What Does It Mean?
Your sell-through rate is the percentage of units you’ve sold compared to the total available inventory for sale. The KPI is usually related to your supply chain and is designed to measure efficiency for your purchasing and ordering process.
A Sell Through Rate Sisense Dashboard
Why Does It Matter?
Inventory is one of the biggest costs for any retailer and making sure your inventory is translating into sales is essential. Sell through rates help you understand not just how much you’re selling, but rather how efficiently you can turn over your inventory to avoid additional costs for storage and warehousing.
When considering every item that takes space on your shelf costs money, a high sell-through rate indicates that you are getting the most out of your inventory. It is a broader indicator and while it won’t reveal specific problems, sell-through rate can quickly indicate that there is an issue.
How Do You Measure the KPI?
To determine your sell-through rate, start by tracking the total number of units sold and the beginning inventory for the period you wish to measure. To calculate the KPI, divide the total number of units sold by your beginning inventory and multiply it by 100. For this metric, a higher percentage is a positive.
What Sources Would You Use to Measure the KPI?
Tracking your sell-through rate is easy if you use the right sources. There are several retail dashboard examples you can utilize, including a combination of raw sales data and total transaction volumes combined with inventory metrics. You can also take data directly from your stock room to determine inventory levels at any given time for a more accurate and timely measurement.
Give Me an Example…
Imagine your store has seen significant foot traffic in recent months, but your sales don’t appear to reflect this traffic and your inventory costs are unusually high. You notice that many of the products you have on display haven’t moved in weeks or even months, and that’s a big problem.
By measuring your sell-through rate, you can determine which merchandise is performing well and which is costing you money to display. This KPI can build an overall picture or used to show you how each specific item is performing. This way, you can optimize displays with those products flying off the shelves, and discard merchandise that isn’t selling.
What Benchmark/Indicators Should I Use?
- Total sales per product
- Total sales
- Existing Inventory
- Beginning inventory
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