Sell-through rate calculator

A six-style jacket line is 64.5% sold at week 6 of a 10-week season, 9.5 points ahead of a 55% plan, and on the dashboard it looks fine. Underneath, the vest is 86% sold and will run out in week 7, while the trench coat is 29% sold and will finish the season with 77 units unsold. At the current pace, four of the six styles sell out early, costing about $16,843 in gross profit, and two are left with $9,167 of stock at cost. The one number was right about the average and wrong about every style.

The calculator computes sell-through four ways from the same data, then shows it by style against your plan: weekly pace, weeks of supply, when each style sells out or what it is left with, and the unit lift a markdown would need.

Who reaches for this

For each style you enter the units you began the period with, the units received, the units sold net of returns, the unit cost and the price. You also enter how many weeks have passed, how long the season is, the sell-through you plan to have reached by now and the target for the end. The calculator computes sell-through for each style and for the line as a whole, compares them with the plan, and projects each style to the end of the season at its current weekly pace.

The projection is a pacing tool. It asks a simple question of every style: if it keeps selling at this rate, will it run out before the season ends, or will it be left with stock? The answer tells you where to reorder and where to mark down. Sell-through is the short-window view of inventory. For the annual view, see the inventory turnover calculator and the days inventory outstanding calculator.

Search for the formula and you will find three, sometimes on the same page. Klipfolio and Zinfi divide by beginning inventory plus units received. OneCart, Toolio and ShipBob divide by units received. Other guides divide by beginning inventory alone. They agree only when nothing carries over from the last period, and the differences matter.

A small example shows it. A store starts the month with 200 units, receives 100 and sells 180, leaving 120. Sold ÷ available is 180 ÷ 300 = 60%. Sold ÷ received is 180 ÷ 100 = 180%, a number that cannot be right, because you cannot sell through more than you have. Sold ÷ beginning is 90%. Sold ÷ (sold + on hand) is 180 ÷ 300 = 60%, the same as the first, because nothing was lost.

The jacket line began with 130 units, received 1,520 during the season so far, and sold 1,064, leaving 586. By the first formula it is 64.5% sold. By the second it is 70.0%, because the 130 carryover units are left out of the denominator. By the third, sales are 8.2 times the beginning stock, which is not a sell-through rate at all, since most of the stock arrived later.

Which one to use

Use sold ÷ available for almost everything. It answers the question buyers ask, which is how much of what we had did we sell, and it stays between 0% and 100%. Sold ÷ received is a reasonable measure for a single delivery tracked from the day it arrived, such as a purchase order, a drop or a wholesale shipment to a retailer, and only then. Sold ÷ beginning fits a period in which nothing is received. Whatever you choose, use it consistently. Comparing a number from one formula with a benchmark or a past result from another is the most common source of confusion.

The formula is simple and the data is where it goes wrong. Three rules keep it honest.

Two further points. Units received should be units available to sell, so stock in transit or in a warehouse that cannot be sold does not belong in the denominator until it can be. And sales should be counted by the date of the sale, not the date of shipment, when the two are far apart. For an ecommerce seller, that means an order counts when it is placed or when it ships, and the choice should be the same in every period.

A sell-through rate is only useful next to a plan. Sixty percent sold means one thing at week 3 and another at week 9. Most seasonal goods sell along a curve, not a straight line, so the plan should say what sell-through you expect at each point in the season.

Build the curve from last season’s data for the same category. Record cumulative sell-through at the end of each week, and use it as a starting point, adjusted for what has changed. The calculator asks for the planned sell-through by now, 55% in the example, and the target for the end, 80%. The example line is 64.5% sold, 9.5 points ahead of plan, and it projects to 89.3% by the end if each style holds its pace.

The rate you need

Turn the target into a weekly number. To end the season at 80% sell-through, the parka, with 400 units available and 268 sold, needs 320 sold in total, or 52 more over 4 weeks, which is 13 a week. It is selling 44.7 a week, so it is far ahead of target. The rain shell, with 250 available and 90 sold, needs 110 more to reach 200, which is 27.5 a week against the 15 it is doing. The gap between the two numbers is what a markdown, a display change or a promotion has to close.

