Calculate Sell Through Rates

Posted By: editor
Posted On: 21 Nov 2019

Inventory management has always been difficult with omnichannel presence for businesses, especially in an eCommerce environment. But a business has to maintain the correct balance between its inventory and market trends so that they can meet the demand of its customers.  In the Inventory Management System, Sell-through-rate or STR is a vital index for determining the performance of products. The sell-through rate is a useful metric that indicates how fast a company is turning over its inventory within a specific period. Moreover, it will guide the business to perform the necessary alterations in its inventory strategy. This will minimize the inventory and storage costs of the company. 

Sell-through rate can be calculated as:

STR = (actual units sold* / initial stock on hand) x 100

Actual units sold can be defined as the total sales across all channels which must be equal to both the inventory and unsold stock in store.

The following can be listed as the most important Use-cases of Sell-through rates:

  • Analysis on STRs can be done to study the selling trends for the present and on historic periods. Seasonality trends can factor in making pricing decisions
  • STRs will indicate whether the inventory is moving fast or slow. Hence will prevent a slow-moving inventory to turn into a dead inventory. 
  • STRs also help businesses to identify and manage unexpected sales increases through the comprehensive study of past trends in sales. So, it will help in devising a strong inventory strategy.

How to Calculate Sell Through Rates ?

Inventory Snapshot will update you on the regular stock of products and their costs for a company. Total sales will be based on the sale of a product through all the channels be it online or offline. Hence with the inventory snapshot, businesses would not get a comprehensive idea about the total sales of a product. Obtaining only the inventory snapshot will not serve the cause. The sales data is also required from both online and offline channels and store stock must also be factored in while arriving at the actual sale figures. It can be easier for businesses to get actual sales data if they have data from Inventory, Online Sales, and Offline Sales at a centralized data warehouse. In addition to this, manual efforts that are put in to collate data can be a hassle as several platforms do not provide historic data and businesses.

Daton for Calculating Sell Through Rates

For some of the warehouse management systems, historic data cannot be obtained. Daton, the data pipeline will come handy in these situations. It will facilitate the integration of data from various inventory management systems like Vinculum, Unicommerce, etc.  with sales platforms such as Shopify, Magento etc.  With Orders data and Inventory data getting stacked regularly in the warehouse will easily tell us how much the starting stock was. The Sell-through-rate can then be calculated from this relevant information stacked in data warehouses. 

A sell-through rate of 40% is considered common and average while STR of 70% is a superb number to be achieved. A good Sell-through rate will be more beneficial to monitor the inventory for a short duration of time than an inventory turnover. 

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Arunima R.C.
Arunima R.C.

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