The ABC inventory analysis allows Shopify merchants to divide the inventory into three grades (A, B, C) based on value and demand. As an example, ~20% of products (grade A) usually bring in ~80% of sales, whereas C-grade products may only bring in ~5%.
This brings out the bestsellers vs. slow movers, which allows you to concentrate on replenishing high-impact products and reducing overstock with unused products. Such smart inventory analysis maintains cash flow through the availability of important products.
What is ABC Product Analysis in Shopify
The analytics of Shopify are able to produce an ABC product analysis report. This classifies goods into A-grade (bestsellers), B-grade (mid-level sellers) and C-grade (low sellers). A-grade items are typically the highest 20% of the products by revenue, B-grade items the next 15%, and C-grade items the rest 5%. The ABC inventory analysis indicates the SKUs that are in each grade.
The Importance of ABC Analysis
ABC analysis is important for effective inventory management because it helps you:
- Focus on A-grade products that generate the majority of revenue, avoiding lost sales due to stockouts.
- Identify C-grade items that contribute little and may tie up capital unnecessarily.
- Prioritize high-value stock, ensuring bestsellers are always available.
- Trim slow-moving items to improve cash flow and free up storage.
- Maintain extra stock or backup suppliers for A-grade items to reduce risk.
- Use just-in-time or clearance strategies for C-grade products to prevent overstock.
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Benefits of Shopify ABC Product Analysis
ABC analysis in Shopify gives a clear picture on what to restock and what to give a discount or promotion. This leads to a higher turnover and less waste. As an example, you may want to market A-grade products to ensure that they continue to sell, and you may want to bundle or discount C-grade products to move them.
Our Shopify Reports and Shopify Custom Reports are tools that will allow you to create an ABC inventory analysis in any date range.
How to Perform ABC Analysis by Product on Shopify: A Step-by-Step Guide
- In Shopify Admin, go to Apps > Mipler Reports > Reports.
- Choose ABC Analysis from our library.
- Mipler ranks products by sales value and assigns A/B/C grades (top ~80%, next ~15%, rest).
- Review the report, which lists each product’s grade and sales value. Use this info to adjust your stock levels.
Using ABC Analysis for Cycle Counting
Cycle counting is a schedule of inventory counts by product type. As an example, A items should be checked every day or every week, B items every month, and C items every three months. This is where it strikes audit effort. You can achieve a higher level of accuracy when you are not required to check all SKUs equally, since you would be working on the most valuable products. In the long-term, this method will ensure that important items are aligned, and no surprises will be encountered.
Best Practices for ABC Inventory Management
- Protect A-stock: Always reorder A-grade items early and keep a backup supply. Avoid stockouts of your top revenue drivers.
- Balance B-stock: Maintain moderate quantities of B items.
- Monitor trends: if a B-grade item warms up, treat it like A-grade; if it cools, treat it like C-grade.
- Trim C-stock: Reduce C-grade items by selling them off or phasing them out. Use discounts or bundles to move slow movers.
- Refresh Regularly: Rerun ABC analysis every few months to account for changing demand.
- Leverage Reports: Use our Shopify Inventory Reports to automate ABC calculations. Combine ABC data with cost and demand info for deeper insight.
FAQ
What is ABC analysis in inventory management?
ABC analysis classifies inventory into three groups by sales value. Grade A items are top-selling (~80% of revenue), B-grade are mid-tier (~15%), and C-grade are low-value (~5%). This method helps focus on the most important products.
How often should I update my ABC analysis?
It’s best to update it regularly, such as quarterly, to capture shifts in trends and keep your priorities current.
Can I do ABC analysis in Shopify without code?
Yes. Mipler includes an ABC analysis(for eligible plans). If you don’t see it, a reporting app or our Shopify Custom Reports can provide the same data and even provide more useful information for your store.
How are the ABC categories calculated?
Products are sorted by annual revenue, and classes are assigned by cumulative share (e.g., top ~80% of revenue = A-grade, next ~15% = B-grade, rest = C-grade). Many tools (including our app) automate this so you get immediate categories for each item without calculations.
