What is Sell-Through Rate?
Sell-Through Rate measures the amount of inventory you’ve sold in a month versus the amount of inventory shipped to you from a manufacturer. The sell-through rate is an important retail sales metric that allows you to monitor the efficiency of your supply chain. It’s an especially important metric for physical stores, given the rise of e-commerce platforms like eBay, Amazon, and Shopify.
You want to aim to have a high sell-through rate. Any product you have on the shelf is costing you money and could be used for more popular products. If your sell-through rate is too low, you will need to dig deeper into the problem. As a leading indicator, the sell-through rate won’t tell you what’s wrong but rather that something is wrong.
Segment your sell-through rate analysis by product to see which products are selling well and which products are selling poorly. Use this to inform your inventory process and reduce the risk of carrying slow-moving products. Finally, be aware of the seasonal trends impacting product sales.
Sell-Through Rate Formula
The sell-through rate formula is:
Sell-through Rate (STR) = (Units Sold / (Beginning Inventory + Units Received)) * 100
- Units Sold: The number of units sold during the time period.
- Beginning Inventory: The number of units in stock at the beginning of the time period.
- Units Received: The number of units added to the inventory during the time period.
The resulting STR value is expressed as a percentage. A higher sell-through rate is generally more desirable, as it indicates a faster inventory turnover and better sales performance.
Example of KPI target