Sometimes the fastest way to grow is to shrink.

How to Reduce SKU Count and Improve Profitability

Sometimes, the fastest way to grow is to shrink. SKU count, that is.

I’ve worked with dozens of consumer product brands. I’ve seen the same cycle again and again: growth takes off, and so does the product line. More flavors, more sizes, more SKUs. At first, it feels like momentum. But then, profitability slows down—if it was even there in the first place!

In big companies, we called it SKU rationalization.

I Call It Sustainable Growth

Some teams get scared and stop launching. Others keep adding more, chasing the next hit. Either way, they’re often not looking closely at what’s actually driving profit (or lack thereof).

Key Considerations for SKU Management

Here’s what I look at when reviewing a product line:

• What’s the true cost of each item when you include materials, tariffs, labor, and shipping?

• Are your prices sustainable for the business and reasonable for the customer?

• Are new SKUs set up to bring in real incremental revenue, or just shifting sales around?

• Are you stretching your marketing and operations across too many products?

• Do your products still support your brand and your core customer?

  
  

The Cycle of Growth and Retraction

Growth and retraction tend to come in cycles. The key is knowing when it’s time to simplify.

The Importance of SKU Rationalization

SKU rationalization is not just a buzzword; it’s a strategy. It helps businesses focus on what truly matters. By reducing the number of SKUs, you can streamline operations and improve profitability. This process allows you to allocate resources more effectively and concentrate on high-performing products.

Strategies for Effective SKU Management

1. Analyze Sales Data: Look at your sales data to identify which SKUs are performing well and which are not. This will help you make informed decisions about which products to keep and which to eliminate.

   
   

2. Customer Feedback: Engage with your customers to understand their preferences. This can provide insights into which products are truly valued and which ones are just taking up space.

   
   

3. Cost Analysis: Conduct a thorough cost analysis for each SKU. Understanding the true cost of each item, including materials, labor, and shipping, will help you identify unprofitable products.

   
   

4. Market Trends: Stay updated on market trends. This will help you anticipate changes in consumer preferences and adjust your product line accordingly.

   
   

5. Test and Learn: Implement a test-and-learn approach. Introduce new SKUs on a trial basis and monitor their performance before making long-term commitments.

   
   

At ZAZ Business Solutions, I help leaders uncover the hidden profit in their product lines. We don’t just chase revenue. We build smart, intentional systems to grow what works and cut out what doesn’t.

You don’t need to double your revenue to grow your profit. You just need to know what to prune.

📸 Sequoia National Park 2019: Real growth starts with deep roots. Prune wisely, grow intentionally