Step-by-Step Guide: How to Perform ABC Analysis for Your Shopify Store

Do you know which products in your Shopify store are silently fueling most of your revenue?

Well, there is a method to show you exactly which products deserve your attention and which ones can take a back seat.

That’s exactly what ABC analysis helps you do.

Instead of treating every SKU as equally important, it helps you identify the real revenue drivers and organize your inventory strategy around them.

In this guide, we’ll walk you through the exact steps to run ABC analysis inside your Shopify store from gathering your data to building a smarter reorder plan that saves time, money, and stress.

Step 0: Gather Your Product and Sales Data

Before jumping into calculations, the first step is to make sure you have all the essential product and sales data ready. Without accurate data, your ABC analysis can lead to incorrect results and ultimately, poor inventory decisions.

Here’s what you should collect from your Shopify store:

• SKU list: A complete list of all active products and their variants.
• Units sold: Total quantity sold for each SKU in the last 12 months (or a full sales cycle).
• Selling price or unit cost: Needed to calculate total consumption value.
• Total revenue per SKU: Units sold × selling price.

Pro tip: Export this data directly from Shopify’s Sales Reports or Product Performance Reports into a spreadsheet. This ensures you’re working with real, up-to-date numbers and sets the foundation for accurate ABC classification later on.

Step 1: Calculate the Annual Consumption Value of Each SKU

Once you have your product and sales data ready, the first real step in ABC analysis is to calculate the annual consumption value for every SKU.

This tells you how much revenue (or cost) each product contributes over a full sales period and it’s the key metric that determines which category (A, B, or C) it belongs to.

Here’s the simple formula you’ll use:

Annual Consumption Value = Units Sold × Selling Price (or Unit Cost)

Example:

• Product A: 1,200 units sold × $50 = $60,000
• Product B: 300 units sold × $20 = $6,000

This calculation provides a clear, data-driven view of which products are generating the most value.

It also helps you identify those “silent performer” items that may not sell in huge quantities but still generate significant revenue due to a higher price point.

Pro tip: Always use data from at least the last 12 months to account for seasonality and trends. If you’re a newer store, use data from the longest period you have.

Step 2: Rank Your Products by Value Contribution

At this stage, your goal is not to make any decisions yet it’s simply to understand the performance landscape of your products.

Ranking is about visibility: identifying which SKUs contribute most to your revenue and how sales are distributed across your catalog.

Here’s how to do it:

1. Create a master list of all your SKUs with their total annual value.
2. Sort them from highest to lowest based on revenue contribution.
3. Calculate cumulative revenue % as you go down the list, this shows how much of your income each product adds up to.

What you’re looking for: Patterns.

You’ll likely see a sharp revenue curve, a small cluster of SKUs at the top driving most of your revenue, a middle group contributing moderately, and a long tail that barely moves the needle.

Pro Tip: With inventory software like Sumtracker, you don’t have to manually crunch these numbers. It automatically calculates each SKU’s revenue share and builds the ranked list for you, updating it as new orders come in.

Step 3: Segment SKUs Into A, B, and C Categories (Turn Data Into Strategy)

Now that you understand how your revenue is distributed, it’s time to act on that data. This step involves transforming your ranked list into actionable categories that guide how you manage stock, determine reorder cycles, and make purchasing decisions.

Here’s how to approach it:

• A Items – Your revenue backbone
  These are the few SKUs at the top of your list, typically 10–20% of total products, that account for the lion’s share of sales. They’re your priority for close forecasting, frequent reorders, and tight safety stock.

• B Items – The steady contributors
  These fall in the middle of your ranked list. They contribute meaningfully but don’t dominate revenue. They’re important for cash flow but don’t require daily oversight.

• C Items – The long-tail products
  These make up the bulk of your catalog but generate the least revenue. They should be managed with cost-efficiency in mind, with less frequent reorders, bulk purchasing, or even product pruning.

The outcome of Step 3:

• A strategic segmentation that tells you where to focus your time, money, and attention.
• A clear plan for how often to reorder, how much safety stock to hold, and how closely to monitor each group.

Step 4: Create a Tailored Replenishment Plan for Each Category

Once your products are segmented, the next step is to manage each group differently. A one-size-fits-all approach doesn’t work, your top performers need more attention than slow movers.

A Items – High Priority

• Reorder frequently and keep extra safety stock to avoid stockouts.
• Track sales trends closely and forecast demand.
• Negotiate faster lead times with suppliers.

