Stock Health

In this article

we will describe the functionality of the ABC analysis report and how to make the best use of it.

In merchandising, the terms "stars," "cash cows," "dogs," and "dead stock" are used to categorize products based on their performance and profitability. These terms are derived from marketing and business management frameworks, such as the BCG Matrix, and they help retailers and businesses make strategic decisions about inventory management, marketing, and product lifecycle.

1. Stars

• Definition: Stars are high-performing products that have both high market share and high market growth.
• Characteristics: These products are popular, in-demand, and typically drive significant sales. They often require investment to maintain their growth and market position.
• Merchandising Strategy: Businesses should invest in promoting and stocking these items, as they have the potential to become future cash cows.

2. Cash Cows

• Definition: Cash cows are products with a high market share but low market growth.
• Characteristics: These products generate steady revenue with little need for investment. They have matured in the market and provide consistent cash flow.
• Merchandising Strategy: Maintain adequate stock levels and continue to sell these items, as they are reliable sources of profit.

3. Dogs

• Definition: Dogs are products with low market share and low market growth.
• Characteristics: These items are typically underperforming, with weak sales and limited future potential. They may be outdated or no longer relevant to consumers.
• Merchandising Strategy: Consider discontinuing these products or reducing stock levels, as they tie up resources without generating significant returns.

4. Dead Stock

• Definition: Dead stock refers to products that are unsold or obsolete inventory that has been sitting in storage for a long time.
• Characteristics: These items have not sold for a considerable period and are unlikely to sell without significant markdowns or promotions.
• Merchandising Strategy: Focus on clearing out dead stock through discounts, bundles, or liquidation sales to free up space and capital for more profitable items.

These categories help businesses manage their product portfolios effectively, focusing resources on items that offer the best returns while minimising losses on underperforming products.