What is the difference between sell-through rate and inventory turnover?

1.The sell-through rate refers to the percentage of inventory sold within a specific period, typically measured in a month or a season. It indicates how quickly products are being purchased by customers and is calculated by dividing the total units sold by the beginning inventory and multiplying by 100. 2. Inventory turnover, on the other hand, is a financial metric that measures how many times a company's inventory is sold and replaced during a given time period, usually a year. It shows how efficiently a company manages its inventory and is calculated by dividing the cost of goods sold by the average inventory value.

In basic terms, sell-through tells you the amount of inventory sold within a certain time period, inventory turnover tells you the speed of your sales or the rate that inventory stock is sold, or used, and replaced.

A very dangerous KPI to use in isolation as it is based on the volume you buy/stock holding. An item can still be a best selling item, with a low STR, but you need to ensure future stock is managed correctly.

1.Sell-through rate is a standard retail calculation that ties sales to inventory. It relates much inventory (could be beginning inventory + receipts, or ending inventory + sales) was sold during a time period. If sales = $500 and inventory = $5000, sell-through rate = 10% . Too high sell-through % can mean a missed opportunity, especially around goods with a size component. Too low sell-through % can mean you have too much inventory. 2. Turnover relates to the investment of inventory. It's kind of like a waiter in a restaurant who turns tables. The more people I wait on in a day at my tables, the more I can make. The fastest selling items can potentially return a profit before the bill is due and there is no better scenario than that.

Sell-through rate (STR) is a vital metric indicating the percentage of units sold from available inventory during a specific period. Calculated by dividing units sold by the beginning inventory and multiplying by 100, it gauges how effectively products are selling relative to stock. For instance, starting with 100 units and selling 60 results in a 60% STR. High STR signals robust demand and low inventory risk, while low STR suggests weak demand and higher inventory risk. This metric empowers businesses to optimize stock levels, aligning supply with consumer demand.

Inventory turn also called stock turn is very useful to gauge the financial health of assortment. Laggards can be identified and various actions taken to improve the metric. For e.g, a low IT for a category may not necessarily be only due to lower sales. It can also indicate excessive and unwanted inventory or longer replenishment cycles. A high inventory turn can be analysed to see if there is opportunity loss of sale ...say,can sales be improved by pumping in more stock.

I love this measurement! If we consider stock as an investment, stock turn, (or inventory turnover if you want to get fancy), measures how many times you had the opportunity to get a return on your investment! The more times you turn stock the more gross profit you generate from the sales, the more likely you are to be profitable. It explains why there is sometimes more profit in FMCG than there is in high fashion. Your GM% in FMCG may be significantly lower but you realise it, (and bank it!), so much more frequently.

Consider comparing monthly IT per SKU or Category to understand the fluctuations. You can plan for a certain yearly IT and understand what levers you can use to reach the target. Also, observe your OOS levels. If IT is very high, may be there was a frequent OOS situation, not that your sales smash!

Inventory Turnover covers how often inventory is sold AND replaced during a given period. Formula, =COGS / Average inventory A high turnover rate indicates that stocked inventory is selling through quickly. This can be interpreted in two ways. First, it could be good as you are efficiently managing inventory and avoiding costs associated with excess stock. Second, it could be bad in the case that there are stock-out periods in between periods of high sell-through (resulting in loss of total sales).

STR & IT Great insight and finite practices rhat can result in produce tangible cash flow towards expansion, growth and reinvestment within the whole structure and systems.

The biggest difference between Sell Through Rate and Inventory Turn is that IT uses COGS or cost of goods sold. So, changes in margin or buying cost impacts the IT while it is not a significant factor in STR. IT is a more critical ratio from a long term perspective while STR can be used for short term tactical objectives.

The luxury jewelry industry specifically shows that sell through is less advantageous than inventory turn due to the high value of our inventory. Especially when looking at reordering product, if we have a high inventory turn, it is wise to invest more money rather than a high sell-through on my affordable pieces. The ROI is benefited more by high IT than high STR for high value goods.

STR provides a detailed, close-up analysis at the option or category level, allowing you to assess performance based on seasons or drops. It aids in comprehending qualitative feedback on buys and influence of trends. On the other hand, IT offers a broader perspective, focusing on how buying decisions, costs, margins, and markdowns can influence the overall health of inventory. It takes into account multiple seasons in most cases.

In inventory management, Sales to Inventory Ratio (STR) focuses on product quantity, affected by changes in stock. Inventory Turnover (IT) considers the value of sales, impacted by price fluctuations. STR is vital for stable-priced products, while IT is more relevant for those with variable prices. Both ratios offer insights tailored to your goals and market conditions for effective product sales strategies.

The sell-thru rate informs storage, inventory, sales, and merchandising decisions. Whereas your inventory turnover ratio helps you make better decisions about pricing, manufacturing, purchasing, and warehouse management.

