What is SKU Rationalization in Retail? Explained

SKU Rationalization is the strategic process of evaluating and optimizing the Stock Keeping Unit (SKU) portfolio carried by a retailer. This involves analyzing the performance, profitability, and relevance of individual SKUs to determine which products should be retained, expanded, reduced, or discontinued. Retailers often undertake SKU rationalization to streamline their product assortment, improve inventory management, and enhance overall operational efficiency. By focusing on the most profitable and high-performing SKUs, retailers can allocate resources more effectively, reduce carrying costs, and better meet customer demand, ultimately contributing to increased profitability and competitiveness.