Share of Active Items (SAI) is a key performance indicator (KPI) in e-commerce that allows companies to evaluate the effectiveness and appeal of their product assortment.
This metric provides insight into the variety of products that attract customer purchases within a given time period. By examining the SAI, companies can gauge the attractiveness and balance of their inventory, facilitating decisions related to product additions, discontinuations, or promotions. It is a lens through which the vitality and customer relevance of a product assortment can be viewed and improved.
Key Takeaways
- Definition: Share of Active Items (SAI) is a metric that measures the proportion of unique products in an assortment that have been purchased at least once during a given time period.
- Calculation: SAI is calculated by dividing the number of products purchased at least once by the total number of unique products (SKUs) available for purchase and multiplying the result by 100.
- Strategic Importance: SAI helps companies evaluate the effectiveness and appeal of their product assortment, guiding inventory management and marketing strategies.
- Optimization Strategies: Increasing SAI includes strategies such as regular product reviews and updates, promotions and discounts, effective product categorization and display, customer feedback analysis, and dynamic inventory management.
- Limitations: SAI has limitations such as not necessarily indicating sales volume, limited insight into product popularity, susceptibility to inventory changes, lack of profitability differentiation, no insight into customer behavior, seasonal variations, lack of context without additional metrics, and potential for unnecessary product diversity.
- Complementary Metrics: SAI should be considered alongside other metrics such as inventory turnover, sales conversion rate, and product return rate for a complete understanding of business performance.
Why does Share of Active Items matter for your business?
Incorporating the Share of Active Items as a KPI is impactful for ecommerce businesses for several reasons:
- Product Range Effectiveness: A higher SAI indicates that a broader array of products in your inventory is being purchased, signifying a well-balanced and attractive product range.
- Inventory Optimization: Understanding which products are active allows for a more informed decision-making process regarding which items to stock more, discontinue, or promote.
- Customer Preference Insights: Analyzing the SAI can unveil customer preferences and trends, aiding in tailoring the product offerings to meet consumer demands and expectations.
- Marketing Strategy: Knowledge of active items can guide marketing strategies, enabling businesses to focus on promoting products that are less active to enhance their visibility and sales potential.
How to calculate Share of Active Items (SAI)?
Explanation of the parts of the formula:
- Number of products bought at least once: This represents the number of unique products that customers have purchased during a certain period. Each product is counted only once, regardless of how many times it was purchased.
- Total Items (SKU): This represents the total number of unique products (Stock Keeping Units) available for purchase in the inventory. It includes all items, whether they were purchased or not during the specified period.
- The ratio: Dividing the number of products bought at least once by the total items (SKU) gives us the proportion of the inventory that has been actively purchased. This value is between 0 and 1.
- Multiplying by 100: This step converts the proportion into a percentage, making it easier to understand and analyze.
The Share of Active Items (SAI) essentially tells us what portion of the inventory is actively contributing to sales, allowing for better product range management and strategy planning.
Example Scenario
Imagine an online bookstore’s scenario over a month:
- The bookstore has a total of 10,000 unique book titles (SKUs) in its inventory.
- During this month, 2,500 unique titles were purchased at least once.
Applying these numbers to the formula:
- Share of Active Items (SAI) = \( \frac{2,500}{10,000} \) × 100
- Share of Active Items (SAI) = 0.25 × 100
- Share of Active Items (SAI) = 25%
This means that 25% of the bookstore’s inventory actively contributed to sales during this month.
Tips and recommendations for increasing Share of Active Items
SAI optimization includes strategies that increase the visibility, appeal, and accessibility of products in inventory:
Regular product reviews and updates
Regular product reviews and updates are critical to optimizing Share of Active Items (SAI). By conducting regular analysis, you can identify which products in your inventory are not selling well and take appropriate action. This could include updating product features, packaging, or even discontinuing the product if it is no longer in line with current market trends and customer preferences. By keeping a close eye on your products and making the necessary updates, you can ensure that your inventory remains relevant and appealing to customers.
Promotions and discounts
Promotions and discounts can be effective strategies for increasing the visibility and appeal of less active items in your inventory. Consider offering special promotions or discounts on these items to attract the attention of potential buyers. This can create a sense of urgency and incentivize customers to make a purchase. By strategically pricing and promoting these items, you can increase their visibility and their chances of being purchased by customers.
Effective product categorization and display
Effective product categorization and display play a critical role in improving customer navigation and product discovery, thereby optimizing ROI. Ensure that your products are logically categorized based on their features, benefits, or intended use. This will help customers easily find what they are looking for and browse related items. In addition, invest in attractive product displays on your Web site or online store to make products visually appealing and enticing to customers, increasing the likelihood that they will explore and purchase items from your inventory.
Customer feedback and reviews
Customer feedback and reviews provide valuable insight into product preferences and areas for improvement, which can be instrumental in optimizing the SAI. Encourage customers to leave reviews and provide feedback on their purchases. Analyze this feedback to understand what customers like about your products and identify potential areas for improvement. By actively listening to your customers, you can make the necessary adjustments to your inventory to ensure that it meets their needs and preferences, ultimately improving the SAI.
Dynamic inventory management
Dynamic inventory management is essential to optimizing the SAI. It involves regularly updating your inventory by adding new products that reflect current market trends and removing or updating outdated or less popular items. By constantly refreshing your inventory, you can ensure that it remains relevant and appealing to customers. This may involve sourcing new products, discontinuing underperforming products, or making updates to existing products based on customer feedback or changing market demands. A dynamic approach to inventory management helps maximize SAI by offering a fresh selection of products that resonate with customers.
