With this sell-through rate calculator, we help you calculate a metric that can be used to assess the inventory management of your business. The sell-through rate is one of the most common metrics out there for understanding the health of your inventory in your business.
We have prepared this article to help you understand what sell-through rate is and how to calculate the sell-through rate. We will also demonstrate some practical examples to make sure you understand the concept thoroughly.
What is sell through rate?
The sell-through rate is one of the most important key performance indicators (KPI) of inventory management. The sell-through rate is defined as the amount of inventory sold within a period relative to the amount of the inventory received or bought.
We commonly use this metric in the retail industry as it **assesses how fast the business can sell its inventory and convert it into revenue.
How the sell-through rate calculator works
To understand how to perform a sell-through rate calculation, let's take Company Alpha as an example:
- Company name: Company Alpha;
- Duration: 1 month;
- Number of units received: 1,000,000; and
- Number of units sold: 650,000.
The sell-through rate calculator performs three steps:
- Determine the number of units received
The number of units received is defined as the number of units bought by the business. The
number of units receivedis
- Determine the number of units sold
The number of units sold is the number of units that the company managed to sell during the time period.
number of units soldis
- Calculate the sell-through rate
For the last step, let's use the following sell-through formula:
sell-through rate = number of units sold / number of units received
sell through ratefor Company Alpha is
650,000 / 1,000,000 = 65%over one month.
How to increase the sell-through rate?
Now, let's talk about how to increase your business's sell-through rate for . There are generally two ways for businesses to increase their sell-through rate:
The first option is to increase the number of units sold by increasing sales aggressively. You can achieve this by putting on some promotions that encourages customers to buy more.
The second option is to decrease the number of units received. You can do it by reducing the number of units bought from your suppliers. This can improve the business' inventory management and increase your sell-through rate.
What is inventory?
Inventory is defined as the stock of goods or materials that a business holds. From the inventory, these items are mainly used for resale or production.
What is inventory management?
Inventory management is about tracking the inventory of a business from production to sale. It helps a business to decide when and how much inventory should it buy so they are never caught short or have unshiftable stock.
Can sell-through rate be applied to industries other than retail?
Yes! While sell-through rate is used mostly in the retail industry, it can be applied to other industries, such as the automobile industry. However, it is wise to limit its usage to industries that supply or sell physical goods.
How can I calculate the sell-through rate?
You can calculate the sell-through rate using 3 steps:
- Determine the number of units received.
- Determine the number of units sold.
- Apply the sell-through rate formula:
sell-through rate = number of units sold / number of units received.
What does sell-through mean?
Sell-through is the ratio of the number of products sold to the number of products shipped by a supplier, expressed as a percentage. It is a metric corresponding to the net sales for which we use absolute numbers.