greater payment security and recourse
• American-made products are often of higher quality.
• U.S. production supports the national economy.
• Easier to manage quality control

CONS of U.S. Manufacturing

• Higher manufacturing costs
• Less product choice (some products are no longer manufactured in the U.S.)

Steps to find a U.S. manufacturer

This article assumes product development has already begun or is in progress with a supplier (overseas or otherwise). This means you have a viable product and know the basic requirements necessary for production. While we won’t go into detail about this aspect, it is crucial to understand the vision for your product, what type of manufacturer you require, and any special services or qualities needed in a supplier.

Step 1 - Research

Identifying a U.S. manufacturer is the first step in finding a domestic manufacturer. International supplier directories like Alibaba make it easy to discover global manufacturers. There are similar domestic directories to begin discovering local suppliers.

Online domestic directories

• ThomasNet - Has been around for 120 years and has more than 500k businesses and suppliers listed. They are one of the best places to begin looking for a U.S. manufacturer. 
• Maker’s Row - This paid service helps locate manufacturers and developmental professionals to improve or refine your product offerings. Plus, they have a specific small batch option if your U.S. supplier is not your primary supplier. 
• MFG - MFG is a marketplace primarily for plastic, metal, or rubberized parts production. Companies needing machining services, assembly, injection molding, metal stamping, and metal fabrication would do well to use MFG. 
• Kompass - Kompass is a searchable marketplace with more than 70 countries on the site but is filterable to include online U.S. suppliers. Due to vendors ranging from lawyers and insurance agents to manufacturers and trading companies, the directory is extensive but isn’t simple to navigate. However, it is still helpful if you use the filtering mechanism well. 
• Council of Manufacturing Associations Member Organizations - This is a lengthy list of sub-categorized organizations and member manufacturers in the (National Association of Manufacturers). It is a hub for news, policy, and updates for the manufacturing community. This is a good resource if you have a good idea of what type of manufacturer you are looking for. 

General search engine results

You can also research manufacturers directly via Google or Safari, etc. Keep in mind most manufacturers focus on creating quality products rather than boosting their SEO performance. Therefore, you might need to scroll to the second, third, or tenth search page to find what you are looking for. Nevertheless, finding U.S. manufacturers through a search engine is still viable. Ensure you use terms like distributor, wholesale, etc., in your search to help boost your results.

Referral

A direct referral is one of the best ways to find a reputable U.S. manufacturer. Make sure to leverage your professional network to reach out and see if anyone knows of a supplier who could help you. Don’t be afraid to contact companies that potentially use a similar manufacturer and see if they wouldn’t mind sharing their contact. E.g., A shoe company specializing in fine leather would be a good source if your company produces leather handbags or backpacks.

Trade Shows

A trade show is a great place to source contacts in local manufacturing. Suppliers often attend these events to secure new buyers and showcase new capabilities. Furthermore, trade shows are a gathering of industry leaders and influencers under one roof. Finding multiple suppliers and having initial conversations at one event is possible.

Step 2 - Evaluate the shortlist

Once you have researched potential manufacturers and have a shortlist, it is time to evaluate each one. This process involves collecting information and investigating their capacity, pricing, lead times, and cultural values. 

Things to consider when evaluating a potential U.S. manufacturer:

• Check certifications - Each industry will have its own specific certifications and value-specific certifications like organic, sustainably sourced, etc. If you are still determining what certifications to look for, consider researching the U.S. Consumer and Product Safety website for guidance.
• Gauge financial stability - To protect your own company, you must evaluate the financial viability of your vendors. Start by asking for a financial statement and have it reviewed by a qualified CPA. They can determine whether a supplier has adequate resources to maintain business operations. 
• Asses weather-related risks - Assessing weather complications might seem silly until your manufacturer shuts down because of a hurricane for 3-6 months or longer. Ensure you know the probability of weather-related delays and have insurance should the “unthinkable” happen.
• Geographic proximity to customer base - The closer your manufacturing facility is to your customer base, the faster shipping and procurement occur and the less it costs. Therefore, it is a key factor in deciding which manufacturer to partner with. 
• Scaling capability - Evaluate how flexible your supplier is with order quantities. You may find that your original choice, which offered preferential small batch order costs, cannot meet greater demand. This is why proper sales projections are crucial in determining your scalability needs.  
• Contact references - Manufacturers confident in their work and service have no problem sharing references. Ask for at least 2-3 references and interview them about their experience with the supplier.
• Understand lead times and delivery success statistics - Understanding lead times and success metrics are vital to choosing the right manufacturing partner. If the potential supplier has lead times that are incongruent with your ordering cycles, it might be better to choose a different partner.
• Scrutinize payment terms - Many manufacturers will ask for full payment upfront when working with a new company. However, ask if payment terms become more flexible over time. Determine what your company needs regarding payment terms and negotiate to that end without losing the relationship.

Step 3 - Get into the nitty gritty

Once you have narrowed your shortlist and have decided to move forward with negotiating a contract with a supplier, it is time to dig into the details. Several questions will be crucial to finding a U.S. manufacturer that will be the best fit for you. 

• What is the process to ensure quality control for your product? 
• What are the shipping costs?
• What are the minimum order quantities (MOQs)? 
• What assurances do they offer to protect your intellectual property? Do they offer exclusivity?
• What do your clients say about you? Can you contact them?
• What will be the CPU (cost per unit)? 
• What are their policies on defective products?
• Do they support sustainable and ethical production standards?
• Do they have any value-added services that would be helpful? I.e., assembly, engineering, prototyping, etc.  
• What are their communication patterns, style, and platforms? Determining how you will communicate is vital to a healthy partnership and resolving issues as they arise.

