In order to organise your inventory & discount your products effectively, you’ll need to learn your ABC’s. It’s a straightforward analytics strategy on what to do with your best & worst performing stock. There are various methods to get through your inventory but this is the one we’ll focus on today. Effective, methodic discounting will allow you to squeeze every last drop of profit from your current product range.
Getting through your stock is about profitability. Being profitable will mean reassessing your product performance regularly. You should aim to do this process every 28 days.
The ABC analysis is loosely based on the 80/20 rule and breaks down your stock into 3 categories.
- A grade. Your best performing products. They account for approximately 80% of your revenue. These products are your holy grail & should be treated as such.
- B grade. Your middle ground products. These will account for around 15% of your revenue. Expect them to jump in & out of Grades A/C regularly.
- C grade. Your worst performing products. C grade is made up of slow moving, almost deadstock products. They bring little value to your store & should be downgraded as much as possible.
What to do with your A Grade products
- Create strong relationships with A grade suppliers
- Identify multiple suppliers for A items
- Always have A grade inventory on hand
- Identify a reorder point for A grade stock
- Invest more in A grade inventory
- Increase prices for your A grade inventory
- Secure and control A grade inventory
What to do with your C Products
- Reduce the price or sell C grade products at a discount
- Give your C grade products to charity
- Bundle dead stock products with A grade or B grade products
- Increase visibility for your C grade inventory
- Give away your C grade products as gifts
- Discontinue and stop ordering C grade inventory
Shortcomings of ABC analysis
- It doesn’t account for seasonality.
- It doesn’t account for changing consumer behavior and trends.
- It doesn’t account for new product launches.
- It’s one of many metrics you should consider when making inventory decisions.
If you need some tips on how to get your store off the ground, here are a few articles to get you on the right track: