A SKU is a single product variant. Same shirt, different sizes and colors. You have hundreds of SKUs. Some sell ten units per week. Some sit for months. You do not know which to reorder and which to kill. SKU-level analytics reveals inventory truth. Which variants sell. Which waste shelf space. Which drive profit. Which drain cash. This article explains how to track SKU performance and optimize inventory allocation.
Understanding SKU metrics and inventory data
What a SKU is and why it matters
SKU means stock keeping unit. One product with many variants. Blue shirt size small is one SKU. Blue shirt size large is another SKU. Red shirt size small is another SKU. Same product. Different SKUs. Each SKU has different demand. Each needs individual tracking.
SKU revenue vs product revenue
Product revenue combines all SKUs. Blue shirt total revenue. SKU revenue breaks it down. Blue shirt size small revenue. Blue shirt size large revenue. Red shirt size small revenue. SKU view shows which variants sell.
Tracking SKU-level sales and revenue
Setting up SKU tracking in your system
Each SKU needs a unique identifier. Your inventory system tracks it. Your analytics system tracks it. Connect them. Revenue flows by SKU. Inventory flows by SKU. Set this up correctly. Do not guess SKU performance.
Matching inventory to sales data
Inventory system shows you have one hundred blue shirts size small. Sales data shows you sold two last month. Mismatch. Either inventory is wrong or sales data is wrong. Reconcile them. Accurate SKU data requires accurate inventory and sales tracking.
Identifying best-selling SKUs
Volume leaders vs revenue leaders
Volume leader: one hundred units sold, low price, low revenue. Revenue leader: five units sold, high price, high revenue. Which is better. Depends. High-volume SKUs are cashflow. High-revenue SKUs are profit. Track both.
Fast movers vs slow movers
Fast movers sell out quickly. Need reordering. Small inventory risk. Fast movement. Slow movers sit for months. Tie up cash. Risk of obsolescence. Fast movers are good. Slow movers are problems.
Identifying dead-stock SKUs
SKUs that never sell
Some SKUs never sell. Zero revenue. Dead inventory. Why stock them. Why tie up cash. Identify them. Liquidate them. Free up cash for fast movers.
SKUs that need liquidation
Some SKUs sold well last year but do not sell now. Obsolete. Fashion items past season. Technology items outdated. Liquidate them. Clear inventory. Free up shelf space. Free up cash.
Optimizing SKU mix and variants
Which variants are worth stocking
Blue shirt sells in all sizes. Stock all sizes. Red shirt sells only in size small and medium. Stock only those. Analyze demand by variant. Stock what sells. Do not stock what does not.
When to discontinue a SKU
SKU zero sales for three months. Discontinue it. SKU negative profit after all costs. Discontinue it. SKU decline trajectory. Forecast its decline. Discontinue before it becomes a problem.
Using SKU data to improve inventory turnover
Inventory allocation by SKU performance
Fast-moving SKUs get large inventory. Slow-moving SKUs get small inventory. Fast movers need reordering. Slow movers sit. Allocate inventory proportional to velocity. Turn cash faster. Reduce inventory cost.
Reorder timing based on sales velocity
SKU selling one hundred units per month needs reorder every month. SKU selling five units per month needs reorder every six months. Time reorders to sales velocity. Do not overstock. Do not understock.
Forecasting SKU demand
Growth forecast by SKU
SKU growing ten percent per quarter needs increasing inventory. SKU flat needs stable inventory. SKU declining needs decreasing inventory. Forecast demand by SKU. Adjust inventory accordingly.
Seasonal demand patterns
Summer clothing SKUs peak in summer. Holiday decoration SKUs peak in November. Snow boots peak in winter. Know seasonal SKUs. Forecast high and low demand. Allocate inventory seasonally.
Frequently asked questions
How many colors should I stock for a new product?
Start with top two colors. If those sell well, expand. Most SKUs follow power law distribution. Twenty percent of variants generate eighty percent of sales. Find the winners. Stock only winners. Do not guess variant demand. With WEMASY's website builder, you can set this up directly on your website.
What is the right inventory level for each SKU?
Inventory level equals monthly sales volume times safety stock. SKU selling ten units monthly needs thirty to forty units inventory. SKU selling one hundred units monthly needs three hundred to four hundred units. Inventory covers one to three months of sales plus buffer for variance.
How do I decide between stocking more colors versus more sizes?
Track which variant sells out first. If blue sells out and red sits, stock more blue. If size medium sells out and large sits, stock more medium. Let sales velocity guide variant decisions. Restock winners. Eliminate losers.
Should I discontinue a size that doesn't sell even if the product is otherwise popular?
Yes, after three months no sales. If medium size never sells and small and large sell well, discontinue medium. Free up inventory space. Reduce complexity. Stock what customers buy.
How do I handle SKUs that are profitable but slow-moving?
Slow-moving high-margin SKUs tie up cash but generate profit. Accept the inventory investment if margin justifies it. SKU with one hundred dollar margin selling two units monthly is twelve hundred dollars annual profit. That might justify sitting inventory. Calculate if it is worth the cash tie-up.
What inventory metrics matter most for making SKU decisions?
Three metrics: sell-through rate (percentage of inventory sold monthly), margin (profit per unit), and velocity (units sold per month). High sell-through, high margin, high velocity is perfect. Low sell-through with low margin is disaster. Track all three for every SKU.