What is ABC analysis?

It builds on a common pattern: a small share of products brings in most of the money. Rather than watching all products equally, you watch the A group closely, check B regularly, and keep C simple.

A shop has 100 products and sold $50,000 last year. Ranked by sales:

Ten products, a tenth of the range, produce 70% of sales. Running out of an A item is expensive, so those get a firm reorder point, extra safety stock and frequent counts. The 70 C items get a simple rule, such as reorder when the shelf is empty, and a regular check for dead stock.

1. List each product with its sales for the period, for example 12 months.
2. Sort from highest to lowest.
3. Add up the running total as a share of all sales.
4. Mark the products up to about 70% as A, the next 20% as B and the rest as C.

The 70, 20, 10 split is a guide, not a law. Some owners rank by profit rather than sales, because a cheap, fast seller can earn less than a slower one with a high margin. Redo it every few months.

The best sellers report in Shopkeepa gives you the ranking for the A group, and slow movers highlights the bottom. Use them as your starting list. The guide to ABC analysis walks through the steps.