ABC curve: your store’s best seller is probably only fifth in profit

Build your store’s ABC curve twice: once by revenue and once by profit in reais. If your store is like most, the product leading the first list shows up fifth or sixth on the second, and some low-profile item you almost discontinued is at the top for profit. The difference between these two lists is where almost every decision worth making in your catalog lives.

The revenue curve is what everyone does, because it’s what the marketplace dashboard gives you. It shows who sells. The problem is, no one pays rent with revenue.

#How the two lists split

Look at a cell phone accessories store, with the six SKUs that make up most of the sales:

The headset accounts for 37.5% of revenue and 12% of profit. The wall mount accounts for 17% of revenue and 32% of profit. If this store decides where to put ad budget by looking only at the first column, it will invest in the product that brings back the least money.

I’m not saying to kill the headset. High ticket helps dilute fixed costs, brings traffic, and sometimes drives bundled sales. I’m saying treating the headset as “the flagship” and the wall mount as “that small item” is a misread of your own store.

#The mistake that makes the curve lie: mirror listing

Before trusting any curve, check one thing: is the same product in more than one listing?

It’s common. You created a Classic and a Premium listing. Or you have your own listing and a catalog publication. Or you made a new listing because the old one got stuck. If your curve sums by listing, each one shows a slice of the volume and none make it to class A. The whole product disappears from the list, and you’ll never understand why its stock runs out every week.

The sum has to be by product, or by catalog SKU. It’s a tedious fix to do by hand and it changes the result more than any other adjustment.

In practice. In a home and garden store, three SKUs jumped from class C to class A only after the mirror listings were merged. Two of them were left out of every ad campaign because they “didn’t sell enough to justify it.” They did. They were split across four listings each.

#Deduct ad spend before classifying

One detail that changes positions: the profit curve needs to be after ad spend, not before.

Products that only sell with heavy sponsorship have good shelf margin but thin real profit. Products that sell on their own, organically, deliver the full margin. When you deduct ad spend SKU by SKU, some champions drop a lot, and some average items rise.

It’s the same logic I described in the article about ACOS and TACOS: ad spend has an owner, and the owner is the product that used the budget.

#What to do with each class

For A by profit, the rule is protect. Stock can never run out, price doesn’t change without thought, and these are where ad budget makes the most sense.

For B, the rule is test. They’re natural candidates to move up with a price tweak, a better photo, or a new variation.

For C, the rule is stop spending. Remove from campaigns, take out of fulfillment if stock coverage is high, test a higher price without fear. C items that handle a price increase become B. C items that can’t and don’t move are candidates to leave the catalog, but that’s the last decision, not the first.

#How often to redo

Once a month works for most stores, with one exception: whenever the marketplace changes the fee table or you change price ranges for many products, redo it right away. Table changes reorder the profit curve without changing a comma in the revenue curve.

In Milewa, the ABC curve is already by product, with mirror listings summed and ad spend deducted, so both lists are side by side with no spreadsheet work.