SKU Profitability:A Formula For Sustainable Growth Rate

SKU profitability is a pretty hot topic in the eCommerce world. The idea of "SKU-ing" your business and focusing on what sells is becoming more and more popular as we move into 2019. But how do you know which SKUs are profitable? How can you tell if an inventory investment in that new product will actually pay off? A simple formula might be all it takes to save your company from overspending on products that don't sell!

Why Choose SKU Productivity? 

Here is where the SKU productivity formula steps in. Without proper SKU calculations, the products do not yield their maximum returns for the business. In an e-commerce business where products are central to the working, SKU profitability determines which product is in demand, underselling, and needs improvement. The eCommerce business only remains dynamic when the product inventory replenishes with time. Moreover, introducing new products and discontinuing older products keep the supply chain moving. This maintains maximum profits at all times. In the present era, where the customer prefers the nostalgia of some products or the novelty of some products, it is difficult for businesses to strike that balance. 

SKU Tracking

SKU tracking helps track the performance of each product in the inventory so that the analysis of each product helps manage inventory with ease. A good SKU profitability knowledge helps in strategy making that suits the business prospects. With the help of SKU profitability, the business can make decisions about boosting the sales of underperforming products or tweaking the marketing strategy accordingly. 

With no SKU profitability calculations, the seller has no idea of his revenue and profit sources. When a product has high SKU profitability, the seller must keep up the stock to supply demand. When a product has low SKU profitability, the seller should use a new marketing strategy that highlights the product for the customer. 

Distribution and Marketing

If SKU profitability is meager and the marketing strategies do not yield results, the seller should discontinue the product or repackage it. Therefore, nearly all the significant decisions linked with products need the help of SKU profitability. The micromanagement of product inventory only happens using SKUs profits score. Today, every business operates over multiple channels of sale and revenue. For each channel, a company has a strategy. Without a detailed profits SKU score, the channel strategy fails to succeed. Profit SKU calculation helps you monitor each product's distribution and marketing strategies. 

Selling Costs

On the other hand, the costs linked with selling also need micromanagement. The expenses related to selling a product often remain latent. While marketing and packaging costs are straightforward, management costs often remain hidden. Such overhead costs and hidden costs also impact a product's profitability. When the seller wants to boost the profitability of a product, he can also analyze and minimize the expenses allied with the selling cost of the product. The selling costs further differ in different channels of sales. 

Therefore, the selling of products needs SKU profitability calculations for in-depth analysis and management of cost factors. A close look at the SKU profitability and selling costs of a product shows whether the business is losing or gaining money with each sale. 

Investment Strategy

A close look at SKU profitability allows a more informed marketing investment decision. As a seller, a person cannot invest uniformly in each product. The strategy and spending for an in-demand product will differ from a product with less demand. The decision to restock or discontinue a product and withdraw marketing investment only happens with proper SKU profitability calculations. 

Chain Management

Knowing what products are in demand also helps in supply chain management. The supply chain has suppliers, processors, sellers, and customers. Knowing how to find SKU helps in the proper administration of each stakeholder. For the seller, SKU profitability provides insights into how the customer behaves and the products he prefers. SKU profitability thus, allows the business to connect to the customer in a better way and cater to them with accuracy. This further drives the profits from sales up. The timely analysis of SKU profitability keeps your sales figures up and profits at the maximum level. 

Conclusion

The way to maximize profits from product sales is by maximizing the number of SKUs that are profitable. That means either discontinuing unprofitable products or replacing them with better versions. Sometimes sellers bundle items together, sell them at a discount in order to clear inventory and boost sales for all their other products. To do this effectively you need accurate SKU profitability calculations which we can help you get!

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