Depth Over Breadth: How a SKU Audit Can Save Your Margins

Niti

• 1 min read
Depth Over Breadth: How a SKU Audit Can Save Your Margins

Introduction
Most D2C founders think growth comes from adding more products to their catalog. More choice, more sales — right?
Wrong. In reality, too much assortment silently erodes profit. The hidden truth? For most brands, 20% of SKUs drive 80% of revenue. The rest lock up capital, eat storage space, and inflate complexity.

In a competitive 2025 market, SKU discipline is not optional — it’s a growth lever.

Step 1: Audit for Your Money-Makers

Don’t just look at gross sales — that’s a vanity metric. Instead, measure net revenue per SKU:

  • Units sold
  • Minus returns
  • Multiplied by average selling price
    Also consider margin contribution and marketing cost per SKU to understand the real profit impact.

Step 2: Find Your Silent Performers

Not all winners are loud. Some products quietly generate consistent sales without high ad spend or influencer hype.
These “silent performers” are often:

  • Evergreen styles or colors
  • Products with low return rates
  • High-margin items with stable demand
    Promote them more — they’re your compounding assets.

Step 3: Prune the Costly Passengers

Holding on to low performers is like keeping employees who don’t show up. They take up space and resources but don’t pull their weight.
Criteria for cutting:

  • Sell-through under 40%
  • Return rate above 20%
  • Contributes <5% to revenue

Cut them, consolidate variants, or clear stock strategically.

Step 4: Maintain a Living SKU Scorecard

A one-time audit is good.
A quarterly audit is powerful.
Track:

  • Sell-through %
  • Return rate
  • Gross margin %
  • Contribution to revenue
    Review in every business cycle and make cuts or reinvestments accordingly.

The Payoff of SKU Discipline

Focusing on fewer, better products will:
✔ Free up working capital
✔ Reduce warehousing costs
✔ Improve marketing efficiency
✔ Strengthen your brand story

Conclusion
The brands winning in 2025 are not the ones with the widest catalogs — they’re the ones with clarity. SKU audits turn guesswork into strategy, helping you double down on what works and cut what doesn’t.
Depth over breadth. Focus over frenzy. That’s how you protect your margins — and grow sustainably.