A revenue-leading SKU almost always attracts more purchasing and advertising priority. Capital and warehouse capacity, however, are finite. Additional investment should be justified by the incremental contribution the SKU generates relative to the capital and operating capacity it consumes.
Invest by contribution and capital intensity
| Low capital intensity | High capital intensity | |
|---|---|---|
| Strong contribution | Scale selectively | Improve turnover first |
| Weak contribution | Repair economics | Repair or exit |
Conceptual only. Strategic roles, demand patterns and constraints can override any quadrant.
01Bestselling Is a Signal, Not a Decision
High sales can result from heavy discounting, aggressive advertising or seasonal peaks. Before increasing investment, establish:
- Contribution after platform fees, fulfilment and marketing
- Return rates and true net demand
- Whether the volume is sustainable without continuous subsidy
A low-margin SKU may still play a traffic or cross-sell role. That role must be demonstrated with basket data and controlled tests, not assumed.
02Measure on the Same Basis
| SKU | Post-marketing contribution | Average inventory | Contribution / Inventory |
|---|---|---|---|
| A | VND 100m | VND 1,000m | 10% |
| B | VND 60m | VND 300m | 20% |
B converts inventory capital more efficiently on this measure. A still delivers higher absolute contribution. The ratio alone does not justify cutting A; it does show that B uses scarce capital more productively. Note that this is not full ROIC — receivables, payables and fixed costs are excluded.
03Evaluate the Next Increment, Not the Average
Past average performance does not guarantee the next purchase order will perform the same way. Demand may be approaching saturation, or a better unit cost may require a larger, slower-moving batch.
Estimate for each proposed investment:
- Incremental contribution
- Cash tied up and expected recovery period
- Liquidation options if demand disappoints
Under capital constraints, the opportunity cost of not funding another SKU or clearing slow stock is real.
04Inventory Policy Must Reflect Lead Time and Uncertainty
A single inventory-days target rarely works. Long-lead imports, seasonal items and fast local replenishment require different rules. Key variables are demand forecast accuracy, lead time, MOQ and desired service level.
Stock-outs lose sales and customer goodwill. Excess stock consumes cash and eventually triggers markdowns. Finance should make both costs and the cash constraint explicit.
05Segment by Economics and Role
| Fast turnover | Slow turnover | |
|---|---|---|
| Strong contribution | Scale Candidate for more investment | Improve velocity Reduce order size or accelerate sell-through |
| Weak contribution | Repair economics Review price, fees and marketing intensity | Repair or exit Define recovery plan or phase out |
These are review prompts, not automatic rules. Product relationships, seasonality and customer commitments still matter.
06Close the Loop in the Assortment Meeting
Every purchase decision should state:
- Capital required
- Quantity and expected contribution
- Replenishment timing
- Clear adjustment triggers
Review open purchase orders together with current inventory to avoid funding the same demand twice. When results differ from plan, separate forecast error, pricing, operations and marketing effects, then update the assumptions.
Key takeaway
Allocate capital by incremental contribution and speed of conversion into cash, while recognising legitimate strategic roles. Bestsellers do not automatically deserve more investment.
All numerical examples are hypothetical, not client results. Definitions, assumptions and business context affect the conclusion.
Back to E-commerce ↗