Sell-through rate

How the sell-through rate is worked out

The sum is units sold in the period, divided by units you had to sell in that period, multiplied by one hundred. The only real decision is what goes in the bottom half.

Dividing by receipts in the period answers the buying question: was that order the right size. Dividing by opening stock plus receipts answers the performance question: how did this line do with everything we had. For a seasonal buy the first is the sharper question, because it puts a number on a decision somebody made six months earlier.

What matters more than either is the date. Sell-through only ever goes up, so a figure without a week attached to it says almost nothing: 62 per cent at week four is a line that will sell out and should have been bought deeper, and 62 per cent at week twelve is a markdown waiting to happen. Always report the figure with the week, and against a planned curve if you have one.

There is no good number

Sell-through targets belong to a category and a season length, not to retail in general. A summer garden line has one shot a year; a basic white T-shirt has fifty-two weeks and no deadline at all.

And the ceiling is not 100. A line that sells out at full price two weeks before the season ends has left margin on the table and sent customers away empty-handed. A planned sell-through at full price with a planned markdown to clear the rest almost always earns more than a sell-out, which is the arithmetic the markdown plan exists to do. Read this alongside GMROI, which is where the margin side of the trade shows up.

In practice

The buy was 1,000 units for an eight-week season.

By the end of week eight, 620 had sold at full price. Sell-through at week eight: 62 per cent. A further 250 went in the two weeks after that at a thirty per cent markdown, taking cumulative sell-through to 87 per cent. The remaining 130 went to an outlet channel at cost, or sat into next season as dead stock.

Now look at the shape rather than the endpoint. Half of the 620 sold in the first two weeks, which says the line was right and the buy was too shallow for the early demand and too deep for the tail. The lesson is in the curve, and the single figure of 62 per cent does not carry it. The numbers here are an illustration.

What moves the figure

• The size of the buy against the forecast. This is the big one, and it is decided before the season starts.
• The length of the season you measure against. Shortening the window lowers sell-through without anything changing in the shop.
• When the markdown lands. Early markdowns lift sell-through and cost margin. The planned date is a commercial decision, not a reaction.
• The size and colour curve. A line can look like a poor seller when in fact it sold out in the three sizes that matter and sat in the other four.
• Availability of the sizes that sell. This is where sell-through meets the warehouse: a stockout in one size reads in the report as weak demand for the line.
• Channel. The same line can show very different sell-through online and in a shop, and averaging the two hides both.