What is SKU Analysis? How to Do It?

In the realm of inventory management and retail, SKU analysis plays a crucial role in understanding and optimizing product performance. It is often described as the backbone of successful product performance and keeping track of things.

SKU, short for Stock Keeping Unit, refers to a unique identifier assigned to each distinct product or item within a company's inventory. SKU analysis involves the examination and evaluation of SKU-level data to gain insights into sales.

It also contributes significantly to profitability, demand patterns, and overall inventory performance. This blog post aims to shed light on the significance of SKU analysis, how to conduct it effectively, and the benefits it offers to businesses.

SKU analysis is the process of examining individual product SKUs to gain a deeper understanding of their performance, profitability, and contribution to overall business objectives.

It involves the collection and analysis of various metrics associated with SKUs, such as sales volume, revenue, margin, stock levels, and customer demand patterns. By dissecting these data points, businesses can identify top-performing SKUs and monetize them further.

They can also assess slow-moving or obsolete products, and make informed decisions regarding pricing, promotions, and inventory management strategies.

Consider a fictional fashion brand that conducts SKU analysis to evaluate the performance of its product inventory. The team collects various metrics for each SKU, such as sales volume, revenue, margin, stock levels, and customer demand patterns.

During the SKU analysis process, the brand identifies that SKU A, a trendy summer dress, has consistently high sales volume, generating substantial revenue and profit margins. As a result, the fashion brand decides to allocate additional marketing resources to promote SKU A and ensure sufficient stock levels to meet the high demand.

On the other hand, the team discovers that SKU B, a winter coat, has been experiencing low sales volume and limited customer demand during the summer season. This insight alerts them to the slow-moving nature of SKU B.

Based on this analysis, the team can make informed decisions such as running targeted promotions, offering discounts, or planning inventory clearance to improve the sales performance of SKU B and prevent excess stock.

Furthermore, SKU analysis enables the team to assess the profitability of each SKU. For instance, they analyze SKU C, a basic t-shirt, and find that despite moderate sales volume, its low production and marketing costs result in a high-profit margin.

Armed with this information, the brand can strategically price SKU C to maximize profitability. They can achieve better sales while remaining competitive in the market. It is a win-win for the brand due to a well-executed SKU analysis!

Analyzing SKUs provides several key benefits to businesses:

Identifying top-performing products: SKU analysis helps identify SKUs that generate the highest sales, revenue, and profitability. By understanding which products are performing well, businesses can focus their resources on maximizing the success of these SKUs and allocate marketing and promotional efforts accordingly.

Identifying slow-moving or obsolete products: Through SKU analysis, businesses can identify SKUs that have low sales velocity or are no longer in demand. This information allows companies to take corrective actions, such as implementing targeted marketing campaigns, adjusting pricing strategies, or discontinuing unprofitable products.

Optimizing inventory management: SKU analysis helps businesses optimize their inventory levels by identifying products with high demand and ensuring sufficient stock is available. By analyzing SKU data, companies can avoid overstocking or understocking situations, leading to improved operational efficiency and reduced carrying costs.

Pricing and promotion strategies: SKU analysis enables businesses to evaluate the impact of pricing and promotional strategies on product performance. By assessing the relationship between price changes, promotional activities, and SKU-level data, companies can refine their pricing strategies to maximize profitability and customer demand.

Performing SKU analysis involves several steps. By following this guide, your team can conduct a successful analysis and derive useful results:

Gather SKU data: Collect relevant data for each SKU, including sales volume, revenue, margin, inventory levels, customer feedback, and any other pertinent information. This data can be obtained from point-of-sale systems, inventory management software, or customer relationship management systems.

Segment SKUs: Categorize SKUs based on product attributes, such as product category, brand, or price range. This segmentation allows for more targeted analysis and comparisons.

Analyze performance metrics: Evaluate performance metrics for each SKU, such as sales volume, revenue, and margin. Identify top-performing SKUs and those that require attention or improvement.

Assess demand patterns: Analyze historical sales data to identify demand patterns for each SKU. This analysis can reveal seasonal trends, demand fluctuations, and other factors influencing sales.

Evaluate profitability: Calculate the profitability of each SKU by considering both direct costs (e.g., production, packaging) and indirect costs (e.g., marketing, warehousing). This analysis helps prioritize SKUs based on their contribution to the bottom line.

Make data-driven decisions: Utilize the insights gained from SKU analysis to make informed decisions regarding pricing strategies, inventory management, product assortment, and marketing efforts.

In conclusion, SKU analysis provides businesses with valuable insights into the profitability and customer demand patterns of individual product SKUs. They are timely inputs for businesses to make key decisions and optimize their performance.

If you are planning to use SKU analysis to empower your team to optimize their product portfolio, now is the best time! It can help you assess your stock, maximize profitability, and stay competitive in the market.

It is a vital practice for businesses seeking to scale and meet the demands of present markets. It can enhance their operational efficiency, customer satisfaction, and overall success.

Q: When should SKU analysis be done?

A: SKU analysis should be conducted regularly, ideally on a quarterly or monthly basis for your business. This will help your team stay updated on SKU performance and make timely adjustments.

Q: How does Beeontrade help with SKU analysis?

A: Beeontrade streamlines SKU analysis with automated data collection, customizable dashboards, and advanced analytics. This is a good process if your business is planning on simplifying the process of gaining insights and making informed decisions.

Q: What are the benefits of SKU analysis to businesses?

A: SKU analysis offers benefits such as optimized inventory management, increased profitability through identifying top-performing SKUs, informed pricing and promotion strategies, improved decision-making based on data, and a competitive advantage in the market.