The 80/20 Principle Applies to Life As Well As Business

The Pareto Principle says that 80% of your sales come from 20% of your customers. Looked at from the other side, it also states that 80% of your sales come from 20% of your stock, which is what I’ve been working on. Where does your wardrobe come into this? Well, it’s a theory based on human activity, not only shopping. So Pareto would say 80% of the time you wear 20% of your clothes.

This 80/20 rule doesn’t stop there because, if you analyse the 20% that are your best customers, best selling products or favourite clothes, you’ll find they break down into 20% being responsible for 80%. And if you analyse that 20%... well, you get the idea.

I admit you may not have enough clothes to get beyond the first 80/20 analysis. Unless you’re Victoria Beckham, you’ll end up with a jumper and a pair of jeans. However shops have thousands of products and customers. So how should we apply the Pareto Principle? We can’t just dump the 80% of poorer sellers and then analyse the remaining 20% and cull 80% of them. We’d end up with 20 products and a lot of empty shelves.

There are other factors. For example, people who want to buy Dora Designs products visit our website because we have the largest selection in the country. Similarly people in Winchester who want glassware or candles, for example, come to our shop because they know we have a great choice. If we only had the top twenty products, many would go elsewhere.

It’s a bit like if you were to throw out all your clothes barring the 20% you wear most of the time. The next day you’d be bound to need that discarded sweater that would have gone perfectly with your new trousers. That’s known as Sod’s Law, not as scientific as the Pareto Principle but true nevertheless.

I also don’t recommend a shop telling the 80% of its customers that only bring in 20% of sales to push off because it has more important people to serve, although I have been in some upmarket boutiques that seem to adopt that approach.

Where the Pareto Principle helps businesses is in telling us that it is worth identifying your key 20% of customers and products and then concentrating marketing resources on them. We’ve found that certain ranges such as Dora Designs animal doorstops, Dartington Crystal glasses and Ashleigh & Burwood fragrance lamps form part of the 20% that are giving us 80% of our sales. So we will be specialising more in these kinds of products in the coming year.

As for your wardrobe, I suggest you clear out the clothes you never wear but don’t get rid of them. Put them in a box in the loft. If you haven’t needed them a year later, then give them to the charity shop. And when you look around at their stock, you’ll know that’s the 80% that only accounted for 20% of other shops’ sales. Maybe that’s why they get an 80% discount on their rates.

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