Boards need fewer metrics, not more

Most ecommerce teams can produce hundreds of metrics. A board does not need them. A board needs a compact set that reveals whether the business is creating attractive growth, becoming more fragile, or accumulating problems that will surface later.

I would rather see eight well-defined measures consistently than a board book filled with screenshots from operating dashboards.

1. Net revenue by channel

Start with revenue, but separate channels that have materially different economics. Amazon 1P, Amazon 3P, DTC, Walmart Marketplace and wholesale should not be blended if doing so hides how the business makes money.

2. Contribution margin by channel

Contribution should include the costs necessary to generate and fulfill the revenue: marketplace fees, fulfillment, advertising, returns and other channel-specific expenses. The exact definition can vary by company. What matters is that the board uses a consistent definition and sees the trend.

3. Customer or platform concentration

Track the share of revenue and contribution dependent on major platforms or customers. Concentration can be rational, but the board should know the economic consequence of a policy change, account disruption or sudden deterioration in channel performance.

4. Paid-media dependency

The board does not need campaign-level ROAS. It does need to understand how much incremental revenue and margin depend on paid acquisition, whether acquisition costs are rising, and whether the business is building durable demand or renting it.

5. Inventory productivity

Days or weeks of supply, aging inventory, stockout frequency and write-down exposure should be visible in a form the board can interpret. Inventory problems often appear as marketing or revenue problems before they are recognized as working-capital problems.

6. Channel-control health

Measure the presence and economic effect of unauthorized sellers, distributor leakage, pricing inconsistency and Buy Box loss where relevant. If these issues materially affect revenue or margin, they belong in governance reporting.

7. Return and defect economics

Returns, refunds, chargebacks and product defects can create a large gap between reported demand and economic value. Boards should watch trends rather than isolated rates.

8. Exit-readiness indicators

Can the company reconcile channel revenue, inventory and contribution cleanly? Are marketplace accounts, supplier relationships and data ownership documented? These are not quarterly financial metrics, but they indicate whether a future buyer will trust the operating system.

The board scorecard

The scorecard should show current period, prior period, plan and trend. If a metric changes materially, management should explain the cause and action. The board’s job is not to manage the metric. It is to understand what the movement says about the business.

I work with PE sponsors, CEOs and boards where ecommerce, marketplaces or channel complexity can materially affect enterprise value. If that is a capability gap on your board, I am always interested in comparing notes.

James Thomson – former Amazon executive, four successful exits, board member/investor, and author of two books on marketplace governance and brand strategy.