Sell-Through Rate and How to Use It
The best way to define a sell-through rate is the percentage of inventory you managed to sell. But, let’s dig deeper and examine how we can use sell-through rates, and also find out how to determine a satisfactory sell-through rate.
Sell Through Rate and Inventory Management
If a company has an excess in inventory it usually indicates a loss of profit, however being unable to answer customer demand is likely more damaging. It means a loss on a profit you could have realized, and it also means bad customer experience.
Ideally, there should be a balance between sell-through rate and inventory, but due to many factors beyond control, it’s practically impossible to achieve this.
It is important to note that the sell-through rate is a metric that shows how fast a company sells a product during a certain period, which means you can use it to make necessary adjustments to inventory strategy.
How to Use Sell-Through Rate Data
Apart from using it for adapting your inventory strategy, sell-through rates can help you in a few different ways. You get to see the effectiveness of your marketing strategy.
For example, if your digital marketing impressions and reach are both high and sales conversion rate is low that can indicate gaps in your business strategy.
Either the product is below the market standard, or the pricing is too high when compared to value. If the impressions and reach are low, then maybe the overall demand for the product is low then.
Low Sell Through Rate Recovery Strategies
In the worst-case scenario, the sell-through rate is significantly lower than your estimate, and you need to think about how to salvage the project.
Here are some ideas:
- Be patient and give it more time maybe the numbers will pick up;
- Remove the product from the market re-package it and try different marketing approach (avoid this if it is too expensive to mitigate the chance of sunk cost fallacy);
- Use the program as a gift incentive to boost sales of another product;
- If you have a responsive user base create an online survey that helps you identify the major flaws in deployments so as not to repeat them.
Sell Through Rate FAQ
What is a good sale through rate?
It varies on a case by case basis, but the general rule of thumb is that anything above 80% is excellent while below 40% is concerning.
So, between 40% and 80% should be okay.
How is sale through rate calculated?
Pick a specific time frame a day, a week, a month, etc.
Take the number of units sold within that time frame, divide it by the number of units you purchased for that sales cycle and multiply it by 100.