What is it, what is it for and how is it carried out

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Head of Analytics Sector at the inSales online business management platform

From time to time, the seller needs to determine which product range items are profitable to invest in, and which do not generate the desired income and lead to costs. A convenient tool for comparing products is ABC analysis.

Ilya Kuzin, head of the analytics department at the online bolivia whatsapp phone number business management platform inSales, explains what these three letters actually mean, how to conduct such research independently, and how to combine it with other sales analysis tools.Subscribe to RB.RU in Telegram


Content:

What is ABC analysis?
What and how is ABC/XYZ analysis studied?
Where is ABC analysis used?
Types of ABC analysis
How to do ABC analysis?
Example of ABC analysis
Advantages and Disadvantages of the ABC Method
ABC/XYZ analysis
Conclusion


ABC Analysis: What Does It Mean?
ABC sales analysis is a study of the seller's product portfolio, which allows the product range to be divided into three groups by profitability:

A - brings in the majority of revenue;
B - intermediate positions that bring about 15%;
C - makes up the smallest share, less than 5%.
The distribution into categories is based on the Pareto principle, according to which 80% of the result is achieved by 20% of the efforts, while the remaining 80% of the efforts give only 20% of the result. The same is true for the product range - the lion's share of revenue comes from sales of a smaller share of items.
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What and how is studied using the ABC method?
The ABC analysis method is used to study the assortment in retail and wholesale sales, both online and offline. But the method is not limited to assessing the assortment. Using the ABC principle, you can also study other quantitative factors from employee efficiency to the profitability of customer categories.

The main rule is that only homogeneous objects with comparable indicators can be studied simultaneously.

For example, it is impossible to evaluate the profitability of both products and points of sale at the same time. Also, when conducting a sales analysis, products of different categories are not compared. For example, food products and household chemicals should be evaluated separately. The results of the study will also be distorted if recently released items and products that have been in circulation for a long time are compared at the same time.

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