Vampire SKUs - An Origin Story
A vampire SKU is a product that sucks the lifeblood out of your business. They are caused most frequently by making decisions solely based on gross margin.
Let’s say a business has a goal of a 30% gross margin on all sales – they might take a cost-plus approach in pricing to achieve this.
Here is a tile company:
Clearly Tile #1 is a great sale and Tile #4 is a loser, right? If you are looking only at margin- absolutely. And that is how a vampire SKU is born…
That origin story is not completely clear until this we add this question. What if I told you the cost to pick, pack, and load each of these SKUs was $8.00?
This gives us a much better understanding of the true winners and losers. Tile #1 and #2 are vampires, Tile #3 is okay, but not great, and Tile #4, with the lowest margin, is actually the best performing SKU.
Vampire SKUs are deadly for a business because they don’t cover operating costs. Other SKUs must overperform to cover vampire SKUs. Your business may need certain loss leader SKUs, but a product portfolio with too many vampires is a sure path to bankruptcy.
Add “vampire SKU” to your business vocabulary.