ABC analysis on marketplaces: how to find the most profitable products

ABC analysis is a method of dividing products into three groups based on how strongly each one impacts the final business metrics: revenue, profit, margin, etc.

The Essence of the Method:

A small portion of the assortment generates the majority of the result. This reflects the Pareto principle — often about 20% of SKUs provide up to 80% of revenue or profit. The numbers may vary, but the pattern holds true for most sellers.

The final classification typically includes three blocks:

Group A — key items that generate the bulk of revenue or profit. Group B — a moderate contribution to the result, "second-tier" products. Group C — items with minimal financial impact.

Dividing into groups allows you to:

focus attention on a limited number of truly important SKUs;

understand what to optimize and what to eventually phase out or radically rethink the strategy for.

Why ABC Analysis is Needed on Marketplaces

On marketplaces, "high sales" does not mean "high profit." The final result is influenced by:

platform commissions;

logistics to the warehouse and within the marketplace;

paid storage;

advertising costs;

discounts and promotions;

returns and defects.

ABC analysis helps prioritize in this situation. With it, you can:

identify products that generate the main profit, not just turnover;

reallocate the advertising budget towards truly profitable items;

build a stock control system for important SKUs;

plan purchases and replenishments more accurately;

find products that "freeze" money in warehouse stock;

generally increase the profitability of the assortment.

If you conduct the analysis regularly, it becomes easier to quickly notice changes in sales and adjust your strategy before profit drops.

Which Product Groups are Identified in ABC Analysis

Group A: The Core of the Business

Group A includes products that generate the bulk of the money. Most often, this is about 10–20% of the assortment items, but they provide up to 70–80% of revenue or profit.

How to work with Group A:

maintain sufficient stock in the warehouse, avoid stockouts;

promptly track changes in demand and competition;

regularly check and adjust prices;

support and refine ad campaigns;

monitor listing metrics: conversion rate, ratings, reviews.

Essentially, these are the products around which the entire operational framework is built.

Group B: Stable "Middle Ground" with Potential

Group B provides a moderate contribution to total sales and profit. Typically, these products account for about 15–20% of the result.

What to do with Group B:

improve listing content: photos, videos, descriptions, specifications;

try different ad formats and settings;

carefully test prices;

work on increasing conversion rate and visibility.

With proper work, some products from Group B can move into category A and become new growth drivers.

Group C: Weak Contribution, But Not Always "Junk"

Group C consists of products that have virtually no impact on revenue and profit. However, being in C is not a death sentence. There can be many reasons:

pronounced seasonality;

weak or non-existent promotion;

poor listing (content, title, keywords);

high competition in the niche;

inflated price relative to the market.

Before cutting the assortment, it's worth analyzing each item: sometimes reworking the listing or adjusting the price is enough to "revive" the product.

Which Metric to Use for ABC Analysis

ABC analysis can be built on different metrics. The choice depends on the management task you need to solve.

Analysis by Revenue

ABC analysis by revenue answers the question: which products generate the main turnover.

Pros:

simple calculations;

quickly helps identify "high-turnover" products.

Cons:

does not show how much money remains after all expenses;

can create an illusion of success for items that actually earn little.

Analysis by Profit

ABC analysis by profit provides a more accurate picture of the economics.

It takes into account:

product cost price;

marketplace commissions;

advertising expenses;

logistics and storage;

other direct costs.

The result is a list of products that actually bring in money. This approach is best suited for management decisions: which items to develop, which to cut, where to allocate the advertising budget.

Analysis by Margin

ABC analysis by margin helps find products with the highest profitability per unit of turnover.

Useful when:

you need to understand which items are worth scaling, even if their sales are currently small;

you are choosing which new SKUs to add based on current experience.

It is often used in addition to analysis by revenue and profit.

ABC Analysis by Revenue and Profit

Combined analysis by revenue and profit shows the full picture: which products sell well and which ones actually earn money. This is the approach used in the Torgstat service.

This is critical for marketplaces where:

high sales volume can easily be "eaten up" by commissions;

aggressive advertising can turn a hit into a low-profit product;

paid storage and logistics heavily pressure margins.

With this approach, each SKU receives two letters — one for revenue and one for profit:

AA — product in group A for both revenue and profit: an ideal leader;

AC — high revenue (A), but low profit (C): a warning sign;

and other combinations (AB, BA, BC, etc.).

Dual classification helps you quickly see where turnover is not turning into money and more precisely adjust your assortment and advertising.

How to Interpret ABC Combinations by Revenue and Profit

AA — Key Business Drivers

AA products are the best in the store: they are simultaneously:

in the top for revenue;

and generate maximum profit.

How to work with them:

avoid shortages and carefully plan supplies;

maintain a stable price and do not "kill" margins with excessive discounts;

regularly evaluate advertising effectiveness, but do not cut it without reason;

closely monitor competitors' moves.

AC — Strong Sales, Weak Profit

AC is a dangerous category: products sell well, but their contribution to profit is low.

Common reasons:

high cost price;

aggressive or ineffective advertising;

high commissions within the category;

slow turnover and expensive warehouse stock;

paid storage and frequent returns.

What to do with AC items:

check current stock and demand forecast;

analyze turnover and warehouse costs;

calculate the unit economics for each item in detail;

reconsider the price (up or down depending on the niche and competition);

optimize ad campaigns: remove ineffective formats, reallocate budgets.

