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E-Commerce Reboot: Final Track - Revenue (2/8)

Kill Overstock

Author

ERIK HOLLEMAN
August 04, 2024

Hi there! 👋

Overstock inventory is the #2 biggest problem for online retailers.

Inventory management must be a top priority to maintain a healthy cash conversion cycle.

I've used this 6-step framework to free up $100,000 in cash for a $20M e-com business:

Step 1: Data Prep

  • Go to your inventory management system or e-commerce platform.

  • Generate a report with sales and profit by product.

  • Combine variants into a single product.

  • Remove outliers (large one-time orders, sample orders).

Step 2: Define "Value" Ranking

  • Determine your business goal:

    • For growth -> rank products by revenue.

    • For profitability -> rank by total profit.

    • For cash flow -> rank by sales and turnover.

Step 3: Assign the ABC Grade

  • First 40% of the value = A-grade products.

  • Next 40% of the value = B-grade products.

  • Last 20% of the value = C-grade products.

Step 4: Determine Action for Each Grade

  • Know your goal.

  • Identify products that align with the goal.

  • Take action:

    • A-grade = core products -> focus and grow.

    • B-grade = complementary/potential overstock -> monitor and test.

    • C-grade = overstock/potential deadstock -> downsize and cut.

Step 5: Marketing <> Ops Alignment

  • Build the brand around A-grade products.

  • Upsell B-grade products with A-grade products.

  • Blow out or give away C-grade products.

Convert overstock and deadstock to cash and reinvest in A-grade products.

Cut the dead weight and move forward.

Step 6: Qualitative Analysis

  • Some C-grade products may have high volume and velocity -> quick cash conversion.

  • Others might be critical for the growth of other products.

  • Use your judgment to take the right action.

This 6-step process can transform your inventory management and boost your bottom line.

Stay tuned, have a great Sunday!

Erik

Whenever you’re ready, there are three ways I can help you.

  1. 1:1 Advisory for E-Com Managers: I help you run, scale & optimize your e-commerce business.

  2. Resource Library. Useful resources for every marketer. Includes an E-Commerce Audit Report, ChatGPT Prompt Guide & Midjourney Masterclass.

  3. Book a 1:1 Call. A No Bullshit 20 min Ask Me Anything call. If you’re facing challenges in online business, I’m happy to talk.

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