Introducing Velocity Insights: Unleash the Power of Data

Working with e-commerce businesses day in and day out, we discovered two significant pain points. 

Firstly, the nature of these businesses is such that they are spread across various online platforms. These include online marketplaces, self-owned websites and various digital marketing platforms.

The challenge here is that these platforms have varying UIs, display different metrics, and often have custom definitions for each metric. As a result, founders have a hard time toggling between platforms, monitoring all these metrics, and making sense of them.

Secondly, in this sea of metrics, founders have a hard time pinpointing the ones that need to be tracked. Further, no two e-commerce businesses are the same and will have their own definition of success and metrics to quantify the same. A business with a low average order value might focus on its customer retention while one with a high average order value might focus on the customer acquisition cost. There are thousands of metrics that you can track across platforms. But as a founder with a jam-packed schedule, which ones deserve your attention?

More metrics, less clarity.

We thought about these problems extensively and arrived at the conclusion that there has to be a better way for a founder to stay on top of relevant metrics. 

With immense pleasure, we bring to you Velocity Insights – a one stop destination to track your online business’s performance every day. Insights consolidates the six key metrics we believe every D2C business should track in one comprehensive report delivered.

Sample Velocity Insights report.

While deciding on the metrics that should be monitored by an online business, we utilised an approach driven by first principles to select the ones that would enable a founder to keep a finger on the pulse of the business. 

Current Velocity Insights metrics and definitions.

More on each of these metrics and how they can be coupled with others to derive actionable insights below.

To add a dash of fun, we’ll be using Indian cricket team analogies to explain how you can hit the ball out of the park with Insights

Net Sales

Why monitor net sales? 

Net Sales helps you keep track of your growth curve and revenue trajectory. The exclusion of discounts and returns from the gross sales number ensures that the revenues represented via this metric are closer to realized cash flows. 

What do I take away from fluctuations in this metric?

Net Sales as a metric will keep you true to the actual performance of your business. If you see variations that stand out; this might be because of accelerating/decelerating growth, changes in discounting or return rate.

If your discounting and returns have remained the same, a change in net sales is purely attributable to the growth trajectory of your business.

Monitoring this metric during periods where you are running discounts will help you understand the impact of such discounts on your top line.

Additionally, this metric will also help you keep track of your returns. An increasing return rate is a major red flag, given the logistics costs associated with the same and their impact on profitability.

Indian Cricket Team Analogy

All in all net sales is the Rahul Dravid of metrics – the wall on which you build everything else.

Orders

Why monitor orders?

Order count is simply the total number of orders placed in a given period. An analysis of this metric can help you keep track of fluctuations and predict inventory cycles.

What do I take away from fluctuations in this metric?

Using this metric, you can forecast demand and plan your inventory to cut costs. All B School students play the Beer Game at some point, to understand supply chains. All walk away with the same lesson, monitoring customer demand continuously is key to preventing stockouts and pressure on production.

Tracking order count accompanied by detailed inventory tracking is essential to accurately forecast inventory levels.

Indian Cricket Team Analogy

Order Count is the Virendar Sehwag of metrics. When the stars align, it rains brilliance. When not, it can forecast doom.

Average Order Value (AOV)

Why monitor AOV? 

This metric tells you how much you earn on average from each customer. This matters since the long-term value of each customer is directly tied to the frequency of their orders and the AOV. A higher AOV can lead to healthier margins for your business given fixed costs associated with processing one order such as labour cost and logistics (in certain instances) can remain largely fixed.

What do I take away from fluctuations in this metric?

Your AOV is based on the type of product you are selling, your pricing strategy and the tier of customers who procure your products. 

If your AOV is decreasing, it could result in lower margins for your business in the long run. If proactively monitored, a declining AOV can help drive decisions around pricing and bundling to increase the customer’s basket. 

Indian Cricket Team Analogy

AOV is like Dhoni. When all else fails, it has the ability to bring clarity to the table. 

Ad Spend

Why monitor Advertising Spends?
Advertising spends are the primary expenses that drive revenues for D2C businesses, therefore tracking the primary cost center is essential. Additionally, given most D2C businesses outsource their digital marketing to agencies, tracking these expenses and gaining visibility into how your ad dollars are being spent becomes even more critical.

What do I take away from tracking this metric?

If your ad spends are constantly rising but your net sales value remains flat, it means one of two things – either your marketing is futile and you aren’t acquiring new customers or your marketing expense is driving revenues and you’re not retaining customers. Not a pretty situation either way.

Additionally, tracking the trajectory of advertising spends in conjunction with net sales can also help gauge the impact that activation of new campaigns has on sales.

Indian Cricket Team Analogy

Advertising Spends are like Jaspreet Bumrah. Undroppable and if utilised effectively, can deliver victory. 

Blended Customer Acquisition Cost (CAC)

Why monitor CAC?

Blended CAC is the cost of acquiring a new customer. The economics of any D2C business are primarily dependent on this metric coupled with the customer retention rate. 

What do I take away from fluctuations in this metric?

This metric will help you figure out the right advertising platform, campaigns and targeting settings that you should utilise in your digital marketing efforts. Monitoring changes in the CAC coupled with changes made to your campaigns recently will help you stay on top of your marketing game. This knowledge will help you juice your ad dollars to the max.

Utilised in conjunction with AOV, gross margins, and other fixed costs, every business should have a target for their CAC.

Indian Cricket Team Analogy

CAC is the Jadeja of metrics. It brings everything together and adds perspective towards strategy in tense situations. 

Return on Ad Spend (ROAS)

Why monitor ROAS?

ROAS is a crucial metric that correlates your ad spends and revenue. ROAS tells you how much revenue your business is generating as a multiple of your digital marketing spends.

What do I take away from this metric?

This metric is directly related to the effectiveness of your marketing campaigns and customer retention. 

If you’ve recently started your business, your ROAS will solely be dependent on the effectiveness of your campaigns to drive sales. As time passes, if you see your ROAS holding constant at a certain level, it implies that your retention is probably not great. 

Further, you can leverage this metric by comparing your ROAS against the industry average ROAS to understand where you stand vis-a-vis your competition. 

Indian Cricket Team Analogy

ROAS is the Yuvraj Singh of metrics. A simple metric and a simple player. A high ROAS and a tournament where Yuvraj consistently hits it out of the park, both bring good times.

The Velocity Insights beta is live and free! To sign up, all you need to do is connect your online sales and marketing channels. This is a one-time activity that will hardly take under two minutes. Once you connect your accounts, Insights will consolidate your data and deliver a report to you every morning via WhatsApp. 

Currently, you can integrate Insights with your Facebook, Google and Shopify accounts. We are also working towards enabling several more platform and marketplace integrations, presenting more metrics and enabling industry benchmarking that can be utilised to add velocity to your venture.

Have any questions for us? Drop a comment and we’ll be happy to answer them.

Velocity provides revenue-based financing of up to Rs. 2 crore to online Indian businesses. We currently cater to direct-to-consumer (D2C) and e-commerce brands. To grow your business with us, apply now and get funded within 7 days.

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