Marketing
E-Commerce KPIs Beyond Traffic and Conversion: Weeks of Stock
March 14, 2018 Santiago Oleas

Measuring the success of our e-commerce sites is very often based on traffic, conversion and basket value. We are measuring the effectiveness of our websites and how well our customers respond but we should also look at measuring  how well our products are selling. In this post we will look at how to measure sales performance of our products by using the Key Performance Indicator (KPI) of Weeks of Stock.


Once an item is available for sale we can determine if we have the right amount of inventory by calculating the Weeks of Stock using Units as the basis.

WeeksOfStock


For example, assume you have 6 000 units of inventory and your sales for the last 5 weeks were:

  • Week 1: 450

  • Week 2: 473

  • Week 3: 512

  • Week 4: 401

  • Week 5: 398


Our average for the past 5 weeks is approximately 447 units per week. We therefore have:

WeeksOfStock

 

If you apply this formula against all your items you will get a sense for which of your items are selling relatively well compared to each other. The ones that have a low Weeks of Stock number are likely to be your best sellers and may need to have more inventory to come in. Those that have a relatively high Weeks of Stock number are moving slowly and may require a promotion or price reduction to help move that inventory, and any future orders for this item that could be delayed or cancelled should be reviewed as well.  

 

WeeksOfStock

 

WeeksOfStock

Looking at the chart, we can clearly see that Item A is selling relatively well and if we have a replenishment lead time of 5 or more weeks, we are likely to run out of inventory in about a month’s time. Item D on the other hand is selling slowly and will take about 6 months to go through its inventory.

 

What’s important to remember is that Weeks of Stock normalizes our products but it does not give us the big picture. We need to consider how much inventory each item represents, how much is its selling price, what is its Gross Margin and any inventory carrying costs.  If Item D is a $1.00 pencil with only 100 units of inventory it is less of an issue than if it represented 100 000 units of a $15 000 item.

 


Questions to consider:

  • What is the right number of weeks to base your average weekly sales?

  • How do you factor in seasonality to ensure you aren’t incorrectly using past performance ?

  • How do you leverage this metric to help you develop a better collection in the future?

  • How do you combine this metric with e-commerce KPIs like abandoned carts and conversion to gain better insight?

  • What items should be included in determining the average weeks of stock so you don’t skew your basis incorrectly?


Contact us to discuss these ideas and more.


Santiago Oleas
Solution Architect