Many e-commerce brands only scratch the surface when it comes to understanding their revenue.
But beneath those numbers lies a treasure trove of insights that can transform your business.
The key is knowing how to dig deeper.
In this video, I’m unveiling five powerful ways to analyze your revenue and gain a richer, more profound understanding of your business.
While the first two methods might be familiar, the last three will unlock new levels of insight that can drive your business to greater heights.
If you prefer reading, let’s dive right in with the first one.
1. Month-over-month
This is a staple for most brands, but it’s true power lies in the details.
Month-over-month data offers a snapshot of your revenue trends, providing a rough idea of your business’s direction.
A 20% increase from one month to the next? Fantastic!
However, a deeper understanding requires a bit more nuance.
If revenue goes up 16% from July to August, that can be pretty good.
But the same 16% jump from October to November? That might indicate missed opportunities, especially as the holiday season ramps up.
On the flip side, a dip in revenue from November to December, following the Black Friday surge, isn’t necessarily a red flag.
Sure, we’d love to see revenue keep on growing, but that’s not realistic for that time of year.
The key is to interpret your month-over-month data within the context of your business cycle and industry trends.
This way, you can pinpoint true successes and areas ripe for improvement.
2. Year over Year
Next, we have the year-over-year analysis—a perspective many brands already consider, but one that warrants a closer look.
The true value of year-over-year data lies in its ability to account for seasonality within your business.
Comparing this year’s Black Friday to last year’s Black Friday provides a clearer picture than comparing November to October.
For brands experiencing modest growth, month-over-month data can appear erratic: up 8% one month, 4% the next, down 2%, then up 7%, and down 4%.
While you may be trending upward, the path looks uneven. Year-over-year comparisons, however, offer a more stable view.
By comparing the same month year after year, you can better gauge your annual growth trajectory.
Conversely, if you’re a relatively new brand scaling rapidly, year-over-year data might not be as relevant.
Rapid growth can mask the nuances that this perspective typically reveals.
Understanding your yearly performance in the context of past years helps you identify true growth patterns and seasonal impacts.
Now, let’s move on to the next method, where we’ll uncover even deeper insights.
3. Sales by channel
Next up, we have sales by channel—an often-overlooked yet crucial aspect of revenue analysis.
Many brands start with direct-to-consumer sales on platforms like Shopify, and later expand to Amazon, wholesale, and even retail.
Each of these channels operates almost like a separate business, complete with its own strengths, weaknesses, cost profiles, growth rates, and seasonality.
Take Shopify and Amazon, for example.
On Shopify, you might see a significant spike around Black Friday in November, whereas Amazon’s peak could align with Prime Day in June or July.
And if you’re selling wholesale, then if they also want to take advantage of Black Friday, they’re going to have to order your product 2 to 3 months ahead of time.
So, those big orders might come in August and September.
It can be nice to look at total sales numbers just because they’re so big, but it’s helpful to understand the nuances of each one of those channels.
It’s essential to analyze them individually.
Break down your data to see month-over-month and year-over-year performance for each channel.
This granular approach reveals invaluable insights and helps you optimize strategies for each sales avenue.
Understanding the unique dynamics of each channel enables you to tailor your strategies for maximum impact.
Now, let’s dive into the next method: gross versus net revenue.
4. Gross versus net
Analyzing gross versus net revenue is absolutely crucial, yet it’s often done poorly, if at all.
Many brands tend to focus solely on the net numbers reported in platforms like Shopify, missing the vital details that reveal the true state of their performance.
But those details can give you a much more clear picture as to how you’re performing.
For example, a brand might look at their net sales and see that it went up 3% month over month.
Nothing crazy, but hey, it’s forward movement.
What’s hidden beneath the surface, though, is that that growth was driven by heavy discounting.
So, while gross sales went up 16%, discounts went up 121%.
Here’s why this matters: your cost per unit remains constant, regardless of the selling price.
So, with a 16% rise in gross sales, your cost of goods sold will also increase by 16%.
If your revenue per unit decreases due to discounts, your gross profit will actually decline.
So it may seem like you had more sales, but you’re less profitable.
And again, there’s nothing wrong with that. That can be a viable strategy.
It’s just important that you’re aware of what’s happening.
As a little bonus tip, you can also look at the various components as a percentage of revenue over time.
This way, you’ll be able to notice trends as well as outlying data.
For example, if I look at my discounts as a percentage of revenue month over month over month, I’ll be able to notice if it goes up unusually high or low.
5. Sales by product
Finally, the fifth view, which can often be the most crucial, is analyzing your sales by product.
Understanding which products are truly driving your growth and revenue is essential.
For example, the product generating the most revenue might not be the one you’re putting the most advertising behind.
Then again, maybe you’re advertising it more because that’s an effective product for customer acquisition, but once the customer is acquired, they like buying the other stuff.
One product might be very popular with new customers, but other ones might be much more popular with returning customers.
Or maybe you’ll do a new product launch, and you’ll notice that the sales of that product are going up, but simultaneously, the sales of another product are going down because the new product is cannibalizing the sales of the old product.
So, your overall increase in net new revenue isn’t as high as you’d like.
Digging into sales performance by product can give you a wealth of information, and that’s before we even start talking about the margins on each product.
As you master these methods, you’ll find value in combining them.
So, you can look at your sales by channel over time, and you can also break out the components.
Track discounts for Shopify, Amazon, and wholesale separately, and monitor these as a percentage of revenue to identify trends.
Imagine discovering that your wholesale discount percentage usually sits around 50%, but in April it jumped to 65%.
I might dig into that and realize that a big order came from a massive customer that had negotiated a very strong discount.
Not all of these methods will be equally relevant to your business, but the real value lies in understanding these tools.
This way, you can use them effectively to gain deeper insights into your financial performance.
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