SKU Rationalization
Definition
Reviewing your product line to cut or consolidate SKUs that do not earn their keep, so cash and attention go to the products that drive profit.
Want a deeper explanation?
SKUs tend to multiply over time: new colors, sizes, bundles. Each one adds MOQs, storage, photography and complexity, even when it barely sells.
A yearly review using real margin and inventory data keeps the catalog focused. Watch for: cutting SKUs on revenue alone, when some low-volume SKUs are high-margin or drive bundles.
Example
Ranking 400 SKUs by contribution margin and GMROI shows that the bottom 120 produce 4% of profit but hold 22% of inventory dollars.