A SKU By Any Other Name…is still a SKU.

The dreaded SKU or Stock Keeping Unit. It can make or break you, whether you have too many or too few.

Have you even thought about SKUs? Do you know what they are? Simply, it’s all your stuff added up.

If you have 8 products that come in 8 scents, you have 64 SKUs. Ack! What!? You say? I have 64 products? But I only have 8 products that come in 8 scents. Same thing? NO. When you break out your product offering into actual SKUs is when the realization of how large your line is and how many $$, sweat and frustration it takes to manage them.

There is not a right or wrong way to manage your SKUs. This is just another thing you now have in common with the multi-billion dollar corporations. I can’t tell you how many SKU management meetings I’ve sat through…zzzzzzzzzzzzzzzzzzz. It may put you to sleep or overwhelm you, in which case you tune out, then fall asleep.

But SKUs are like birthdays, no matter how you figure them, the number is what it is.

SKUs can be your friends, or at least powerful tools. Being a person who thinks of themselves as right-brained person with left-brain leanings (creative with a grounded business sense), I have long contracted arguments with myself, sometimes out loud, about SKUs.

I spent countless hours developing and merchandising the message content and products in my line. All my fragrances are my “babies” handpicked by me and a circle of friends. Let’s face it, some babies turn  out to be not-so-cute. Some babies don’t venture forth out into the world and bring mommy money. Do I throw these babies out with the scented bath water? Yes and no.

What I do is look at each SKU’s value. They’re not always a dollar value. Here are a few scenarios:

1. My fabulous Coconut Coffee Bubble Bath brings customers into my booth, but they end up buying the Coconut Coffee Lotion and Hand Wash.
2. My fabulous Coconut Coffee Bubble Bath brings customers into my booth, but they end up buying Freesia Rose and Tutti-Frutti scents.
3. My fabulous Coconut Coffee Bubble Bath brings customers into my booth, they buy tons of it, as well as my other Bubble Bath Scents. However, I make 20% instead of my usual 50% Profit Margin for other products.
4. My fabulous Coconut Coffee Bubble Bath brings customers into my booth, they buy it.  Not as much as the Freesia Rose or Tutti-Frutti, but more than Lush Blueberry.
5. My fabulous Coconut Coffee Bubble Bath brings customers into my booth, but they end up buying it only for 4th quarter sales.

Yes, that seemed repetitive, your actual comparison will vary in each scenario, a combination of these scenarios or  your own micro-niche scenarios. I was trying to make it as simple as possible so that you could see the forest and the trees. So lets’ go through the possible solutions.

1. My fabulous Coconut Coffee Bubble Bath brings customers into my booth, but they end up buying the Coconut Coffee Lotion and the Body Wash.

Why do you carry the bubble bath? In order to be a well rounded bath and body line? Sounds legitimate. Do you carry the bubble bath in all your scents? Does it sell in your other scents?

• If you never sell the bubble bath – Drop it.
• If you sell it in just certain scents. Just carry those.
• If it’s random what scents the bubble bath sells in, consider making your body wash a 2 or 3-in-1. Body wash, shampoo and bubble bath. Drop the stand alone bubble bath SKUs.

2. My fabulous Coconut Coffee Bubble Bath brings customers into my booth, but they end up buying Freesia Rose and Tutti-Frutti scents.

• Just have the sample for display. Kidding.
• Drop it and just carry what sells.

3. My fabulous Coconut Coffee Bubble Bath brings customers into my booth, they buy tons of it, as well as my other Bubble Bath Scents. However, I make 20% instead of my usual 50% Profit Margin for other products.

I assume you are only making 20% because you have priced the wholesale cost at what the market will bear or have backed out the price from what an acceptable retail price would be.

Have you? Can the market bear a little bit more? Does your packaging or special ingredient or other  niche aspect warrant a larger mark up? Think about it. 25, 35, 50 cents per item makes a difference to your bottom line. Just do the math.

Reassess your line. Are all items bought, or is this your biggest seller? If this is your biggest seller, it can be considered your loss leader, meaning you take less margin in order to gain sales on other items that you make a larger profit on. It also means that even though you take a smaller margin, it’s still acceptable because you are able to buy the supplies in larger quantities with larger discounts.

The trick is to get the sale on the other items. If your orders are mainly made up of bubble bath, then it is not a loss leader…it’s just a loss. If you can get higher margin on other items and average out your orders to carry all the products, then you can also cost-average and look at your margins that way. But this makes for tricky bookeeping.

You may want to:

• Rethink your wholesale cost.
• Buy your base ingredients or product in larger quantities in order to get a lower cost, this translates to a larger profit margin for you.
• Increase the minimum buy on this or all of your products so that you can purchase your base ingredients in larger quantities.
• Reassess your line and costing, find opportunities to mark up product in order to cost-average.

4. My fabulous Coconut Coffee Bubble Bath brings customers into my booth, they buy it.  Not as much as the Freesia Rose or Tutti-Frutti, but more than Lush Blueberry.

Well, Coconut Coffee still qualifies as a good seller in this scenario. However, why do your customers end up buying more of the Freesia Rose  or Tutti-Frutti? Is the Coffee Coconut a close third place or a distant third?  If it is a close third, keep it, especially if your margin is good on it. If your margin is not good, then would anyone care if you dropped it? Would the other top 2 items bring customers into your booth? Think about it. And what’s up with the Lush Blueberry? Do you need it?

5. My fabulous Coconut Coffee Bubble Bath brings customers into my booth, but they end up buying it only for 4th quarter sales.

Then only offer it 4th quarter. Make a big build up marketing it with a limited time frame and quantity. Publicize it on your website, market signage and postcards, etc. You can decide as you go along what “limited” quantity is. The great thing about this is that you  don’t have to worry about freshness of stock or keeping items in inventory year round.

As you can tell, there will be a lot of circular arguments in this process. However, your brain knows this and will kick-out a circular argument, the more it twirls in your head the more the truth will rise to the top. It’s up to you whether you pay attention.

Thinking that it doesn’t really matter to have a few extra scents or products hanging around is just lying to yourself. It’s costing you shelf space, time, effort and thought. It’s costing you money to special order because you didn’t realize you were out and got an order for 6 bottles.

You want to order new labels and have to count the 12 extra SKUs of the 4 products in the 3 scents you don’t really sell; with a minimum run of 100 labels each, that’s 1200 unnecessary labels. Think of the new items you could be adding- but can’t afford to.

Having too many scents or products may also be diluting your Brand Image or message. You may want to re-evaluate your selection of scents and products according to collections, end uses and target market. By doing this, you may trim some of the fat and find that you’re actually missing something. Guess what? Sometimes the problem is not having too many SKUs, it’s not having the right one!

Is it starting to add up?

* The barcode tattoo picture is the cover of one of my favorite books The Jennifer Government.