ABC Analysis of a Seller's Assortment
ABC analysis is a way to split your assortment into three groups by their contribution to results, so you can see what the business actually rests on. Group A is the flagship products that deliver most of the revenue or profit (typically ~20% of SKUs produce ~80% of the result). Group B is the mid-tier, and C is the tail that brings in almost no money yet still demands attention and warehouse space. ABC analysis shows where to put your budget and which SKUs to retire.
In short: ABC = split products into core (A), mid-tier (B) and dead weight (C). Manage each group differently.
How to run it
- Take revenue (or profit) per SKU for the period.
- Sort in descending order and calculate the cumulative share.
- A — the products that make up the first ~80% of the result.
- B — the next ~15%.
- C — the remaining ~5% (the long tail of weak SKUs).
What to do with each group
- A — protect them: watch stock levels, avoid out-of-stock, invest in advertising.
- B — develop them: test the card, price and promotion to move them up into A.
- C — reconsider them: sell off dead stock, pull it from storage or discontinue it if it eats into inventory turnover.
Frequently asked questions (FAQ)
"What is ABC analysis of an assortment?" It is a breakdown of products into three groups by their contribution to revenue or profit: A — the core products (~80% of the result), B — the mid-tier, C — the weak tail. It shows what the business really rests on.
"How often should ABC analysis be run?" Usually once a month or once a quarter — group membership shifts with seasonality, advertising and demand. Regular analysis helps you catch SKUs rising and falling in time.
"Should ABC be calculated by revenue or by profit?" Profit is the better basis. A product with high revenue may bring almost no income because of commission and logistics. Analysis by profit shows more precisely where you earn.
"What should be done with group C?" Sell off dead stock, pull it from storage or discontinue products that bring no money and drag down inventory turnover. Redirect the freed-up budget into groups A and B.
