Growth stalls. Revenue plateaus somewhere between £300K and £1M and the founder starts looking for answers. The most common conclusion: we need more products. A new flavour, a new format, a complementary line. Something to give the brand fresh energy and customers a reason to come back. The logic feels sound. In practice, it usually makes the problem significantly worse.
Every new SKU carries costs that do not show up cleanly on a P&L. There is the minimum order quantity locked into inventory before a single unit sells. There is the photography, the copywriting, the Shopify product setup, the customer service training. There is the ops complexity: additional pick-and-pack rules, more lines in the 3PL system, extra packaging formats. And there is the most damaging cost of all, which is invisible: your marketing attention is now split. Every pound of ad spend and every email send that promotes the new product is a pound not reinforcing the product that already works.
I built Liquiproof from zero to 3,000 retailers globally and went through this exact mistake in year three. We added six SKUs in twelve months. Revenue went up slightly. Gross margin dropped by nine percentage points. We spent six months unwinding it. What follows is the framework I use now with every Purposeful Profits client, regardless of category.
The hidden cost stack most founders never calculate
When a founder pitches a new SKU, the cost conversation usually covers COGS and maybe packaging. That is roughly 30% of the true cost of bringing a new product to market and keeping it there. The rest lives across five areas that compound invisibly.
Inventory carrying cost
Every unit sitting in a 3PL is capital you have deployed at zero return. Inventory carrying costs typically run 20-30% of product value annually when you factor in warehouse fees, insurance, obsolescence risk, and the opportunity cost of that cash. A new SKU with a 500-unit MOQ at £8 landed cost ties up £4,000 minimum. If it moves slowly, that capital sits for 6-12 months while your hero products are underfunded.
Minimum viable marketing spend per product
A product with no dedicated marketing spend does not grow. It occupies shelf space in your catalogue and occasionally converts when a customer browses far enough. To actually move a new SKU, you need creative, at least one email flow trigger, and some paid media allocation. At current Meta CPMs for DTC brands in the UK, a meaningful test for a single product costs £1,500-£3,000 in media alone, before creative production.
Ops complexity tax
Every additional SKU adds to pick-and-pack error rates, increases the number of packing configurations your 3PL must manage, and raises the likelihood of a customer receiving the wrong item. The ops complexity tax is real, and it scales non-linearly. Going from 5 SKUs to 10 does not double your ops overhead; it usually triples it, because bundles, substitutions, and out-of-stock protocols multiply.
Customer service load
More products mean more questions. Is this compatible with X? How is it different from Y? My order came with Z but I wanted W. Customer service cost per order rises with range complexity, and for most DTC brands using a helpdesk like Gorgias or Zendesk, that cost is measurable and material.
Cannibalisation of hero product attention
This is the one founders resist hearing. Your best-performing product built the brand. Every email, ad, and social post promoting a new product is one fewer touchpoint reinforcing the product that already has social proof, reviews, and a conversion rate you trust. Splitting attention between products splits results across all of them.
When you add these costs together for a new product that is not yet proven, you are typically looking at £10,000-£15,000 in total first-year overhead before the product contributes a single pound of net positive margin. That is the number to hold in mind when a new SKU idea feels compelling.
The SKU audit: how to find out which products deserve to exist
Run this audit quarterly. It takes about an hour the first time, less than 20 minutes after that. Pull your Shopify data into a spreadsheet and build four columns per SKU.
| Column | What to calculate | Warning threshold |
|---|---|---|
| Gross profit contribution | Revenue minus COGS, fulfilment, and returns for the SKU over 12 months | Under 5% of total brand gross profit |
| Monthly unit velocity | Average units sold per month over the last 90 days | Under 10 units per month |
| Inventory turn rate | Annual units sold divided by average units held in stock | Under 4x per year |
| Customer acquisition role | What percentage of first orders include this SKU | Under 3% of first orders |
Any SKU that triggers two or more warning thresholds is a candidate for rationalisation. Do not kill it immediately. First check whether it serves a role the numbers do not capture: a product that appears on 30% of multi-unit orders as an add-on has strategic value even if its standalone acquisition numbers are weak. But if a product is neither a strong acquisition driver nor a frequent basket addition, it is a margin drain you should be honest about.
One client in wellness came to us with 22 SKUs. The audit took 90 minutes. Four products were responsible for 81% of gross profit. Six products had not turned their inventory once in the prior six months. We consolidated to 11 SKUs. Gross margin improved by 6.2 percentage points in the following quarter, and ops cost per order dropped by £1.40.