B Items – Moderate Priority

• Check stock levels monthly or bi-weekly.
• Maintain a balanced safety buffer without overstocking.
• Combine orders to save on procurement costs.

C Items – Low Priority

• Reorder less often, ideally in bulk to cut costs.
• Keep minimal safety stock or consider discontinuing low-performing SKUs.
• Automate reorders where possible to reduce manual work.

Result: Each category now follows its own plan ensuring your best-sellers are always available, mid-tier products are managed efficiently, and low-impact items don’t tie up cash unnecessarily.

Step 5: Review and Refine Your Analysis Regularly

ABC analysis isn’t something you do once and forget, it only stays accurate if you update it as your business evolves. Product demand, customer preferences, and sales trends change over time, and your categories should reflect that.

Here’s how to keep your analysis relevant:

• Set a review schedule: Revisit your ABC categories at least once every quarter. For fast-moving stores, monthly updates are even better.
• Watch for seasonal shifts: Products that are “C” most of the year might become “A” during holiday peaks or BFCM.
• Reassess new SKUs: Add new products into your analysis once they’ve gathered enough sales data.
• Use automation to stay updated: Tools like Sumtracker automatically recalculate consumption values and adjust categories as sales change, saving you time and reducing errors.

Why this matters: A regularly updated ABC analysis ensures your inventory strategy always aligns with current demand, helping you stay in control of stock levels and make smarter purchasing decisions.

Pro Tips to Make ABC Analysis More Effective

Once you’ve set up your ABC analysis, a few small tweaks can make it far more powerful and impactful for your business. Here’s how to get the most out of it:

• Include profit margins, not just revenue: A product with slightly lower sales but higher margins may be more valuable than a best-seller with thin profits.
• Combine ABC with demand forecasting: This helps you predict future sales more accurately and plan reorders proactively.
• Reclassify products after major sales events: Categories can shift significantly after peak seasons, so refresh your analysis after events like BFCM or holiday sales.
• Automate where possible: Using an inventory tool like Sumtracker can automate calculations, classifications, and reorder alerts, saving you hours of manual work.
• Act on your insights: Don’t just categorize, use the results to shape supplier negotiations, pricing decisions, and marketing campaigns.

The takeaway: ABC analysis is most effective when it’s dynamic, data-driven, and tied to decision-making, not just a static report you check once and forget.

Automate the Process with Inventory Management Software

Running ABC analysis manually is fine when you’re dealing with a small catalog but once your product range expands, updating spreadsheets and recalculating categories can become time-consuming and prone to errors. That’s where an inventory management tool can make the process much easier and more accurate.

A good platform, like Sumtracker, automates the heavy lifting for you. It can:

• Calculate consumption value automatically: Pull sales and inventory data from Shopify and compute each product’s revenue contribution without manual input.
• Classify SKUs into A, B, and C: Instantly categorize your products and keep those categories updated as sales trends change.
• Provide low-stock alerts and reorder suggestions: Help you restock the most important products before they run out, and manage less impactful items more efficiently.
• Centralize visibility: Give you a single dashboard to track stock levels, product categories, and reorder priorities, saving hours of manual work.

Conclusion

ABC analysis isn’t just another inventory tactic it’s one of the simplest and most effective ways to run a more profitable Shopify business.

By ranking products based on their revenue contribution, segmenting them into meaningful categories, and tailoring your replenishment strategy, you shift from reactive inventory management to proactive decision-making.

And with an inventory management tool like Sumtracker, you can automate the heavy lifting, get real-time category updates, and make smarter restocking decisions without relying on spreadsheets.

Try Sumtracker today and turn your inventory into a profit-driving engine.

FAQs

1. How often should I update my ABC analysis?

Ideally, every quarter. But if your store has frequent product launches, seasonal peaks, or rapid growth, reviewing it monthly will give you more accurate insights.

2. Can ABC analysis be applied to small product catalogs?

Yes! Even if you sell fewer than 20 products, ABC analysis can still show you which SKUs deserve more focus and help guide purchasing decisions.

3. What’s the biggest mistake merchants make with ABC analysis?

Treating it as a one-time task. Demand changes constantly, so failing to update your categories can lead to overstocking slow movers and understocking best-sellers.

4. Is ABC analysis only based on revenue?

Not necessarily. You can also factor in profit margins, order frequency, or customer demand, depending on what matters most to your business goals.

5. How does Sumtracker help with ABC analysis?

Sumtracker automates the entire process from calculating consumption value and classifying SKUs to updating categories as sales trends change. It also gives reorder suggestions so you can act on the insights immediately.

‍