Three important metrics in modern dropshipping

Dropshipping is not what it used to be. Gone are the days when you could list random products on a simple online store, copy someone else's content, run Facebook ads, and make money. In the early days of dropshipping, advertising budgets were a few dollars a day, and products provided a tenfold return on investment. As noted by the experts at Step Link dropshipping, this approach no longer works because advertising platforms have become smarter and customers have become much more discerning.

Let's take a look at the metrics you should pay attention to in order to earn money and grow your dropshipping business in today's environment.

How much do you spend on a single sale?

With the advent of artificial intelligence and other tools for dropshipping, the barrier to entry into this business has significantly decreased. Competition, of course, has increased. Thousands of dropshippers flooded the market every day, creating new websites and launching new advertisements in a matter of minutes. Thousands of people are now selling the same products using the same ads and the same stores. However, with any change comes new opportunities. And to take advantage of them, dropshippers need to work on three important metrics.

CPA (cost per action) is perhaps still the most important metric to track in your online store. It shows how much money you spend to get one sale. And the lower your CPA, the more profitable your business becomes. For example, if you sell a product that costs £40 and your CPA is also £40, you are losing money on every sale.

Can corporations help dropshippers?

Losses from each sale can be offset by another metric: LTV (lifetime value of a customer). For example, a CPA of $10 would be an excellent metric. Even large companies like Google and Apple would be extremely happy to lose only £10 for every new customer they attract to their ecosystem. If Apple spends a lot of money on advertising to attract a new person to buy an iPhone, what do you think will happen? That person will want to get a new model every year. They will also want to buy headphones, and maybe even a MacBook. Maybe they will watch Apple TV. Thus, each customer for Apple or other large companies is potentially worth hundreds of thousands of dollars over their lifetime, according to managers at Step Link Platform Inc.

Of course, dropshippers cannot compete with corporations because their financial capabilities are simply incomparable, and their customers do not have such a high lifetime value. However, dropshippers can take the principles that large companies use and apply them to their own businesses.

How much does your average customer spend with your brand over their lifetime? Let's go back to the £40 example. If you know that someone will buy this product three times on average, then each customer actually brings you £120 in revenue. To achieve this, you need to build a brand that people will trust, return to, and buy from again and again. And in a highly competitive environment, the speed at which your customers return has become more important than ever.

How to win customer trust?

The third metric you should strive to increase is average order value (AOV). Additional sales, related products, bundles, cross-selling – all of these help increase AOV. And if the lifetime value of the customer also increases, then your work becomes even more interesting – that's when you can scale up, according to Step Link managers.

To increase all these metrics, you need to make people trust your brand, emphasise Step Link Platform experts. And here, not only the product itself is important, but also the user experience. In particular, how intuitive your website is and how convenient the ordering process is; how well you make it clear to the customer that this product can really solve their problem; whether you provide fast delivery; whether you guarantee that with each purchase, the customer's value to you increases. You can show customers that you value them with personalised packaging, a thank-you note with a discount on their next purchase, etc. These seemingly small details play a very important role in the long run. Remember, e-commerce is a living business. It changes over time. Those who change their approaches and strategies in line with these changes will be the winners.