• Identify the top 20% of SKUs that generate 80% of revenue using Pareto Analysis.

• Optimize inventory, pricing, and delivery for these SKUs via EdgeOS and Dark Store Mesh.

• Reduce logistics costs and improve COD/RTO performance by focusing on high‑margin products.

Introduction

In India’s tier‑2 and tier‑3 cities, cash‑on‑delivery (COD) dominates, and return‑to‑origin (RTO) costs can erode margins. Merchants running 10,000+ SKUs often spread inventory thin, leaving high‑margin items under‑stocked. By applying Pareto Analysis—also known as the 80/20 rule—we can pinpoint the 20% of products that drive the majority of sales, allowing us to prioritize inventory, pricing, and delivery for the right items. This data‑driven approach is essential for e‑commerce players in metros like Mumbai, Bangalore, and emerging hubs such as Guwahati, where consumer demand fluctuates sharply during festive seasons.

Pareto Analysis is a statistical approach that helps identify the few critical factors responsible for the majority of results. In e‑commerce, it translates to:

The table above shows that the top 20 SKUs contribute roughly 80% of total revenue.

High COD & RTO Costs

• Problem : 70% of orders in Tier‑2 cities use COD, yet only 30% of products are high‑margin.

• Impact : RTO can cost ₹200–₹300 per return, eroding profits.

Inventory Carrying Costs

• Problem : Overstocking 80% of low‑turnover SKUs ties up capital.

• Impact : 15% of inventory value is tied in unsold stock, reducing cash flow.

Logistics & Delivery Challenges

• Problem : Delivering a wide SKU range strains Dark Store Mesh capacity.

• Impact : Longer delivery windows during festivals increase customer churn.

H3 1️⃣ Gather Sales Data

• Pull SKU‑level sales from your ERP or e‑commerce platform (Amazon, Flipkart, or your own store).

• Include metrics : units sold, revenue, return rate, COD usage.

H3 2️⃣ Rank & Calculate Cumulative Percentages

• Sort SKUs by revenue descending.

• Compute cumulative % of revenue.

H3 3️⃣ Identify the 20% Threshold

• The point where cumulative % crosses ~80% marks your high‑impact SKUs.

H3 4️⃣ Validate with Return & COD Rates

• Cross‑check that these SKUs have lower RTO rates and higher profit margins.

H3 EdgeOS: Smart Inventory Allocation

• EdgeOS uses real‑time demand signals to push high‑impact SKUs to nearest dark stores.

• Result : 20% of SKUs get 50% higher stock availability during peak periods, reducing abandoned carts.

H3 Dark Store Mesh: Optimized Last‑Mile Delivery

• Deploy the Dark Store Mesh in high‑traffic zones (e.g., Mumbai‑Navi Mumbai, Bangalore‑Bengaluru).

• Benefit : 25% faster delivery for top 20% SKUs, decreasing COD attempts and RTO rates.

H3 NDR Management: Minimizing Non‑Delivery Risk

• NDR (Non‑Delivery Rate) Management flags SKUs with high RTO.

• By focusing on the Pareto‑identified SKUs, NDR drops by ~12%, freeing up courier capacity for new product launches.

Bottom line: Targeting the 20% of SKUs not only boosts margins but also optimizes logistics spend—critical for Indian merchants facing stiff competition.

• 1. Quarterly Pareto Refresh – Re‑run the analysis every 3–4 months to capture seasonal shifts.

• 2. Dynamic Pricing – Use EdgeOS to adjust prices of high‑impact SKUs based on demand elasticity.

• 3. Localized Dark Store Allocation – Align high‑volume SKUs with the nearest dark stores to reduce last‑mile distance.

• 4. RTO Incentives – Offer lower COD charges for the top 20% SKUs to further reduce return risk.

Pareto Analysis is more than a statistical exercise; it’s a strategic lever that can transform Indian e‑commerce operations. By concentrating resources on the 20% of SKUs that generate 80% of sales, merchants can slash COD/RTO costs, reduce inventory carrying charges, and deliver faster, reliable service through Edgistify’s EdgeOS and Dark Store Mesh. The result? Higher margins, happier customers, and a leaner, more resilient supply chain ready for India’s next shopping wave.