The Best Solution For Shopify ABC Analyses by Product

If you're performing inventory forecasting for your Shopify store, running an ABC analysis by product may seem like a good place to start. But it's only that — a start. It will tell you how each product in your inventory contributes to your store's revenue, and which products are the highest priority, but that's all. This information is important, and we'll show you how to calculate it, but if you're looking to prevent stockouts and overstocking, and to get real help with resource allocation, you'll need to take your ABC analysis a step further.

This is one of the many inventory forecasting issues we built our Shopify app Monocle to solve. If you've manually pulled all of your order history and run a proper ABC analysis, you may have noticed the following:

• An ABC analysis is not a forecast. It only shows you the historical performance of your products — it is not a prediction of what you'll need for future sales.
• An ABC analysis doesn't account for seasonality. It only shows how much of each product you sold over a period of time, so it can't tell you which products were your biggest sellers in your store's busiest season.
• An ABC analysis won't give you reorder points or quantities. It can't tell you what to order and when, and it won't alert you when you're running low on crucial stock — probably some of the information you were hoping to get from it in the first place.
• It can't guide resource allocation. It won't tell you which products can be removed from your inventory completely.

Closing those gaps means going a step beyond a plain ABC analysis. An ABC XYZ analysis builds on the same data but adds the demand-pattern and seasonality dimension a basic ABC analysis misses — and pairing it with an automated tool adds the reorder points and quantities, too. If you've never run either, don't worry: below, we'll walk through how to run a proper ABC analysis, introduce the ABC XYZ analysis, and show you a fully automated solution that tells you exactly what to order and when — no manual calculations on your end.

What is an ABC Analysis in Shopify?

The purpose is simple: running a Shopify ABC analysis by product helps store owners prioritize their inventory management efforts. It breaks a store's products down into A, B, and C products. When an ABC analysis is run properly, it should look like this:

How to Run an ABC Analysis

Running an ABC analysis by product for your Shopify store involves several steps:

1. Collect data. Gather sales data for each product. If you're collecting it manually, your Excel or Google Sheets spreadsheet should be laid out like this:

   Column	Contents
   A	Product name
   B	Units sold
   C	Unit price
   D	Revenue
   E	% of total revenue

2. Calculate revenue and each product's share of the total.
   • In cell D2, enter =B2*C2 (units sold × unit price) and drag it down every product row.
   • In the cell just below your last product — say D16 if your products end on row 15 — total the column with =SUM(D2:D15).
   • In cell E2, work out that product's share of total revenue with =D2/$D$16. The dollar signs lock the total cell so the reference doesn't shift as you drag the formula down column E. Then format column E as a percentage.
3. Sort products from highest revenue to lowest. Select your product rows (leave the total row out), open the Data tab, click Sort, and sort by the Revenue column (D) in descending order. Your biggest earners now sit at the top.
4. Assign your A, B, and C grades. Working down from the top, keep a running total of the share percentages in column E. The products that together make up the first ~80% of revenue are your A items, the next ~15% are B, and the final ~5% are C. A single product rarely fills a band on its own — it's the cumulative share from the top down that sets the cut-offs.

A worked example

Say you run a phone-accessories store with six products. After calculating revenue, sorting highest to lowest, and running a cumulative total down the share column, your table looks like this:

Notice it's the cumulative column that draws the lines. Two products (earbuds and the charging cable) account for the first 80% of revenue, so they're your A items. The next two carry the following ~15% — those are B. The long tail of low-revenue products makes up the final ~5%, landing them in C. That's the exact 80/15/5 split the class definitions above describe.

An Automated Shopify ABC Analysis

If your inventory is small enough and you have the time to run these calculations manually, you can probably handle an ABC analysis in Excel or Google Sheets. Unfortunately, with a 20+ SKU inventory, doing any of the above manually is time-consuming and prone to errors — but each step of a product-by-product ABC analysis can be performed by Monocle, error free.

If you own a Shopify store and this sounds like it could help your operations, you can try a 14-day free trial of Monocle in the Shopify app store today. All new users get an onboarding call with our founder.

Using your entire order history, Monocle's ABC XYZ analysis gives you all the data of a SKU-by-SKU Shopify ABC analysis — completely automated and continually recalculated with minimal effort on your end. Your A, B, and C products are broken down visually and by their important subcategories. Monocle integrates with your Shopify store in just minutes, and our free 30-minute onboarding call with our founder ensures you have maximum success with your data.

