Sell-through rate (STR) is a critical retail metric that tells you how well products are performing based on the amount of inventory sold compared to the amount of inventory received during a set period of time. Typically, retailers will measure sell-through rates weekly, monthly, quarterly, and yearly, comparing their real STRs to their targets. It is common to look at the performance of the inventory store-wide, for individual items, and across product categories.
Keeping tabs on your sell-through rate is critical to good inventory management. Your STR can help you uncover what products are selling well (and which ones aren’t), when people are buying more (or less), where you have excess (or not enough) inventory, and whether or not your inventory is performing in line with your expectations. In other words, it will help you with inventory management—i.e., keeping the right products in the right quantities in stock at the right times.
Use the calculator below to input your variables and calculate your STR automatically.
Calculating Sell-through Rate
In retail, a good sell-through rate is typically 80%, and that’s where many retailers set their STR goal. However, the average STR is typically somewhere between 40% and 80%, largely depending on the type of products you sell and your turnover.
Whether you use our free calculator or not to see where your STR falls, you should know what goes into the sell-through rate and how to calculate it manually.
Turnover and STR are often confused, but inventory turnover also accounts for the cost of goods sold as it compares inventory sold versus received. You can read more in our guide to inventory turnover ratio.
Sell-through Rate Formula
Here is a breakdown of the sell-through rate formula as well as an example of it in action.
The formula for STR is quite simple:
# units sold | x | 100 | = | Sell-through Rate |
# units received |
In other words, your sell-through rate is equal to the number of units sold versus those received times one hundred.
Let’s say that I own a clothing store and want to find the sell-through rate for the month of July for our tops. First, I would look at our sales reports to see how many we sold for the month: 94. Then, I would look at our purchase orders to see how many tops we received in the same period: 150. Using the sell-through rate formula, I would simply plug in my data:
So, my sell-through rate for tops in the month of July was 62.7%. This indicates to me that shirts were selling well but that I could afford to order fewer next month to hit my target STR of 80%.
Benefits of Tracking Your Sell-through Rate
There are many benefits of tracking your STR and keeping tabs on how inventory performs based on your STR metric. These benefits include:
- Improving your inventory management: Your STR will help you identify which items are selling well and which ones are not, how much product you need, and what your best safety stock quantity looks like for every product.
- Understanding your customer: Your sell-through rate reveals what products sell well and which don’t so you can better understand customer preferences and needs. Additionally, because STR looks at specific periods of time, it can reveal when customers are shopping more versus when they are not spending as much.
- Avoiding excess stock: If you consistently have low sell-through rates, that will indicate to you that you are receiving too much stock. Thus, monitoring your STR can help you get a better grasp on the quantities you actually need to avoid excess stock and the dreaded liquidation.
- Dodging stockouts: Your STR will also help you to see which products are performing their best so that you can get ahead of the customers and order more products before you face a stockout.
How to Improve Your Sell-through Rate
If you find yourself in a position where your sell-through rate is lower than you want, here are a few ways that you can drive your sell-through rate.
- Adopt inventory management software: An inventory management system tracks your products in real time and runs reports automatically. This will help give you a better picture of what sells and what doesn’t, so you can identify the products dragging down your rate, stop ordering them (or order fewer), and boost your average STR.
- Mix up your merchandising: In some cases, it might not be that your products are undesirable but that you are not showcasing them well. Try new merchandising techniques to see if, with a little extra attention, they sell better and your STR goes up.
- Expand your reach: Another way that you can boost your STR is by marketing your products to wider audiences so you increase your customer base and boost your chances of making a sale. Try running ads on Google and Facebook, utilizing your social platforms, advertising in local publications, adding new sales channels, or working with influencers.
- Hold a sale or promotion: A great way to sell through more products and boost your STR is to hold a sale or put certain items on promotion. While this will help increase your sell-through rate, slashing prices will also cut into your margins. Consider which pricing strategy will work best for you whenever you are holding a sale.
- Utilize sales forecasting: Sales forecasting tells you how much inventory you can expect to sell for a certain period. If you have this information, you can avoid ordering too much or little of a product and boost your sell-through rate.
- Understand your target market: Study your target market to understand their preferences and behaviors so you can better anticipate what is going to sell and what isn’t and boost your STR.
Sell-through Rate Frequently Asked Questions (FAQs)
Expand the questions below to get answers to some of your most frequently asked sell-through rate questions.
A good sell-through rate will vary based on your industry, with typical ranges falling between 40% and 80%. But generally, a good rate to aim for is 80%.
A high sell-through rate is great! That indicates that you are selling through X percent of your products as you receive more. A high STR might also indicate that you should have more inventory on hand because you are selling through so much.
An example of a sell-through rate would be if someone sold 50 cards and received 100 in a month, making their sell-through rate 50%. This means the business sold through 50% of its inventory compared to what it received in the same period.
Your sell-through rate is important because it helps improve inventory management by identifying which products you are ordering too much of and which ones you don’t have enough of based on how much of each product you sell versus receive for a set period.
Bottom Line
Your sell-through rate tells you how well products are selling based on the amount of product you have sold versus received in a set period of time. This measurement can help you better manage your inventory, understand your customers, and avoid stockouts and excess stock. In this guide, we explored how you can calculate and utilize your STR to improve your business, as well as ways you can boost your STR. Now, you have the tools to get started finding your sell-through rate and reaping all of the benefits.
