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Sell-Through Rate: What It Is And How to Improve It

Balancing both inventory and demand can be tricky for any business. In this guide, we'll look at how to calculate and improve sell-through rate.

Balancing both inventory and demand can be tricky for any business. Dozens of factors influence how much stock you should have on hand. Fortunately, you don’t have to be an analytical genius to figure out most of them. Sell-through rate is one of those factors that tell business owners how quickly they’re selling a specific product and how much of it they should stock. Read on to learn more about sell-through rate, how to calculate it, and how to improve yours so you can keep your inventory tidy and customers happy.

What is Sell-Through Rate?

Sell-through rates indicate how fast you are selling a certain product within a specific window of time (usually quarterly or monthly). If you have a high sell-through rate, this means your products are selling quickly, while a low sell-through rate indicates the products are selling slowly. Calculating a product’s sell-through rate is an important aspect of demand forecasting.

How to Calculate Sell-Through Rate

Calculating the sell-through rate of a specific product is fairly easy. Simply divide the number of products sold by the number of products made or received by the manufacturer, then multiply by 100 to yield a percentage. That percentage is your sell-through rate.

Example: Let’s say you received 300 bottles of wine from your manufacturer and sold 250 of them within a month. The sell-through rate of that bottle of wine is 83%--pretty high!

Why Calculate Sell-Through Rate?

There are myriad reasons why awareness of your sell-through rate can benefit your business. Let’s look at a few of the advantages you can glean from calculating sell-through rates.

Inventory Management

One of the biggest benefits of calculating sell-through rate is how easy it makes inventory management. Keeping track of your products’ sell-through rates helps you manage your inventory appropriately. For example: if you order too much of a product and it sells too slowly, losses are soon to follow due to over-crowded inventory. Conversely, if you don’t order enough of a hot item, you won’t be able to support customer demand which means they’ll go elsewhere to find what they’re looking for.

Product Performance

Sell-through rate can provide valuable insight into how a product has been received by consumers. Though you should assess additional data such as product reviews, a particularly high or low sell-through rate can tell you a great deal about how well your product is performing. Repeat buyers are a great indication that a product has been well-received by customers and that you should stock it consistently within your inventory.

Marketing Effectiveness

If a product has a low sell-through rate, perhaps it’s time to reevaluate the marketing strategy used for that particular product. If the overall response toward a product is positive, but it’s selling slowly, it’s possible that all you need to do is increase marketing efforts to increase awareness. Though some marketing techniques can be costly, there are dozens of other free and low-budget marketing strategies that can increase sell-through rate.

Learn more: 7 Free & Low-Budget Marketing Ideas that Work [+ Tools and Resources]

5 Best Ways to Improve Sell-Through Rate

Fortunately, there are many ways you can increase a product’s sell-through rate. Check out these strategies that will help you improve the sell-through rate for your products.

1. Decrease Inventory

A simple way to improve a low sell-through rate is to decrease your inventory. A low sell-through rate doesn’t necessarily mean a product has been poorly received by your customers. In fact, it may just mean you’ve ordered or manufactured too much of that product to begin with. Order or make less of your product for the next month and reevaluate your sell-through rate then.

2. Run Ad Campaigns

Sometimes all it takes is a bit more exposure for your product to sell. Run ad campaigns on Google, Facebook, Instagram, the radio, and more to increase awareness of your product. Paid ads can also retarget customers who bought your product once or added it to their cart but never checked out. A little reminder never hurt!

3. Offer Promotions or Discounts

Discounts and promotions are a great way to increase interest in a new or low-selling product. While this strategy can increase sales, it does also decrease your profit margin. Use this strategy sparingly, or in conjunction with other methods. 

Offering a discount when customers sign up for your email list has two benefits; this method increases your email audience and increases your sell-through rate. Another promotional strategy is to offer free shipping when certain purchase criteria are met. Bespoken Spirits has done this well by offering free shipping with the purchase of two or more bottles of their craft spirits.

4. Up-Sell and Cross-Sell

Whether in-store or online, you can employ up-selling and cross-selling techniques to help increase sell-through rate. Up-sold products are usually offered at checkout where customers can add the product to their cart with one simple click, whereas cross-sold products are usually offered in conjunction with an existing purchase. Each method is employed to sell products with low sell-through rates.

5. Incorporate a Product Locator

Integrating a product locator on your website helps customers find your products easier, which in turn increases the sell-through rate. Product locators also compile extremely useful data, allowing you to identify your most popular products, most lucrative markets, opportunity areas, and more–all this information can help you stock items more effectively. 

The Grappos Product Locator does all this and more. Best of all? It’s fully supported by the Grappos team, which means we handle the integration, data management, and updates so you can focus on your business.

Request a demo today →

Final Thoughts on Sell-Through Rates

Keep a finger on the pulse of your products’ sell-through rates, whether you carry five items or five hundred. You’ll be able to service your customers, stay on top of demand, and manage your inventory better than ever.

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Eric Kunisawa

Founder & CEO

Eric Kunisawa is the founder of Grappos. He's been successfully helping businesses connect customers with their products since 2008.

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