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- Your Product Line Expansion Is Backfiring (Here's Why)
Your Product Line Expansion Is Backfiring (Here's Why)
Hidden operational costs compound with each new SKU. Here's how to audit your product line and eliminate profit-destroying complexity.
Kody Nordquist
September 25, 2025
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More products should mean more revenue, right?
Well, not always.
Adding SKUs compounds across warehouse operations, customer service, and inventory management…
Costs that many founders underestimate when expanding their catalog
And SKUs with insufficient demand can result in additional costs of 15-40% of the product cost annually (just in holding expenses).
Meanwhile, 80% of your sales volume typically comes from just 20% of your SKUs.
In this email, we're breaking down:
The hidden operational costs that compound with each new SKU
How to audit your product line to identify profit-destroying complexity
The SKU Rationalization Framework simplifies operations while maintaining revenue
Let’s dive in:
The intelligence gap is destroying brands faster than bad creative.
Most brand owners are making million-dollar decisions with outdated information…
While you're waiting for next week's performance report, your competitors already know:
→ What promotions ran last month
→ How sales performed against market trends
→ Which product launches are actually working in your category
The brands dominating right now are operating with better intelligence.
This is exactly what AI analysts can do now.
The competitive intelligence that used to require an entire research team is now available instantly.
Instead of wondering "What should we try next?", start asking "What's already proven to work in our space?"
This level of market intelligence used to be exclusive to enterprise companies with dedicated research budgets.
Ready to stop making decisions in the dark?
The real cost of expanding your product line isn't just inventory investment, it's the operational drag that each additional SKU creates.
Inventory Holding Cost Multiplication
SKUs without sufficient demand incur holding costs of 15-40% of product cost annually.
Example: That $50 product sitting in inventory for 6 months? It’s costing $7.50-$20 just in holding expenses.
Pick/Pack Complexity Increases
More SKUs mean larger warehouse footprints, longer pick paths, higher error rates, and increased training time for fulfillment staff.
Customer Service Training Overhead
Your support team needs product knowledge for every SKU you carry.
More products mean more training time and higher support costs per interaction.
Return Processing Complications
Each SKU requires separate return handling processes, quality inspection protocols, and restocking procedures.
The 80/20 Rule in Action
Most businesses discover 80% of sales volume comes from 20% of SKUs, which means the majority of your catalog creates operational complexity while contributing minimal profit.
Audit Your Current Product Line Performance: Revenue Concentration Analysis
Pull 12-month sales data and rank SKUs by total revenue contribution.
And then, calculate what percentage comes from your top 20% of products.
Profitability Per SKU Calculation
Factor in all costs here: product cost, inventory holding, warehouse space, customer service time, and return processing.
Many SKUs that appear profitable become loss leaders when true operational costs are included.
Inventory Turn Rate Assessment
Calculate inventory turnover for each SKU.
Products turning less than 4-6 times annually likely cost more to hold than they generate in profit.
The SKU Rationalization Framework
Profitability Analysis with Full Cost Allocation
Calculate true profitability, including hidden costs.
Assign warehouse space costs, customer service time, and handling complexity to each SKU.
Once you have real profitability data, group SKUs into three categories:
Core performers that drive revenue with minimal complexity.
Marginal performers that break even after operational costs.
Elimination candidates that cost more to maintain than they generate.
Discontinuation Strategy
Start with the bottom 10% of SKUs by true profitability.
Analyze whether discontinuing them would drive customers to higher-margin alternatives in your catalog.
The goal here isn't to slash your product line randomly but rather to eliminate the SKUs that create operational drag while maintaining customer choice where it matters.
Often, removing low performers actually increases sales of your better products because customers have clearer options.
AI Is Rewriting the Rules for BFCM Success
Most brands think of AI as a shortcut for copywriting or creative ideas, but that barely scratches the surface. Today, AI is fundamentally reshaping how brands prepare, optimize, and scale. And nowhere is that transformation more essential than during BFCM — the most competitive shopping season of the year. From real-time data analysis to automated decision-making, the brands that embrace AI for BFCM planning won’t just stay competitive — they’ll set the pace and outperform the rest.
That’s where Triple Whale’s Moby AI comes in. With tools like Moby Chat and Moby Agents, you can turn complex data into clear next steps instantly — so you’re never left guessing. During BFCM, that means faster optimizations, sharper strategies, and the ability to respond to rising costs and shifting performance in real time.
To help you put these capabilities into action, Triple Whale created the Ultimate BFCM Prep Guide. It pairs cutting-edge AI use cases with proven data and strategies so your team can prep smarter and scale profitably. Inside, you’ll find:
H1 2025 performance benchmarks to ground your planning in fresh media trends
BFCM 2024 insights that reveal what worked, what failed, and how to evolve your strategy this year
A 90-day checklist to keep campaigns, creative testing, and optimizations on track
AI-powered workflows that go beyond copywriting to unlock growth across your entire brand
Final Thoughts
SKU proliferation feels like growth, but it often destroys operational efficiency.
The brands with the highest profit per order aren't necessarily those with the most products.
They're the ones that eliminate complexity while maintaining customer choice.
Audit your SKU performance, calculate true profitability including operational costs, and ruthlessly eliminate the products that create more complexity than profit.
Want to learn more? Connect with me on social 👇
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Thank you for reading! I appreciate you.
Until Next Time ✌️
- Kody
Disclaimer: Special thanks to Particl & Triple Whale for sponsoring today’s newsletter.