Seeing the big picture is great; it gives you a good idea of how your company is performing and where it’s going. However, you can’t solely focus on the big picture at the cost of neglecting the small details. Revenue is great, but it’s worthless if those individual sales aren’t profitable.
To ensure your business is maximizing its profits, you need to be able to look on a more micro level to see how you are performing. Different products vary greatly in their ability to sell and make a profit, and if you’re not looking at the data, you’re not going to be able to make the informed decisions that are needed to improve profitability.
Tracking SKU profitability can benefit your business in many different areas, but it’s a practice many companies are not proficient at.
When you sell your products in lots of different marketplaces, it can be difficult to know how much you are making from each sale. Every different platform you sell on will have slightly different fees, and this can impact on the profitability of your different SKUs.
It’s easy to see what revenue you’re making from your sales, but understanding the profitability of each product, in each marketplace is much more difficult. When you have this knowledge, though, you can adjust your strategies to maximize the profitability of your sales.
Just as you need to know how much you are making from each sale, you need to know how you are performing across your different sales channels. If you just look at your revenue as a whole, then you might not see that your Amazon sales are way down, whereas your eBay sales are very strong.
When you have this information, you can start to find out why some sales channels are more effective than others and adjust your strategy accordingly.
It’s no use if your landed cost for a product is $20, you spend $10 on advertising to make the sale, and sell the product for $30. Sure, that sale pads your revenue, but you’re not actually making any money from it.
You need to be able to track your marketing spend on each SKU and factor it into each sale. Without this information, you can’t know if you’re making money or which products are your most profitable ones.
SKU level analysis allows you to understand your customers better. You might have some products that are barely selling, but if you’re not looking at things on a micro-level, then you’re not going to notice as quickly.
Understanding your customers’ buying habits and shopping preferences allows you to put your resources into the SKUs that are likely to be the most successful. You want to see a return on your marketing, but you’re not going to see it unless you’re marketing the right products to the right people. Without looking at your performance on a SKU level, you’re not going to get those valuable insights on your customers.