When I was first starting out in retail, one of the things that I struggled with most was understanding how to calculate sell through. It’s such an important retail sales metric, but it can be tricky to wrap your head around. Thankfully, there are some simple steps that you can follow to make sure that you’re calculating sell through correctly. In this blog post, I’m going to share those steps on how to calculate sell through so that you can run promotions like a pro!

What is sell through rate?

Your sell through rate is a key metric that measures how quickly your inventory turns into revenue. By tracking your sell through rate, you can get a better understanding of your business’s overall performance and make more informed decisions about purchasing inventory.

This metric is used to measure how long it takes for inventory to be converted into sales.

The inventory turnover ratio is primarily used by retailers for inventory management, but it is an important metric for any business that needs to do so.

If you’re a retail business owner, you know how important it is to measure more than just your inventory turnover rate.

Retail is not always a low-margin sector. In fact, many businesses in the retail industry have healthy margins. However, inventory turnover does not always equate to good financial health. A business can have a high inventory turnover but still be in poor financial health if it is not generating enough profit.

While an e-commerce site may enjoy a higher profit margin, the reassuring statistic of sales can still lure you into dangerous territory.

Product margin is the most important metric for retailers, but it’s not the only thing they need to worry about. Retailers need to calculate how often their products sell and why this is so important.

Why does sell-through rate matter?

The sell through rate reflects how quickly products are sold from the inventory on hand. It has a big impact on business expenses, cash flow and, ultimately, how much inventory a company needs to keep on hand.

The greater your understanding of your rate of sales, the easier it will be for you to identify the products that are not moving as quickly.

If your products aren’t selling well, you can discount them, bundle them, or upsell them.

If you’re not keeping an eye on your conversion rate, you could end up with excess storage costs and poor product sales.

How to Calculate Sell Through Rate

If you calculate and track your sell through rate regularly, you will be able to prevent yourself from selling out of popular items and having to turn away customers.

It’s easy to figure out.

To figure out your selling through percentage, first, you need to track the number of products you sell and your existing stock. Then, divide the number of items you sold to the number you had in stock at the beginning of the time period.

Then, divide your figure by 100 to get the percentage of your stock that’s sitting idle. The higher this ratio, the more you’re wasting money on unused products.

Once you’ve identified which data sets to track, monitoring your sell through rate is a snap. With retail dashboard software, you get instant access to raw data, including product sales volume, product availability and customer transactions. This helps you keep tabs on how your products are doing and when to order more stock.

If you are looking to calculate your sell-through rate but don’t have the budget to invest in new software, you can use data from your regular stocktaking. This will give you the information you need to see how well your products are selling.

An Example of Sell Through Rate in Practice

So, now that we understand the theory of how to sell through, what are examples of how to use it?

Let’s say you’re the owner of a boutique clothing shop. You have a popular physical store in a prime location and get a lot of walk-in customers.

While your retail location is always busy, you notice that you have some items that have been sitting on the shelves for months.

By calculating your sell through rate, you can get a good idea of how well specific products or product lines are selling. This information can be used to optimise displays and ensure that the most popular items are always in stock.

This data can be used to make improvements to your store. For instance, you can display your most popular products in the most visible locations, while discounting your lower selling items in end-of-season clearance. This will increase your overall revenue and profit.

Tips for improving sell-through in retail

If your retail store isn’t selling enough items, the following tips will help to move your inventory faster.

Continuously measure your sell-through

You know what they say — you can’t improve what you don’t measure. So, ensure that you’re regularly keeping an eye on your sell-through rate.

When you measure something continuously, you can spot trends and make data-backed decisions.

If a product isn’t moving as fast as you’d like, consider running a promotion or marketing it more.

-Tracking your sell through rate is key to making the best inventory decisions. If an item has a sub-par sell through rate, you’ll know not to reorder it in the future. This way, you can avoid stocking items that don’t sell well and focus on the items that are more popular with your customers.

If a product sells more quickly than expected, then you may decide to order more units in the future.

The bottom line is that you won’t be able to make an informed decision unless you consult the data, so it’s important to keep track of your metrics.

Get creative with merchandising

A low sell through rate of a product doesn’t necessary mean that there is low customer demand for the product. It could be a result of poor marketing or merchandising.

If you’re having trouble selling a product, it might be because people can’t find it in your store, or there’s something wrong with the way it’s displayed.

It may be time to examine your strategies and see where improvements can be made. Make sure that high-priority SKUs are visible to shoppers.

This would involve placing these specific items in areas where they’re more likely to be seen. This would ensure that they’re seen by as many customers as possible.

Run promotions

If a product isn’t moving, try offering promotions or discounts. For example, you could lower the price of an item, offer free shipping, or create a package deal.

If you have inventory that isn’t selling, try implementing some promotions. This will help move the product and also increase interest. Some ideas for promotions are bundling slow moving merchandise with popular products or product lines, giving them away as freebies, or using a percentage or dollars-off promotion.

You can also get the product out there using a targeted campaign on social media or email. Another option is to hold a massive sale and promote your markdowns.

There are several ways you can promote your wares. It all boils down to finding the type of sale that works best for your product and getting it out there. With a good plan, you can boost your sales and move more products.

Conclusion

If you’re looking to run a promotion but aren’t sure how to calculate sell through, don’t worry! By following the steps outlined in this blog post, you’ll be able to figure it out with ease. And once you know how to calculate sell through correctly, you’ll be well on your way to running successful promotions that will help boost your bottom line.