Evaluating and Swapping Out Underperforming Products: A Guide for Small Businesses

Introduction

Not every product in your small business will be a bestseller. While some items fly off the shelves, others sit in inventory, tying up cash flow and storage space. Knowing when and how to evaluate and replace underperforming products is essential for maintaining profitability and keeping your business agile.

By regularly analyzing sales data, customer feedback, and market trends, small business owners can make informed decisions about discontinuing, improving, or replacing slow-moving products.

Identifying Underperforming Products

Before swapping out products, you first need to determine which items are not meeting expectations. Look for these key indicators:

  • Low Sales Volume – If an item consistently underperforms compared to others, it may not be resonating with customers.

  • High Inventory Levels – Products that sit in storage too long tie up capital and take up valuable space.

  • Poor Customer Feedback – Negative reviews or frequent returns signal quality or desirability issues.

  • Low Profit Margins – Even if a product sells, low profitability due to high production costs or shipping expenses might not make it worthwhile.

  • Declining Demand – Market trends change; what was once popular may no longer be in demand.

Example: A small boutique selling handmade candles notices that their seasonal cinnamon scent remains unsold, while other fragrances sell out quickly.

Analyzing Why a Product Is Underperforming

Once you’ve identified an underperforming product, determine why it isn’t selling. Ask yourself:

  • Is the product priced too high or too low? Competitive pricing is key to attracting buyers.

  • Is the marketing strategy ineffective? Maybe the product isn’t being promoted properly.

  • Is the product seasonal? Some items may sell better at certain times of the year.

  • Is it a quality or design issue? Customer feedback can reveal flaws that need improvement.

  • Has demand shifted? Trends change, and customer preferences evolve.

Example: A pet treat company notices that their grain-free liver chips sell well, but their regular liver treats don’t move as fast. Customer feedback reveals that more pet owners prefer grain-free options, leading the company to adjust its product lineup.

Strategies for Handling Underperforming Products

Once you’ve pinpointed why a product isn’t selling, you have several options:

Improve and Reposition the Product

  • Adjust Pricing – Test a temporary discount or bundling option to see if pricing is the issue.

  • Enhance Packaging & Branding – A refresh in design might make it more appealing.

  • Improve Product Features – Consider tweaking the product based on customer feedback.

Example: A skincare brand updates its packaging and highlights natural ingredients on the label, making it more attractive to eco-conscious shoppers.

Discount & Clearance Sales

  • Offer Discounts or Flash Sales – Reduce excess inventory with limited-time promotions.

  • Bundle with Bestsellers – Pair underperforming items with high-demand products to boost sales.

  • Include as a Bonus Item – Encourage purchases by offering slow-moving products as free gifts with purchase.

Example: A clothing boutique bundles slow-selling scarves with popular winter coats, increasing sales while clearing old inventory.

Swap It Out & Introduce a New Product

  • Phase Out the Underperforming Item – Discontinue the product and introduce something new that better fits customer demand.

  • Research Market Trends – Use data to launch a product that is currently in high demand.

  • Test Before Fully Committing – Start with a limited release or pre-orders before making a full inventory commitment.

Example: A coffee shop removes a rarely ordered specialty latte and replaces it with a new seasonal drink based on customer requests.

Monitor & Adapt

Once changes are made, it’s important to track the performance of new and updated products.

  • Use sales data to monitor improvements.

  • Collect customer feedback to see how new products are received.

  • Stay adaptable—if something isn’t working, adjust again.

Example: A subscription box company swaps out low-demand products with customer-requested items and sees a 15% increase in renewals.

Conclusion

Regularly evaluating and replacing underperforming products ensures that your business stays profitable, efficient, and in tune with customer preferences. By tracking sales data, customer feedback, and market trends, small business owners can make informed decisions that lead to better inventory management and higher profits.