Key takeaways
- In most shops, a small share of products brings in most of the sales. ABC analysis finds them.
- A items are your top earners (roughly the first 80% of sales), B items the next 15%, and C items the long tail making up the last 5%.
- Treat each group differently: count A items often and never let them run out, keep C items lean.
The idea in one paragraph
Not all products are equal. In most shops, a small group of products brings in most of the money, and a long tail of products brings in very little. ABC analysis is a simple way to sort your range into three groups so you can spend your time, cash and shelf space where they count.
It is not about dropping the C items. Customers often need them, and they make your shop the place that has everything. It is about knowing which products you can never run out of and which ones can wait.
The three groups
| Group | Share of sales | Usually | How to treat them |
|---|---|---|---|
| A | First ~80% | 10 to 20% of products | Never run out. Count often. Best shelf spots. |
| B | Next ~15% | 20 to 30% of products | Normal care. Count regularly. |
| C | Last ~5% | 50% or more of products | Keep lean. Order small. Review for removal. |
The cut-off points are guides, not rules. Use what makes sense for your shop. Some shops use 70/20/10 instead.
How to do it, step by step
Pick a period
Use the last three to twelve months of sales. Longer smooths out seasons; shorter reflects what sells now.
List sales value per product
For each product, total the money it brought in over the period: units sold x selling price. If you know costs, you can use gross profit instead (see below).
Sort from highest to lowest
Biggest earners at the top.
Work out each product's share and the running total
Divide each product's sales by total sales to get its share. Then add the shares down the list as a running total.
Draw the lines
Products in the first 80% of the running total are A. Up to 95% are B. The rest are C.
A worked example
A small shop with ten products (real shops have hundreds, but the method is the same) looks at three months of sales. Total sales: $20,000.
| Product | Sales | Share | Running total | Group |
|---|---|---|---|---|
| Rice 2 kg | $6,000 | 30% | 30% | A |
| Cooking oil 1 L | $4,400 | 22% | 52% | A |
| Bottled water 1.5 L | $3,000 | 15% | 67% | A |
| Sugar 2 kg | $2,400 | 12% | 79% | A |
| Bread | $1,600 | 8% | 87% | B |
| Laundry soap | $1,200 | 6% | 93% | B |
| Tinned fish | $600 | 3% | 96% | C |
| Matches | $400 | 2% | 98% | C |
| Hot sauce | $300 | 1.5% | 99.5% | C |
| Candles | $100 | 0.5% | 100% | C |
Four of ten products bring in 79% of sales. Those four should never run out, get the best reorder points and get counted every week. The C items still matter to customers, but holding a few units of each is plenty.
Sales or profit?
Sorting by sales shows what brings money through the door. Sorting by gross profit shows what actually earns you money. Staples often rank high on sales and lower on profit, because their margins are thin.
Doing both is useful. A product that is A on sales but C on profit is a traffic builder: keep it in stock, but do not expect it to pay the rent. A product that is C on sales but B on profit deserves a better shelf spot. Read gross profit for shop owners for how to work out profit per product.
What to do with the groups
A items
- Set careful reorder points with a generous safety cushion. See how to set reorder points.
- Count them weekly in a quick spot count, not just at the full stocktake.
- Give them the easiest spots for customers to reach.
- Know their cost and price by heart, and watch for supplier price rises.
B items
- Normal reorder points.
- Count monthly or in rotation.
- Review prices every few months.
C items
- Order small amounts and keep few on hand.
- Count them at the full stocktake.
- Each review, ask whether any have stopped selling entirely. Those are candidates for clearing out. See what to do about slow-moving and dead stock.
How often to redo it
Products move between groups as tastes, seasons and prices change. Redo the analysis every three to six months, and before any big season. It gets quicker each time, because most products stay where they were.
How Shopkeepa helps
Shopkeepa's reports show best sellers and slow movers for any day, week or month, which is most of an ABC analysis done for you. Add costs to your products and you can see gross profit too, so you can compare what sells with what earns.
Set a low-stock minimum on your A items and Shopkeepa reminds you before they run out. See how sales and profit reports work. Shopkeepa is in development, and early access shops will help shape it.
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