Sell through tells you the amount of Inventory sold. Turnover tells you the speed of your sales. Sell through tells you storage, inventory, sales and merchandise decision

Sell-through rate provides valuable insights for inventory management, marketing strategies, and overall business decision-making, helping businesses adapt to changing market demands and improve operational efficiency. Grocery Stores:Analyze sell-through rates for perishable goods to minimize waste and ensure freshness. E-commerce Online Marketplaces:Calculate the sell-through rate for specific product categories to identify popular items and optimize online listings. Flash Sales: Evaluate the sell-through rate during time-limited promotions to assess their sale. Supply Chain Optimization:Use sell-through data to collaborate with suppliers and optimize the supply chain for better responsiveness. To name a few

It reports are the light in the darkness. Category killer companies carries more than 10.000 assortments of products . It is very easy to miss product performance . There is some reports are the key indicator for performance 1- not on the floor 2- aging inventory 3-best selling products 4- category performance reports 5- inventory turnover report 6- mss. Minimum self space 7- m2 sales performance 8- minimum orders

While these reports are valuable for retail and inventory management, they don't directly address the difference between sell-through rate and inventory turnover. The key difference lies in what they measure: sell-through rate focuses on the rate of sales for a specific batch of inventory, while inventory turnover is a broader financial metric assessing how efficiently all inventory is being managed over a period.

Use STR to - Decide quantity and timing for inbounding inventory - Planning manufacturing batches of specific SKUs - Reviewing if Price Promotion is needed to improve sell-through for specific items.

Inventory turns can help evaluate category performances by treating differing margin and sales categories with a common lens. Retailers often end up over stocking on high sale- high margin categories. It is easy to be blindsided by a combination of high margin and high sale with scant regard to inventory levels.Inventory turns can help make category management more efficient. IT can be used to take decisions on assortment planning, space planning as well as negotaiting with vendors.

You can actually step up our inventory game using IT. Taking a look at what competitors are doing or analyzing past data helps us see how well you're managing stock. And by calculating your sales, you can figure out ways to make more money. It's a savvy way to boost profits and make the most out of your resources.

Use IT to - Make broader decisions regarding warehousing space and capacity for your business. - Informing payment term decisions with partners and vendors you source multiple products from. - Determine and forecast future warehouse and fulfillment labor demand for staffing decisions.

Sell-through rate is a valuable metric used in retail and inventory management to assess how well inventory is being sold within a certain period. It helps businesses understand the rate at which products are being sold relative to the inventory available. Following metrics are important as, Calculations, Inventory management Seasonal inventory Pricing Most Important is Continous Monitoring and Analysis.

There are so many more granular details to consider, both STR & IT are only as good as the input and plans of the business. IE: what is the season, what is the market price, what is the expected margin, are the right flavours or derivatives in stock. All these factors need to accurate before making a decision on % output on STR & IT reports

Most important points are as follows, Low Sell-through and High Turnover: suggest that while the items are moving quickly when restocked, they're not selling as rapidly as expected. This scenario could indicate potential overstocking or poor sales performance. Low Sell-through and Low Turnover: slow-moving or stagnant inventory that might need reevaluation or adjustments in marketing, pricing, or inventory management strategies. High Sell-through and Low Turnover: it may imply that the initial inventory levels were insufficient to meet demand. This scenario could prompt reevaluation of stocking levels to optimize sales.

Sell through works best for in-and-out promos, one-time buys, or seasonal programs that are not replenished. It is often used to determine when markdowns should be implemented to move through remaining inventory and create space in the store for a new set. Inventory turnover works best on standard year round programs that are replenished on a regular basis. It measures how well assets are being utilized. Typically, higher turnover is better as long as sufficient inventory is available so sales are not being capped or constrained. Inventory turnover also has more visibility with Wall Street and large investors. At the end of the day, these two metrics are highly correlated. Their use and usefulness comes down to the type of category.

Both STR & IT are used to analyse same outcome from 2 different lenses depending on the stakeholder STR is more relevant for Planners, Merchandisers, Buyers etc while IT be more from Finance, Warehousing & SCM etc pov That said, both are correlated & key indicators to reflect business health. While lower STR & IT may not be very healthy in general, but higher levels might also indicate missed opportunities & need to find an ideal level & balance From fashion pov, it needs to be bucketed by segment (core vs fashion), categories (seasonal vs non-seasonal), channel (offline vs online), price points (entry vs exit), gross margin (low vs high) etc & deepdive within each bucket because they behave differently Also STR is better seen at fullprice.

STR normally is used as a tool by B&M to understand the performance of the products from a period of sales perspective and also helps in charting out a markdown strategy for better margin deliverability. IT on the other hand used to gauge the overall financial health of an organisation in terms of inventory holding and working capital requirements and primarily used by finance team and strategy panel of the company. Both being strong tools can be leveraged out well if used alternatively within defined periodicity, STR being a regular periodic read whereas IT can be used ranging from quarterly to half yearly performances

Sell-through rate measures the pace at which inventory is sold within a specific period, typically expressed as a percentage. It focuses on the amount of inventory that's actually sold to customers. On the other hand, inventory turnover calculates how many times the entire inventory is replaced or sold over a given period, without specifically considering sales. It reflects how efficiently a company manages its inventory, including both sold and unsold items. While sell-through rate tracks what percentage of stock is sold, inventory turnover gauges how quickly the inventory is moving overall.

Navigating retail KPIs can reveal much about operational health. The sell-through rate measures the percentage of inventory sold within a specific period, offering insight into sales effectiveness. Inventory turnover, however, tracks how often inventory is sold and replaced, highlighting demand and supply chain efficiency. But beyond the basics, these metrics can forecast trends and inform agile responses. Imagine correlating sell-through rates with marketing campaigns for nuanced ROI analysis or using inventory turnover to gauge market saturation and adjust purchasing. It's time we think of these metrics not as mere reflections but as strategic levers for growth.