The hero product framework: build around what already works
Every successful DTC brand at exit has a hero. Gym Shark built on leggings. Huel built on powder. Grenade built on protein bars. The hero earns the customer acquisition cost. Everything else earns the lifetime value. This is not accidental. It is a deliberate strategic choice to concentrate marketing energy on the product most likely to convert a stranger, and then let the relationship deepen from there.
To identify your hero, you need three things to be true of the same product: it converts new customers at the highest rate, it has your strongest review profile and social proof, and it delivers your best gross margin. If those three things live in different products, you have a portfolio problem worth solving before you add anything new.
Signs your hero product is ready to anchor a scaled range
+Repeat purchase rate above 25% within 90 days of first order
+4.5-star average or above with 50+ reviews
+Gross margin above 55% before paid media
+Existing customers asking for specific adjacent products (captured via post-purchase survey)
+Hero product in 70%+ of first orders and multi-product baskets
When those signals are present, expanding the range makes sense because the hero is generating enough gross profit to fund the experiment and enough brand trust to carry customers into new products. When those signals are absent, adding products borrows from a foundation that is not yet solid. The new product fails, the old product gets less support, and the whole business goes sideways.
When you should actually add a product
There are three legitimate triggers for a new SKU. None of them is a growth plateau.
Customers are asking for something specific
Post-purchase surveys and Klaviyo zero-party data flows are your most reliable signal. If 15%+ of your customers are asking for the same specific product that does not exist yet, that is genuine demand. Not a hunch, not a trend, not a competitor having success with something - your own customers telling you what they want next. This is the only demand signal worth acting on.
You have a basket-size problem, not a revenue problem
If your hero product converts well but AOV is stuck because there is nothing natural to add to the order, a complementary product can solve a genuine business constraint. The test is simple: does the new product raise AOV for existing customers without cannibalising hero sales? If yes, it earns its place. If it mostly redirects existing spend, it does not.
A seasonal or limited edition product protects margin
A time-limited SKU designed to capture demand at a specific moment - a seasonal flavour, a gift bundle, a collab - can drive incremental revenue without permanently adding to your operational complexity. The discipline is retiring it on schedule. A limited edition that never actually ends is not a limited edition; it is a margin problem with a press release.
How to rationalise your range without losing the revenue that matters
Cutting SKUs feels like retreating. It is not. It is deciding where you want to win and concentrating everything behind that decision. The practical mechanics matter though - a badly managed discontinuation can spike customer service tickets and damage retention. Here is how to do it cleanly.
Step 1
Identify discontinuation candidates
Use the four-column audit above. Flag any SKU hitting two or more warning thresholds. Do not act yet.
Step 2
Check subscription and repeat-purchase data
Before cutting anything, pull Klaviyo and ReCharge (or Ordergroove) data to identify whether any of your discontinuation candidates have a loyal sub-segment buying regularly. A product with low overall volume but high subscription attachment has a customer relationship worth protecting.
Step 3
Run a 30-day clearance sell-through
Offer the product at cost in a bundle or as a freebie with hero product orders. Clear your remaining inventory. Do not run a public sale if it will signal brand distress to new customers - use your email list for this.
Step 4
Redirect loyal buyers
Email anyone who has bought the discontinued product in the last 12 months with an explanation and a recommendation for the closest alternative. Give them a reason to try it. Most brands that do this well retain 60-70% of the revenue these customers were generating.
Step 5
Reallocate the budget
Every pound freed from the discontinued SKU goes to the hero. More creative testing, more paid media, more email automation built around the products that already work. This is where the compound effect starts.
The founder who goes from 22 SKUs to 11 does not usually lose 50% of their revenue. They typically lose 8-12%, because the discontinued products were barely selling anyway. But they gain 4-7 percentage points of gross margin, a simpler ops stack, and a marketing focus that finally starts compounding. That trade is almost always worth making.
The one number that tells you how efficiently your range is working
Revenue per SKU is the simplest proxy for range efficiency. Take your total annual revenue and divide it by your total active SKU count. For a brand doing £500K with 20 SKUs, that is £25K per SKU. For a brand doing £500K with 8 SKUs, that is £62.5K per SKU. The second brand is almost certainly running higher margins and cleaner operations.
Revenue per SKU benchmarks by stage
Under £1M revenue
£80K+ per SKU
Focus ruthlessly. Hero + 2-3 supporting products maximum.