Often, AC products create the illusion of a successful business: "tons of sales," but the final profit does not grow.

Group B in Combined Analysis

Group B products are the "middle class" of the assortment, both in terms of revenue and profit.

Main actions:

assess stock: is there any accumulation in the warehouse;

if the product sells poorly and "stagnates," use moderate discounts and promotions;

accelerate turnover, thereby reducing storage costs;

improve listings and advertising to check if there is potential to move into A.

CC — Barely Sell and Barely Earn

CC products are those that:

generate minimal revenue;

do not bring noticeable profit;

continue to occupy warehouse space and tie up working capital.

The optimal strategy is usually:

aggressive discounts and clearance sales of remaining stock;

freeing up warehouse space for more promising items;

reducing or completely stopping new purchases for these SKUs;

removing products from the assortment if there are no arguments in their favor (e.g., strategic product line, cross-selling, etc.).

Step-by-Step Guide: How to Do ABC Analysis

ABC analysis can be done in Excel or through analytical services.

The general algorithm is the same:

Define the analysis period.

For example, a month, quarter, or season, depending on the product's sales cycle. 2. Choose the metric.

Revenue, profit, margin — or several at once if a combined analysis is planned. 3. Create a list of products and sort them in descending order of the chosen metric.

The most important products should be at the top. 4. Calculate the share of each product in the total result.

For example, product revenue / total revenue for the period.

Calculate the cumulative share.

Sum the shares as you move down the list: this will show which products generate, say, the first 70–80% of the result. 6. Divide the products into groups A, B, and C.

A common scheme is: A — up to 70–80% of the cumulative total; B — up to approximately 90–95%; C — everything above this threshold. The boundaries can be adjusted to suit the specifics of the niche.

Interpret the results and create an action plan for each group.

For A — protection and development, for B — growth and optimization, for C — audit and decisions on reduction/relaunch.

If you repeat these steps regularly, you can catch changes in demand, seasonal shifts, and drops in the effectiveness of individual products in time.

Typical Mistakes in ABC Analysis

ABC analysis is often distorted due to several common mistakes:

Focusing only on revenue.

A product can be in the top for turnover and barely break even or operate at a loss.

Ignoring profit and expenses.

Without considering commissions, advertising, logistics, and storage, the analysis gives a false picture.

Too short a period.

For example, evaluating over a couple of weeks with a long customer decision-making cycle or pronounced seasonality.

Lack of consideration for seasonality.

A product might end up in group C only because the analysis was done outside its season.

Automatically removing all C-products from the assortment.

Without additional analysis of the reasons for low performance, you can get rid of a potentially promising item.

One-time analysis without repetition. ABC is not a one-off report, but a tool for continuous monitoring.

For the method to be beneficial, it is better to use it as a regular procedure and combine it with other types of analytics.

How to Automate ABC Analysis on Marketplaces

While the assortment is small, ABC analysis can be done manually. But with dozens and hundreds of SKUs:

the volume of calculations grows;

the risk of errors in formulas and data increases;

it becomes difficult to regularly recalculate metrics for different periods and metrics.

Analytical services for marketplaces solve this problem:

they automatically pull data on sales, revenue, commissions, and expenses;

they build ABC analysis by revenue, profit, and margin;

they show turnover and warehouse stock;

they allow you to compare products against each other using key metrics.

For example, in Torgstat, ABC analysis data can be analyzed together with the store's financial indicators. This makes it possible to:

view products through the lens of both turnover and profit simultaneously;

account for expenses in full unit economics;

analyze turnover and the impact of warehouse stock;

make decisions without manual calculations and constant report exports.

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ABC analysis is a basic but very powerful tool for managing assortment on marketplaces. It helps you:

identify products that generate the main profit;

bring order to purchasing and stock;

rationally allocate advertising budgets;

reduce warehouse and marketing losses;

move assortment management from intuitive to data-driven.

The maximum benefit comes from ABC analysis built on both revenue and profit: it shows not only the best-selling items but also those that actually earn money. If you do such analysis regularly, it is easier for a seller to find growth points and maintain an effective assortment on Wildberries, Ozon, and Yandex Market.

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Frequently Asked Questions

What is ABC analysis?

ABC analysis is a method that divides products into three groups based on their contribution to a result: revenue, profit, or margin. It shows which items provide the main financial effect, which have moderate potential, and which have almost no impact on the business outcome and need review.

Why do ABC analysis on marketplaces?

On marketplaces, the final profit heavily depends on commissions, logistics, storage, advertising, and discounts. ABC analysis allows you to:

understand which products are truly profitable;

manage the assortment rather than "pushing everything";

plan purchases and control stock;

allocate the advertising budget more effectively.

As a result, not only turnover but also the real profitability of the business grows.

Which metric is best for ABC analysis?

For management decisions, analysis by revenue and profit is optimal. This approach reflects both sales volume and their actual profitability.

How often should ABC analysis be done?

The optimal frequency is at least once a month. If:

the assortment is frequently updated;

sales are highly dependent on season or promotions;

the analysis should be done more often (e.g., every 1–2 weeks) to promptly adjust purchases, prices, and advertising strategies.