While this is a partial list, it should give you a good understanding of whether or not the manufacturer will be a good fit.

Step 4 - Request a written contract

The final stage of selecting a U.S. manufacturer involves requesting a written contract outlining working together. It is best to request a proposal from a few different suppliers so that you can make the best decision for your company. Price isn’t the only contributing factor, but it will play a significant role. Therefore, it is essential to review the pricing and payment terms carefully. Ensure that all fees and timelines are clearly outlined. Once you have reviewed the contract terms and are satisfied, a partnership can begin.  

A great way to find a U.S. manufacturer to diversify your supply chain, is by asking your 3PL provider. If they are anything like Falcon Fulfillment, they have solid relationships with existing suppliers with a regular cadence with the distribution facility. Furthermore, working with a quality 3PL can help to create a more resilient supply chain regardless of your manufacturing partners. If you want to learn more about our partners and how we can help bolster your supply chain, contact one of our agents today.

Get Started

by Falcon Team

6 Ways to Improve Picking Accuracy

6 Ways to Improve Picking Accuracy

Consumers expect accurate orders and are leveraging eCommerce to meet the needs of their busy lives more than ever. It is one thing when an order is delayed, but it is more than a frustrating inconvenience when it is entirely inaccurate. Just one picking error erodes customer trust and reduces profitability. Not only that, but picking errors can kill warehouse productivity leading to a loss of revenue and profitability. Therefore, it is vital that companies pay attention to order accuracy. Here are 6 ways to improve picking accuracy and uphold customer satisfaction.

The Importance of Order Picking Accuracy

Simply put, the order-picking process pulls items the customer purchases from inventory and packages them for shipment. It is one of the most labor-intensive warehouse or fulfillment center tasks. Order picking typically accounts for 55% of warehouse operating costs. It often requires the most human touch, which means it also is full of the potential for human error. Furthermore, the process requires a significant amount of heavy physical labor, making it slow and potentially dangerous. This is why continually improving order-picking accuracy and efficiency is crucial to a business's success.

6 Ways to Improve Picking Accuracy

Analyze Product Velocity

Product velocity refers to the quantity and frequency of the SKU picked over a designated time. Evaluating product velocity ensures commonly ordered items are strategically located within easy access to picking areas. Some best practices when considering the velocity of a SKU are:

• Determine fast, medium, and slow movers and slot them accordingly (i.e., slow movers further from picking areas).
• Examine and evaluate picking days, averages vs. optimal
• Store high-velocity SKUs in a readily accessible location for easy selection and replenishment.
• Determine if individual SKU velocities are affected by seasons or promotions.

By properly analyzing product velocity you are able to layout warehouse storage in the most efficient manner to improve picking accuracy and order fulfillment cycle times.

Strategically organizing inventory

Strategically organized inventory helps to improve picking accuracy. Some warehouses store inventory by delineating zones where similar items are grouped together. This type of organization is used when zone-based and batch-picking is implemented. Slotting is another method where cases are strategically placed for easy access and replenishment. Regardless of how your inventory is stored, it must be organized, so pickers have the highest probability of selecting the correct items.

Establish picking routes

Establishing a warehouse traffic flow or picking routes will enable pickers to move through the warehouse seamlessly to fulfill orders. Creating picking routes helps to reduce backtracking through aisles which is costly and time-consuming, as well as overcrowded aisles.

Maintain accurate inventory data

An organized and properly routed picker makes no difference if, when they go to select a product, it is misplaced or out of stock. To improve picking accuracy, it is vital to have a precise foundation of inventory storage, quantities, and locations available in real time. Implementing an automated inventory management system can dramatically improve inventory data.

Analyze error data

You cannot improve what you don’t track. Review picking accuracy data often to determine when problems are occurring. It can give operations insight about staff that are more suited to heavy-picking tasks. Not only that, but it can also provide measurable insight into how to incentivize pickers to improve order accuracy. Lastly, systematic or procedural issues are revealed when reviewing error data.

Use technology

Whether you plan to implement a fully automated warehouse system run by robots or you are easing into new technology, using technology will certainly help level up your picking accuracy. Innumerable solutions have been proven to reduce human error and improve picking accuracy. Here are a few common technology solutions to consider:

• Radio frequency scanning devices - using lightweight, hand-held scanners to read barcodes accurately can help confirm the correct product is picked. These devices eliminate the need to read labels improving speed and accuracy.  
• Visual logistics - rather than using barcode or QR code only, this technology includes images of the product on the scanner and/or visual bin locations
• Pick to light - Pick to light (or PTL) is an order-picking technology that utilizes lights and LEDs on racks or shelves to indicate pick locations and guide pickers through their task. Pick-to-light systems are growing in popularity because they have been shown to increase picking efficiency compared to RF or paper pick lists.
• Voice-directed picking - Voice picking is a hands-free eyes-free system that guides the picker through their task by talking them through it. The systems include headsets and high-tech speech recognition software that is fully integrated with the system of record (WMS, ERP, Inventory System)  
• Conveyor systems - Conveyor systems vary in their function and sophistication. Sortation conveyors are particularly useful in improving order accuracy, as are systems that allow pickers to remain in a single location as items are brought to them directly. Your warehouse size, layout, and product diversity will determine the best conveyor system. 

Whether you implement one or all six ways to improve picking accuracy, it is an important component of successful fulfillment. Customers expect to receive the precise product they order. Business owners and warehouse managers know that picking accuracy is vital to customer satisfaction, but it isn’t always easy to maintain. If picking accuracy is important to your business, but you want to delegate the stress of maintaining the highest standard, let Falcon Fulfillment help. We have a 99.9% accuracy rating and would love to ensure your customers get what they paid for every time. Talk to one of our agents today.

Get Started

by Falcon Team