Editor’s Note
This article explains the concept of sell-through rate (STR), a key retail metric for measuring the percentage of inventory sold versus received. Understanding your STR is crucial for tracking performance, adjusting sales targets, and maintaining supply chain efficiency.
A sell-through rate (STR) measures the percentage of inventory sold relative to the amount of inventory received from manufacturers during the same period.
For performance, your STR is the measurement of monthly sales against a given target. Measuring your STR can help you track sales data, adjust your goals, and keep your supply chain efficient.
Though sell-through rates vary from industry to industry, the benchmark STR is at or above 80%.
Your sell-through rate is an important metric for ecommerce businesses. Here are five reasons why it is useful to calculate:
1. Identify popular and unpopular products
2. Mitigate storage costs
3. Optimize supply lines
4. Measure success
5. Manage your cash flow
Your STR can offer valuable insight into which types of products are most popular. A high sell-through rate indicates that a product is selling well. This information can be used to optimize inventory and better judge customer demand.
A low sell-through rate indicates that your inventory management is poor and that you’re likely storing more than you need. Use your STR to better understand how you can save on storage costs.
Your STR provides clarity on trending sales, so you can work with your suppliers to order the right products ahead of time, focusing on high-selling items.
Your STR helps you measure your monthly revenue and identify opportunities to increase sales by supplier, product line, store location, sales channel, and more.
Your STR is another way to examine your revenue against the cost of your inventory. An STR that drops tells you that you’re spending more money than you’re making, while a growing STR means that your profit margin is rising.
To calculate your sell-through rate, you need the number of units sold during the month, and the total amount of stock available for sale that month.
You can also calculate your STR annually, quarterly, or weekly depending on your sales goals.
Sell-through rate formula
Use this formula to calculate your sell-through rate:
(total sales / stock on hand) x 100 = % sell-through rate
Sell-through rate example
Let’s look at how you would calculate the sell-through rate on a new product and use the information to make a decision on adjusting your inventory.
You own a bakery and want to start selling cupcakes. For September, you order 1,000 cupcakes, 200 each of five different flavors: vanilla, chocolate, red velvet, carrot, and birthday cake.
At the end of the month, you calculate your sell-through rate to understand how much your customers liked the cupcakes. You learn that of the 1,000 cupcakes, you sold 800.
(800 / 1,000) x 100 = % sell-through rate
0.8 x 100 = 80%
In September, your cupcakes had an overall 80% sell-through rate—so far, so good.
Next, you’re curious how your customers liked each flavor. Red velvet, carrot, and birthday cake are more expensive than the others, so you only want to order those that will sell.
You take the number of sales for each flavor and divide each by 200, the total number ordered:
Vanilla: (190 / 200) x 100 = 95%
Chocolate: (180 / 200) x 100 = 90%
Red velvet: (175 / 200) x 100 = 87.5%
Carrot: (100 / 200) x 100 = 50%
Birthday cake: (125 / 200) x 100 = 62.5%
According to September’s sell-through, vanilla and chocolate were the most popular. You’ll order 200 each for next month. Red velvet was also a hit, so you’ll order 200 of those, too.
