Follow us on
Vice President of Sales and Business Development at Direct Tech, Inc.

Return on Inventory

By Joe Palzkill

About Joe

Joe is vice president of sales and business development at Direct Tech, Inc., a company which helps catalog and e-commerce retailers drive profitability, increase demand and optimize inventory investment by providing best-in-class applications and services. Joe is a member of Direct Tech’s seasoned management team, which has more than 150 years experience with demand planning, inventory optimization and merchandise planning in the multichannel retail industry. For more than two decades, Direct Tech’s applications and services have enabled leading multichannel brands to grow their businesses.

Joe is a 28-year veteran of the direct merchandising industry with hands-on experience in marketing, merchandising, inventory management and business development at multichannel retail companies including Lands’ End,, and Duluth Trading Company. At Direct Tech, Joe uses his experience to help customers and prospects understand how to improve sales and profits through applying industry best practices in merchandise planning and inventory management systems and processes.

Catalog Doctor

Susan J. McIntyre
Where NOT to Cut Costs in Your Catalog Business
Mar 19, 2015

Cost cutting among catalog brands has been widespread for the past few years — and with good results. It's kept...

Return on Intelligence

Jim Gilbert
An Open Letter to Facebook's Mark Zuckerberg After His Lame ‘Thank You for Being an Advertiser’ Pop-Up
Feb 26, 2015

As a marketer, I've put my best efforts into building not just likes, but deeply engaged communities on Facebook. And when...

Designed to Convert

Tim Ash
Avoid 3 Common Technology Traps and Boost Conversions
Feb 25, 2015

Technology is your friend. That's what marketers say after they employ a largely tech-driven tactic that provides some lift. Unfortunately, that's...

The Art of Delivering Style

Maria Haggerty
The Best Packages of 2014
Feb 17, 2015

As retailers make decisions for 2015, capitalizing on branded and personalized packaging strategies should be a priority. Retailers don't need...


Stephen Lett
50 Best Tips for 2015
Feb 9, 2015

It's a new year and the Lett Direct team has put together "50 Best Tips for 2015" that will help you increase...

Shipping Insights

Rob Martinez
UPS to Increase Fuel Surcharges on All Products Effective Feb 2, 2015
Feb 2, 2015

In spite of plummeting oil prices, UPS just changed the tables used to calculate fuel surcharges, resulting in yet another rate...

Retail Rants & Raves

Joe Keenan
Retail Jobs Not so Bad After All?
Oct 15, 2014

The National Retail Federation (NRF) today released a study authored by a University of Georgia economist who found that retail jobs...

Retail Revelations

Melissa Campanelli
When Email Snafus Happen to Good Companies
Nov 12, 2014

Say it ain't so! I was actually sad when I read in MarketWatch this week that Seattle-based online retailer Zulily’s...

Email Marketing Bites

Liz Ryan
The Email Hierarchy of Needs: Deliverability is the Foundation
Jun 18, 2014

If you're not getting the most of your email messaging, you might not be asking the right questions. How many...

Email Applied

Reggie  Brady
Subject Lines That Work
Jul 18, 2014

Standing out in the inbox isn't easy. A lot of promotional emails I receive have subject lines that aren't special....

ThinkAbout: Inspirational Verve for Your Product Line!

Andrea Syverson
Springboard From Your Brand Filter
Jun 26, 2014

One of the most important ways I strengthen my clients’ brands and product lines is by collaborating with their leaders...

B-to-B Insights

George Hague
2 Must-Have B-to-B Metrics
Apr 9, 2014

Smart CEOs know two essential B-to-B metrics to successfully grow their businesses: contribution per order (CPO) for new customers and...

How Product Profiling Increases Sales and Profits


An accepted best practice in inventory planning is to adhere to the Pareto Principle, also known as the 80/20 rule. For inventory planners, this is also often referred to as product profiling, or ABC profiling. This makes intuitive sense. It's natural to spend relatively more time in planning, analysis and management of the top-selling items, but what does it mean in financial terms?

As our Direct Tech consultants often remind their customers, it means a great deal!  

Below are two examples of the financial impact product profiling can have on your business. Both represent a $50 million business with 1,000 products separated into quartiles. Each quartile includes a disproportionate percentage of the sales volume, representing the 80/20 rule. The results show the company's total incremental financial gain based on improved performance in the top-selling quartile  even accepting reduced performance in the third and fourth quartiles due to less attention given to those products.

This first example shows the incremental sales potential with focus on delivering a higher fulfillment rate on the first quartile, accepting that it may result in lower fill rate in the third and fourth quartile. The incremental sales gain is $825,000 with the fulfillment assumptions shown in this example.  Plus, these are very profitable sales, considering all advertising and fixed costs are sunk at this point.

Incremental Sales Potential - Chart 1
[+] click to enlarge

The same concept applies with cash flow management. This second example shows the cash flow impact of focusing attention on improving inventory turnover on the highest volume quartile  again, accepting that it might yield lesser results in the third and fourth quartiles. With the assumptions shown here, cash flow improves by $294,000.

Incremental Sales Gain - Chart 2
[+] click to enlarge

This same concept works in virtually all metrics: sales, gross margin, returns, overstock liquidations, etc.  Each business has its own set of facts, but adherence to product profiling with inventory management will deliver incremental sales, profit and cash flow gains for all businesses.



Click here to leave a comment...
Comment *
Most Recent Comments: