4 Reasons You Should Use ABC Inventory Analysis for Your Shopify Store

Daniël de Jager - Writer for Egnition
By Daniël de Jager
Head and shoulders photo of Michelle Meyer
Edited by Michelle Meyer
Joel Taylor
Fact-check by Joel Taylor

Published July 3, 2024.

Magnifying glass sitting next to wooden blocks spelling ABC

Whether you're running a brick-and-mortar or a Shopify online store, inventory management should be a priority. Inventory analysis can help you formulate a strategy by reflecting on your best- and worst-performing items.

ABC inventory analysis is a method of analyzing inventory, including sales and stock levels, and then classifying the inventory into three distinct categories (A, B, or C) determined by their value.

This method identifies the items that add the most value to the business and then prioritizes their management.

4 Benefits of Using ABC Inventory Analysis for Your Shopify Store

While ABC inventory analysis has drawbacks like any system, it's a powerful tool if used properly. Here are four of the biggest benefits:

  1. Better inventory forecasting: Inventory forecasting, like predicting the future, is a difficult task. Thankfully, ABC analysis can help you identify items that have a high turnover rate and need to be replenished to meet future demand.
  2. Opportunity for growth: As high-performing products are identified, their success can be replicated or expanded elsewhere.
  3. Efficient resource allocation: A store can focus its efforts on high-value items, resulting in less time spent negotiating with suppliers and more efficient marketing expenditure. Just like with multi-store inventory management, ABC analysis applied across multiple stores at once saves time.
  4. Eliminated understocking and overstocking: High-value, high-demand product storage can be prioritized, saving on costs and reducing wastage.

» Unsure which inventory management software to implement? Read up on our review of the best inventory management systems for Shopify stores

Final Verdict

With all the benefits it provides, ABC inventory analysis is a no-brainer for your Shopify store. Provided you conduct such analysis continually, it should reward you with efficient stock flows and overall business success.

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