£1M-£3M revenue
£120K+ per SKU
Range can expand with evidence. Every SKU should own a clear job.
£3M+ revenue
£150K+ per SKU
Ops and team can now absorb more range. Still audit quarterly.
These are directional benchmarks, not hard rules. A brand selling a single consumable with three flavour variants is in a different structural position than a brand with a skincare range across four product categories. The point is the habit of tracking revenue per SKU and asking, every quarter, whether your range is getting more efficient or less.
When revenue per SKU falls quarter-on-quarter, one of two things is happening: either your range is growing faster than your revenue, or your revenue is growing slower than it should be. Both are worth diagnosing. The SKU efficiency metric makes the problem visible before it becomes critical.
What rationalisation actually looks like in a DTC brand
A drinks brand we worked with had grown to 14 SKUs across three product lines over four years. Revenue was £1.1M. Gross margin had eroded from 62% to 48% over the same period, though the founder had attributed it to rising COGS rather than operational complexity. The audit told a different story.
Five SKUs in one of the three product lines were generating 11% of total revenue but consuming 34% of total ops cost - mostly because they required a different packaging format that triggered a separate pick line at the 3PL. Those five products were discontinued over two quarters. A small number of loyal buyers were migrated to alternative products via a personal email from the founder. Revenue dropped by roughly £90K in the following two quarters, then recovered as marketing spend was concentrated on the remaining nine SKUs.
Twelve months later, revenue had returned to £1.05M with a gross margin of 57%. The brand had fewer products, more margin per order, and a simpler operation. The founder's time stopped going into managing complexity and started going into growth. That reallocation of attention, as much as anything else, is what range rationalisation is really about.
Find out where your range is costing you
The free scorecard takes three minutes and covers product range efficiency alongside email, conversion rate, and paid media. It will show you where your biggest constraint is right now.
If you want someone to audit your full SKU stack and tell you exactly which products to keep, cut, and develop, the Brand Growth Audit covers your complete product economics with a prioritised action plan. Three days, Loom walkthrough, written report.
Frequently asked questions
How many SKUs should a DTC brand have?
There is no universal number, but most founder-led DTC brands generate 80% of their revenue from fewer than 20% of their SKUs. As a starting principle, a brand under £1M should be able to build a profitable business with 3-8 core products. Beyond that, each new SKU should earn its place by contributing meaningfully to revenue, margin, and customer acquisition, not just filling out a range for the sake of appearances.
What is SKU proliferation and why is it a problem?
SKU proliferation is when a brand adds products faster than the business can support them with inventory, marketing attention, and operational capacity. It becomes a problem because each SKU carries hidden costs: minimum order quantities, photography and copy, fulfilment complexity, customer service burden, and split marketing spend. When those costs are spread across too many products, margin per unit falls and the whole P&L gets thinner.
How do I know if I have too many SKUs?
Run a simple Pareto audit: sort your SKUs by gross profit contribution (not revenue) over the last 12 months and identify what percentage of your total gross profit comes from the top 20% of products. If 3-5 products account for more than 70% of your gross profit, the rest of your range deserves scrutiny. Also look at inventory turns per SKU. A product moving fewer than 4 units per month is almost certainly a margin drain.
What is a hero product strategy for DTC brands?
A hero product strategy means identifying the one or two products that drive the majority of your customer acquisition, and then building everything else - marketing, email flows, paid media, influencer seeding - around those products. Once a hero converts a customer, complementary products become upsell opportunities rather than competing attention centres. The hero earns the CAC; the range earns the LTV.
Does cutting SKUs hurt revenue?
In most cases, cutting underperforming SKUs has minimal impact on total revenue because those products were contributing little revenue to begin with. What changes is your gross margin: overhead, inventory carrying costs, and operational complexity all drop, while your best-performing products get more marketing focus. Brands that cut their range by 30% typically see gross margin improve by 4-7 percentage points within two quarters.
When should a DTC brand add a new product?
Add a new product when your hero product has a repeat purchase rate above 25%, when existing customers are actively asking for a specific product category, or when the new product raises your average order value or basket size without cannibalising the hero. Never add products to solve a revenue plateau. A growth problem is almost always a marketing or conversion problem, not a range problem.
About the author
Caner Veli founded and exited Liquiproof, scaling from zero to 3,000+ retailers globally in under 6 years. He now runs Purposeful Profits, a focused growth consultancy for founder-led DTC and CPG brands. 12 named sprint clients. 518% average growth. 27x highest ROAS. Read more about Caner →