A product profitability matrix is a table that places every item in the catalog on axes of sales volume and contribution margin. It produces four zones: high volume and profitable, high volume but unprofitable, low volume but profitable, low volume and unprofitable. Each zone calls for a different action; contribution margin analysis turns into concrete decisions in this table.
High-volume but unprofitable items are usually a pricing or shipping problem, and they are where ad budget burns fastest. Low-volume but profitable items are a visibility problem; improving the listing and the content is often enough. Low-volume and unprofitable items are candidates for liquidation. The matrix has to be built on contribution margin rather than revenue, otherwise the best-selling item is automatically assumed to be the best item. Refreshed quarterly, it shows which items change zone across season transitions.
High-volume but unprofitable items are usually a pricing or shipping problem, and they are where ad budget burns fastest. Low-volume but profitable items are a visibility problem; improving the listing and the content is often enough. Low-volume and unprofitable items are candidates for liquidation. The matrix has to be built on contribution margin rather than revenue, otherwise the best-selling item is automatically assumed to be the best item. Refreshed quarterly, it shows which items change zone across season transitions.
High-volume but unprofitable items are usually a pricing or shipping problem, and they are where ad budget burns fastest. Low-volume but profitable items are a visibility problem; improving the listing and the content is often enough. Low-volume and unprofitable items are candidates for liquidation. The matrix has to b…
Knowing the term is not enough; you need to know which lever to pull. In a free 30-minute call we look at your store's actual numbers.
Get a free analysis