Examples of use
Seasonal Product Promotions
- Scenario: An ecommerce clothing store identifies that certain winter accessories are not actively being purchased.
- Use Case Application: The store could run a mid-season promotion, offering discounts on these less active items to encourage purchases and make room for new seasonal inventory.
Product Bundling
- Scenario: An online electronics retailer finds that some accessories have a low SAI.
- Use Case Application: The retailer could create bundles that include these accessories with popular electronics, enhancing their appeal and purchase likelihood.
Customer Review Analysis
- Scenario: A beauty products ecommerce store has several items with low SAI.
- Use Case Application: Analyzing customer reviews can provide insights into why certain items are less popular, and adjustments can be made based on customer feedback.
Flash Sales
- Scenario: A furniture ecommerce website identifies that certain items such as specific types of lamps and tables have a low SAI.
- Use Case Application: The website could organize a limited-time flash sale on these specific items. The urgency created by the flash sale could attract customers to purchase the less active items, thus improving their SAI.
Collaborations and Influencer Partnerships
- Scenario: An ecommerce store specializing in fitness apparel notices that some of its new product lines are not performing as expected with lower SAI.
- Use Case Application: The store could collaborate with fitness influencers to promote these specific product lines. Influencers can create content or write reviews, which can help in creating awareness and improving the SAI of the new products.
Share of Active Items SMART goal example
Specific – Increase the percentage of active items (SAI) in our inventory by 20%. This includes increasing the percentage of unique products that are purchased at least once in a given period of time, increasing the activity and turnover of the assortment.
Measurable – SAI will be calculated and compared monthly to track progress. The number of products purchased at least once is divided by the total number of SKUs, and the result is multiplied by 100 to obtain the SAI as a percentage.
Achievable – Yes, by implementing strategies such as product promotions, bundling less active items with popular items, analyzing customer reviews for insights, and adjusting product assortment based on customer preferences and market trends.
Relevant – Yes. Increasing the SAI is consistent with our goal of optimizing the product assortment, improving sales, and reducing excess inventory. A higher SAI indicates a more balanced and actively purchased inventory, which is critical to business profitability and growth.
Timed – Aim to achieve this goal within the next three months. This timeframe allows for implementation of strategies and evaluation of their effectiveness in increasing SAI.
Limitations of using Share of Active Items
While the Share of Active Items (SAI) is an insightful metric for understanding the diversity of products purchased in an ecommerce setting, it has its limitations when used in business analysis:
- Not Necessarily Indicative of Sales Volume: A high SAI indicates a broader range of products being purchased, but it doesn’t necessarily mean that the sales volume is high. An item only needs to be bought once to be considered “active,” which might not contribute significantly to overall sales.
- Limited Insight into Product Popularity: SAI shows the variety of items sold but doesn’t differentiate between bestsellers and less popular items. Two products sold once each have the same weight as one product sold twice in the SAI calculation.
- Susceptibility to Inventory Changes: The SAI metric can be affected by changes in inventory, such as the introduction of new products or the discontinuation of old ones. This variability in the denominator of the SAI formula can impact the consistency and comparability of the metric over time.
- Doesn’t Account for Profitability: SAI doesn’t distinguish between high-margin and low-margin products. A wide variety of low-margin products being sold might increase the SAI but not necessarily contribute much to profitability.
- No Insight into Customer Behavior: SAI focuses on product activity rather than customer behavior. It doesn’t provide insights into customer loyalty, frequency of purchases, or customer lifetime value, which are crucial for business strategies.
- Subject to Seasonal Variations: Similar to other metrics, SAI can be influenced by seasonal trends and shopping holidays, where a wider array of products might be purchased. It’s essential to consider seasonal influences when analyzing the SAI.
- Lacks Context Without Additional Metrics: Analyzing SAI in isolation might not give a full picture of business health. It needs to be evaluated alongside other metrics like sales volume, average order value, and customer retention rates to make informed business decisions.
- May Encourage Unnecessary Product Diversity: Overemphasis on improving SAI may lead to unnecessary expansion of product offerings, leading to inventory management challenges and diluted brand focus.
In conclusion, while SAI provides valuable insight into the diversity of product purchases, it should not be the sole focus of e-commerce analysis. It should be used in conjunction with other key performance indicators (KPIs) to gain a well-rounded understanding of business performance.
KPIs and metrics relevant to Share of Active Items
- Inventory Turnover: This measures how quickly inventory is sold over a specific period. A higher inventory turnover combined with a higher SAI could indicate a well-optimized inventory.
- Sales Conversion Rate: This determines the effectiveness of converting site visitors into customers who make a purchase.
- Product Return Rate: Monitoring the rate at which products are returned can offer insights into product quality and customer satisfaction.
Final thoughts
Share of Active Items (SAI) is a key metric that enables ecommerce businesses to optimize their inventory based on actual customer buying behavior. By focusing on increasing the visibility and appeal of less active items through promotions, effective presentation, and customer feedback, companies can aim to improve their SAI, resulting in a more dynamic and customer-centric assortment.
Share of Active Items (SAI) FAQ
What is Share of Active Items (SAI)?
SAI represents the proportion of unique products in a range that have been purchased at least once during a specific period.
Why is SAI important for my ecommerce business?
SAI allows businesses to understand the effectiveness and appeal of their product range, guiding inventory optimization strategies.
How can I improve my SAI?
Improving SAI involves enhancing product visibility and appeal through promotions, effective online presentation, and inventory updates based on customer preferences and market trends.
What other KPIs should I consider along with SAI?
Consider KPIs like Inventory Turnover, Sales Conversion Rate, and Product Return Rate to get a comprehensive view of your ecommerce performance.