The Benefits of an ABC Analysis for Your Shopify Store

Despite its limitations, conducting a proper ABC analysis of inventory is crucial for Shopify store owners. Its data provides several benefits that directly impact your store's performance and bottom line:

• Inventory control — knowing your top performers (A grade) tells you which products you can never let stock out, preventing lost sales.
• Customer satisfaction — always having your most popular products available creates happy, repeat customers.
• Pricing decisions — knowing how each product affects your bottom line lets you make the most profitable pricing decisions.
• Sell-through rate — focusing on your highest-value products prevents holding too much of a less important item.
• Storage cost — avoiding overstocking on lower-value items saves on storage.
• Resource allocation — knowing your most important products tells you where to focus marketing and sales. You'll also learn which products aren't moving yet are driving storage costs, so you can adjust. We've seen our analyses reveal that users were wasting tens of thousands of dollars on inventory that just won't move.

All these benefits from an automated solution

Monocle's AI-powered analytics let Shopify store owners enjoy all of these benefits seamlessly. Monocle categorizes each A, B, and C product accurately, making sure stockouts and overstocks are not something your store will have to face.

A & B Grade Product Strategies for Shopify

For A grade products, maintaining strong supplier relationships is crucial. Consider multiple suppliers to ensure a steady supply, and always have reorder points set up to avoid stockouts. For B grade products, you need enough stock to meet demand without overstocking. This balance is essential to manage costs and meet customer demand effectively.

Automated reorder points with Monocle

Setting up reorder points manually is cumbersome and can get complicated. To do it, you have to:

• Calculate how much of each product you sell every day.
• Figure out how long it takes to get each product from your supplier.
• Know how much extra stock you need to order, just in case.

Depending on the size of your inventory, calculating all this manually can take 10–20 hours a month, and it needs updating whenever a product starts selling faster.

Purchase order automation with Monocle

Monocle's purchase order automation keeps your supplier relationships smooth. Generate an easy-to-understand, accurate, on-time purchase order and send it straight to your supplier from Monocle. POs arrive in your supplier's inbox as a PDF, eliminating confusion and workload on their part.

C Grade Strategies for Your Shopify Store

For C grade products, consider bundling them with A or B grade items to increase sales. Adjusting pricing or discontinuing underperformers can also help. Increasing visibility for C grade products through promotions can move inventory that would otherwise take up valuable storage space.

Unlock potential C grade bundling opportunities

With Monocle you can easily see which products are frequently purchased together. You may have a C grade product that's often bought alongside an A grade product — an excellent bundling opportunity for your store. Opportunities like this are hard to spot with a manual ABC analysis, but simple with Monocle.

Your C grade resource allocation solution

The best strategy for some C grade products is to simply discontinue them — but that isn't the right call for all of them. You can't tell which C grade products should stay or go from a manual ABC analysis alone, but with Monocle you can. Monocle shows you which of your C grade products contribute little revenue and are costly to manage and plan for due to their unpredictable demand, making them potential candidates for discontinuation. It's broken down visually in an easy-to-understand format you simply won't find with a standard ABC analysis.

An ABC Analysis Can't Forecast Seasonality — But an ABC XYZ Analysis Can

A standard ABC analysis falls short by not accounting for seasonality, which makes it insufficient for inventory forecasting on its own. As noted, an ABC analysis can only tell you how much each product sells overall — it can't tell you when your sales change. So if you sell bathing suits, an ABC analysis can't tell you how much stock your store will need for summer, putting you at risk of running out of your most important products exactly when people most want to buy them.

This is where an ABC XYZ analysis comes in. It analyzes your entire order history like an ABC analysis, then categorizes products based on demand patterns:

• X items — products that sell steadily all year.
• Y items — products with higher sales during certain seasons.
• Z items — products that sell in random patterns.

Although an ABC XYZ analysis can be run manually, it's not something we recommend doing for your Shopify store. Here's why:

• It can take anywhere from 1 to 3 days per month — time you could put into your business instead.
• Getting the right data requires some fairly difficult mathematical formulas. You need to calculate when each product sold, among other data points, and if you're not experienced with these calculations, your data likely won't be correct.
• It's hard to update. You'll have to run the analysis again every time you want to account for new data.

An Automated ABC XYZ Analysis

Monocle's completely automated ABC XYZ analysis overcomes these limitations. It integrates various data points to provide a dynamic, accurate analysis, ensuring you're prepared for your store's busiest sales cycles and your regular high-impact marketing activities. If your store sells bathing suits, Monocle can tell you how many to order for the summer — and if sales usually spike after a certain social media campaign, Monocle can tell you how much of each product to order to be ready for the impact.

Our system continuously analyzes your entire order history, adjusting the ABC XYZ analysis accordingly, so your inventory forecasts are always optimized. By accounting for these variables, Monocle ensures you never face a stockout or overstock scenario, keeping your business running smoothly and efficiently.

Level Up Your ABC Analysis in Shopify

Monocle is the best way to run a Shopify ABC analysis — and an ABC XYZ analysis — by product and SKU. It offers a comprehensive inventory forecasting solution tailored for the Shopify platform. By accurately forecasting each product in your A, B, and C grade inventory and accounting for factors a standard ABC analysis cannot, Monocle ensures you maintain optimal stock levels and maximize your store's efficiency.