The Dangers of Launching Too Many Products in E-commerce

E-commerce founders love SKUs. We love them.

Every SKU represents potential.

Every new product feels like an exciting step forward—shiny new labels, that first sample box arriving at our doorstep, the first launch email hitting our list.

But the things you love can destroy you. I learned this the hard way.

For the first three years of my e-commerce business, I doubled my revenue every year:

$500K → $1.2M → $2.4M

It was a wild ride.

With the extra cash, I launched more products.

It worked—until it didn’t.

Eventually, we hit cash constraints.

Suddenly, we were awaiting the next deposit to cover pending purchase orders (POs).

We had to slow down payments, negotiate for more time, and constantly manage cash flow to keep things moving.

Then, Mr. Pareto showed up.

20% of our SKUs generated 80% of our revenue.

The problem? We couldn't even fund that 20% because our capital was tied up in the remaining 80%—which only accounted for 20% of our sales.

The Real Cost of Launching a New SKU

Say you want to launch a new product that requires a $10,000 investment. Here’s what happens:

1. You pay a deposit ($5,000).

2. Manufacturing and shipping take 60-90 days (sometimes longer).

3. When the product is ready, you pay the remaining $5,000 to ship.

Then, additional costs pile up:

• Freight costs

• Inventory management

• Label/materials coordination

• Packaging procurement

• Time spent managing all of the above

Your money is now tied up for months before you can even sell.

The Cash Cycle

Let’s assume you ordered 1,000 units and are ready to sell:

Day 1: You might sell 10, 1, or 50 units—whatever your sales velocity allows.

Most inventory orders cover at least 90 days of sales.

So, for roughly 90 days, your supplier has your $10,000.

It takes around 90 days to recoup your costs.

By Day 45, you break even, getting your $10,000 back.

The following 45 days are pure profit, but you will likely need to place another order and restart the cycle by then.

The Scaling Problem

Now, multiply this by 10 SKUs. Then another 10. And another 10.

At one point, we had 75 SKUs.

While not every SKU required a $10,000 investment, we still had to cover the following:

• Packaging (bags, labels, etc.)

• Warehouse inventory

• Inventory management

• Expiring products and disposal costs

The more products we had, the more complicated things became:

• Increased operational complexity

• More employees needed

• Higher freight costs

• More product losses and breakages

• More capital tied up before seeing returns

And all of this is funded out of pocket—before you even start selling.

The Hard Truth About SKUs

When you launch a new SKU, you’re committing to a long-term financial burden.

You’re locking up capital for months before seeing returns.

And if you miscalculate demand, that inventory sits, tying up your cash even longer.

The reality is simple: more SKUs do not equal more profit.

The best strategy?

Double down on what works.

Focus on your top 20% and scale what’s already successful before chasing new, unproven products.

Your cash flow—and your sanity—will thank you.