Mar 11

What is Sell-Through Rate, and How Do You Improve It?

Is your inventory stagnating because of incorrect product choices and poor stocking management? Read on to learn how to improve your sell-through rate.

Building a successful business is not for the fainthearted. Particularly when you’re just starting out, you may have a hard time increasing sales and measuring your performance. But good business owners learn how to address each challenge.

Begin by analyzing every aspect of your company with meticulous attention to detail. Then, regularly track key performance indicators and see how to make improvements from there.

Key performance indicators (KPIs) are quantifiable metrics that help companies understand the current standing of their organization and check if strategic objectives are met. There are numerous KPIs to choose from, but it all comes down to what your business goals are.

When it comes to retail inventory management, one of the most important metrics to track is the sell-through rate. 

What is Sell-Through Rate?

The sell-through rate calculates the number of items sold to customers against the inventory received from the supplier over a given period. This metric helps business owners understand how long it takes to sell their products and how efficient their inventory optimization strategies are.

Businesses always aim for a high sell-through rate, which means the products are moving and being purchased by consumers. But what if it turns out low?

A low sell-through rate means that the outflow of products is not as fast as the influx of inventory from the supplier. This may indicate that you’ve overstocked, as the demand is not as high as expected.

If your sell-through rate is not where you want it to be, analyze the factors surrounding the numbers and see what you can do to increase it. For example, should you make price adjustments and replace slow-moving products with newer, trendier ones? There are several ways to quickly get your products in the hands of your customers.

A cashier handing a customer their purchase

How to Improve Sell-Through Rate

Now that you understand the basics of sell-through rate, let’s talk about how to improve it.

Stock Efficiently

Many businesses offer unique products but pay very little attention to metrics, sales strategies, and inventory management. As a result, they struggle to deal with overstocked and under-stocked supplies. Keeping an eye on your sell-through rate and other essential numbers can help you make better purchasing decisions.

A reliable POS system helps take the guesswork and manual number crunching out of the picture. A point of sale system automatically updates the inventory records upon check-out, so you can see the stock levels adjust in real-time, easily identify which products are due for re-stocking, determine consumer trends over a certain period, and pinpoint which products are in-demand versus those stagnating on the shelves.

By streamlining, automating, and optimizing your inventory management process, you can make smarter decisions and implement timely solutions to boost your sell-through rate.

Offer Discounts, Bundles, and Promotions

Lower the prices of your remaining inventory to attract more buyers. Discounts, especially for seasonal products, are usually only good for a few days, so promptly generate hype by implementing targeted campaigns.

To further reduce their inventory, some business owners also pair expensive items with inexpensive ones, as long as they complement one another. Bundle slow-moving stock with your best-selling products. Just make sure that all the items in a single bundle can be used together.

Provide Freebies and Incentives

"Free" is a magical word that can instantly pique the interest of consumers. People love getting free stuff! Why not encourage consumers to spend more to avail certain items? Give away overstocked merchandise as freebies or incentives once customers buy a certain amount of products. For example, once they reach a total of $50, they can take home a smaller item for free.

By offering freebies and incentives, you can entice consumers to spend a little more in exchange for something of value and get your inventory moving at the same time. This is also a good way to encourage customers to try new or lesser-known products. What they got as a freebie today, they'll more likely buy from you tomorrow.

Improve Your Online Visibility

Sometimes, low sell-through rates indicate poor marketing and brand awareness problems. Review, re-evaluate, and revise your marketing strategies to step up your business’s online visibility. By improving your digital presence, you increase your chances of customers finding your brand and knowing how your products can benefit them. 

Whether you’re running an online store, a brick-and-mortar shop with multiple branches in different locations, or a hybrid offline-online business model, ensure that your brand is active on relevant social media platforms. Give your products extra exposure in the most interactive, shareable, and exciting ways possible.

Most of the major online platforms — such as Google, Facebook, Instagram, and Twitter — have business-specific features geared toward helping brands connect with and convert consumers. From in-platform shopping to live-streaming, you’re spoiled for choice on how you can get the word out for your business. If you need help getting started, check out these 2022 social media trends.

A user updating their Facebook page

Give Bulk Purchase Discounts

Bundling, discounts, and giveaways work. But what if customers are willing to buy products in bulk for a much lower price? Shoppers love "buy 3 for $20," "20% for above $150," and "buy 2, get 1" deals. Purchasing lots of products in one go can be a win-win situation for everyone. The customer feels they are getting more value for their money because they’re spending less per piece, while you get to move your inventory quickly.

This strategy works perfectly for essential items that are often bought in bulk, for less money and greater convenience. For instance, for convenience stores or mom-and-pop shops overstocked with one pet food brand, you may want to offer customers an extra bag for every three packs they purchase.

Measure it Regularly

Constantly track your sell-through rate and other metrics. From there, make data-driven decisions to accelerate the movement of your stock. The sell-through rate is usually computed monthly, but some calculate it more frequently than that. If some items are not selling out fast, analyze the numbers. You may want to run promotions and rethink your marketing.

For instance, if you're running a few days of promotions on certain products, look at the sell-through rate from the beginning to the end of the promotional period to check if this strategy is helping you. Ignoring the details may result in deadstock, reducing profitability, and increasing holding costs.

For all your POS needs, contact True POS today and see how we can help you improve your sell-through rate.

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