8 dropshipping KPI metrics to track and how to calculate

DropShipping has become one of the most popular ways to start an Amazon business. But if you don’t know how to track your DropShipping KPI metrics, you might not be making as much money as you could be. In this article, we are going to go through all the Key Performance Indicators (KPIs) that are important to track your dropshipping business. We’ll also show you how to calculate them so you know exactly where your profits are coming from and where they’re going!

There are key performance indicators to track in dropshipping

You’ve started your dropshipping business and you have a good idea of how many products you sell per month. However, there are more KPIs that can help you understand the health of your business. These metrics will give you important insight into where to focus next.

What are Key Performance Indicators (KPIs)?

KPIs are measures that show how well an organization is performing against its goals. The right KPIs will help identify areas for improvement so you can ensure that resources spent on marketing campaigns are generating results and increasing sales, or reducing expenses for campaigns that are not bringing in new customers or generate no repeat purchases to existing purchases – all while using less money than before!

1. traffic

Dropshipping traffic is important because it is the number of people who visit your store. The more people there are, the greater the chance that someone will buy something!

There are several ways to track dropshipping traffic. You can use Google Analytics or AdSense, but I prefer Google Analytics because it’s free and easy to set up. It also gives you detailed information like number of people visited per day/week/month etc., where they came from (location), what page they landed on (landing page), what device they were aiming at your store and more!

Once you have this information at hand, we now need to calculate some metrics based on this data so that we know what is working well in terms of lead generation for our dropshipping business.

2. Conversion rate

Conversion rate is a key metric that every dropshipper should monitor. The conversion rate is the number of conversions divided by the total number of visits. It can be calculated in any way, but it’s best to use Google Analytics as a starting point, as this software tracks your website traffic and provides valuable data on what visitors are doing while on your site.

3. Customer Acquisition Cost

Customer Acquisition Cost: The amount of money it costs you to acquire a new customer.

For example, if you pay for an ad on Facebook and then spend to ship your product to the customer after they place their order, your customer acquisition cost is .

To calculate this number, you’ll need to add up all of your marketing and advertising costs, as well as any other expenses related to drafting new clients (like shipping). Then divide that by the number of new customers who made a purchase during that time.

A good way to think about this metric is: how much should I spend per sale so that I can cover my costs? If we use our previous example again – for Facebook Ads and for shipping, then our answer would be . This means that we now know what it takes to earn a dollar after reimbursing our expenses! Now all that’s left is to figure out how many sales I got over that period?

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4. Total sales

To calculate your total sales, add up the money you earned from DropShipping. This can be done by taking a look at your store’s transaction history and adding up all the numbers on your way to calculate revenue.

The importance of this metric is that it shows how much money has been made in total from dropshipping. The best ways to track this are by tracking income and making sure you have an accounting system that allows for smooth calculations of income, such as accounting software or even just a spreadsheet.

Why is this important?

If you’re interested in growing your business, knowing how much money has been made from dropshipping gives you an idea of where all of your work, time, and energy is going (and how much effort will be required). ).

5. AOV (average order value)

Once you have calculated your total revenue from all orders, you can calculate the Average Order Value (AOV) by dividing this figure by the number of orders. AOV is a good indicator of how your business is doing and can help you identify upcoming trends in terms of what is selling well and what is not.

For example, if your AOV is 0 and you receive 1,000 orders in a month, that means each order averages around 0. If a large percentage of these sales come from a single product or group of products, it may indicate that there is room for improvement when it comes to diversifying your assortment and marketing strategy.

6. Customer Lifetime Value

Customer Lifetime Value (CLV) is the total revenue generated by a single customer over their lifetime.

CLV = Total revenue / number of customers

This metric is important because it measures the value of your customers to your business, which you can use to determine the potential growth of your business in the years to come.

While it’s tempting to focus on short-term goals like click-through rates and conversion rates, it’s important not to overlook long-term metrics like CLV and cost of customer acquisition. (CAC). These metrics will help you make more realistic projections about the effectiveness of your marketing campaigns, whether or not they’re worth continuing, and whether new ones should be launched or not.

7. CLV/CAC Ratio

The CLV / CAC ratio is a good indicator of the profitability of your business. This is the ratio of Customer Lifetime Value (CLV) to Customer Acquisition Cost (CAC). The higher this number, the better.

The CLV/CAC ratio can also help you identify which marketing channels are most profitable and which ones need more attention. If you want to improve your ratio, try experimenting with different tactics and measuring their impact on your bottom line.

There are many ways to calculate the CLV/CAC ratio, but they all boil down to this: -CLV is the lifetime value of your customers (how much they spend over time). -Cac is how much it costs you to acquire a customer.

8. Gross Margin

Gross margin is the difference between revenue and cost of goods sold. If a company sells 0 of products at , the gross margin would be 50%. Gross margins can be used to measure profitability because it tells you how much money you make for each item you sell.

The formula for calculating gross margin is:

Gross Margin = Revenue – Cost of Goods Sold

This calculation can be done using a spreadsheet or calculator.

Conclusion

By tracking key performance indicators, you can ensure that your dropshipping business is performing well. If any of these numbers are off, you’ll know right away and can take corrective action before it gets too big.