What is the sell-through rate and how can you calculate it?

1 What is the sell-through rate?

The sell-through rate (STR) is the percentage of units sold during a given period divided by the average inventory available during that period. It shows you how well your products are meeting the demand of your customers and how efficiently you are managing your inventory levels. A high STR indicates that your products are popular and selling quickly, while a low STR suggests that you have excess inventory or low demand.

2 How to calculate the sell-through rate?

To calculate the sell-through rate, you must first know the number of units sold, the beginning inventory, and the ending inventory for a specific period. The formula for the sell-through rate is Units sold divided by half of the sum of the beginning and ending inventories, multiplied by 100%. For example, if you sold 500 units of a product in a month, and had 800 units in stock at the beginning of the month and 400 units at the end of the month, then your sell-through rate would be 83.3%, meaning you sold 83.3% of your average inventory in a month.

3 Why is the sell-through rate important?

Tracking your sell-through rate is essential for evaluating your merchandising performance and making informed decisions about your inventory management. You can identify your best-selling and worst-selling products or categories, forecast your sales and inventory needs more accurately, and optimize your inventory turnover. Additionally, you can adjust your assortment, pricing, and promotion strategies accordingly to reduce your holding costs and markdowns.

4 How to improve your sell-through rate?

Improving your sell-through rate is highly dependent on various factors such as product type, seasonality, customer preferences, and market trends. However, to increase your sell-through rate, it's important to analyze your sales data and customer feedback regularly, align your inventory levels with sales projections, and use dynamic pricing and discounting strategies. Additionally, experimenting with different merchandising techniques such as visual merchandising, cross-selling, upselling, and bundling can help attract and retain customers while boosting the average order value.

5 How to benchmark your sell-through rate?

To measure the effectiveness of your sell-through rate, you need to compare it with your historical data, goals, and competitors. You can do this by comparing your sell-through rate with previous periods to assess improvement or decline, with targets or budgets to see if expectations are being met, and with industry averages or peers to understand your performance relative to the market. Benchmarking your sell-through rate in this way can help you identify strengths and weaknesses as well as set realistic and achievable goals for merchandising performance.