Mini Case-Study: When Shrinking = Growing

It is easy for things to balloon in your business without realizing it. Especially when it comes to product-based businesses, it can seem like more is more; more products or more services mean more potential business. The fact is that a lot of times, a very small number of items are doing the vast majority of the work. Which means that the effort you put into maintaining a broad offering is out of balance with the impact it has to your revenue.

One business I worked with had over 500 SKUs. While my client knew things had gotten chaotic, it wasn’t clear to them where to cut back. We started by looking at which SKUs were driving the most revenue. It turned out that only about 1/3 of the SKUs were driving 90% of the overall sales volume. Once they had that clarity, they got comfortable with the idea of simplifying the business by reducing SKU count because it didn’t require sacrificing revenue.

We created a 3-month transition plan that reduced their 500+ SKUs to just 150 SKUs. After 3 months, the storefront looked and felt better, and after 6 months they had delivered their best month of sales since 2019.

While they were expecting improvement to operations, they hadn’t anticipated the positive impact on the customer experience. A smaller assortment meant creating more focus within the assortment, making it easier for their customers to shop. Because of this, reducing SKU count actually increased sales overall.

The second thing they were pleasantly surprised to find was that a tighter assortment finally made it possible for the business to buy inventory in bulk, which cut costs, and as a result, increased margins.

This one action, reducing SKU count, became a win-win-win because it allowed the business to:

1) Simplify operations

2) Grow overall sales

3) Become more profitable

While it can be tempting to offer lots of options to your customers or clients, it adds operational load, which makes your job harder, and also complicates the shopper experience. So, before adding products or services, first consider if there is any dead weight that might be slowing you down and see what happens when you narrow your focus.  

Try my free Revenue Drivers Snapshot tool to start finding your own clarity.