Building a curve from last season

Suppose last season’s jackets reached 12% sell-through by week 2, 33% by week 4, 52% by week 6, 68% by week 8 and 82% at week 10. Those figures are illustrations, and the shape is typical of a season: slow at the start, fastest in the middle and slowing as the range is picked over. With that curve, 55% at week 6 is a sensible plan, and 80% is a sensible target for the end. Adjust it for a colder or warmer winter forecast, a bigger buy, a new price point or a promotion. The value of the curve is that a number like 64.5% at week 6 now has something to be compared with.

The line-level rate is an average, and an average of styles that are moving in opposite directions describes none of them. In the example, four styles are well ahead of plan and two are well behind, and the total lands comfortably above plan.

The four fast styles will run out before the season does. Their shortfall at the current pace is 47 parkas, 85 puffers, 82 fleeces and 87 vests. At each one’s margin, that is about $4,060, $6,035, $3,022 and $3,727, together $16,843 of gross profit not earned. The two slow styles will be left with 100 rain shells and 77 trench coats, $3,800 and $5,367 at cost, together $9,167. That is money paid to suppliers for stock that did not sell in its season.

The lost profit is an understatement of true demand. When a style sells out, sales stop, so a projection based on the pace before it sold out cannot see the customers who would have bought. It is also a reason to look at the numbers early: a style that is 86% sold at week 6 is a reorder decision, if the supplier can deliver in time, and it is past being one at week 8.

Sell-through looks back, and weeks of supply looks forward. It is the units on hand divided by the units sold per week, and it says how long the stock will last. The vest has 28 units and sells 28.7 a week, so it has about one week of supply. The trench coat has 106 units and sells 7.3 a week, so it has 14.5 weeks with 4 left in the season.

The comparison that matters is with the weeks remaining and with the lead time. A style with fewer weeks of supply than its reorder lead time is going to stock out whatever you do today, so the decision was due earlier. A style with far more weeks of supply than weeks left is going to be left over. The safety stock calculator covers the buffer that protects against variation in demand and lead time during a reorder.

Across the whole line there are 586 units on hand and 177 sold a week, which is 3.3 weeks of supply against four weeks left. Read alone, that suggests a small shortfall. Read by style, it is a large shortage in four styles and a large surplus in two, and those cannot be offset against each other. A vest is not a substitute for a trench coat.

The reorder timing test

Take the vest. It has 28 units and sells 28.7 a week, so it runs out in week 7. If a reorder takes two weeks to arrive and is placed now, at the end of week 6, the units land at the end of week 8. The vest is out of stock for about a week. The units that arrive can sell for two weeks before the season ends, about 57 at the current pace, and at a $43 margin that is roughly $2,500 of gross profit, less any minimum order or freight. Order a week later and the units arrive with a week left, and the reorder is worth about half as much.

The test is simple and worth running for every style with fewer weeks of supply than its lead time plus a safety margin. It also shows when to skip a reorder: a style that would arrive with one week left in the season is often better left to sell out.

A markdown lowers the profit on every unit, so it must sell enough extra units to justify the cut. The lift needed to hold gross profit is margin ÷ (margin − markdown) − 1, with margin taken as a share of the original price. The rain shell sells for $99 and costs $38, a 61.6% margin. At 25% off, the lift is 0.616 ÷ (0.616 − 0.25) − 1 = 68%. It has to sell 68% more units at the lower price to earn the same total gross profit.

Two different questions are at work. To hold gross profit, the rain shell needs 68% more units. To clear the stock by the end of the season, it needs 40 a week against the 15 it is selling, a 167% lift. A 25% markdown that produces a 68% lift would hold profit and still leave stock unsold, and a markdown that clears the stock might cost more gross profit than it saves.

Clearing is often still the right call, since unsold stock costs money to hold, ties up cash and may be worth less next season. The point of the numbers is to make the decision on purpose: how deep a markdown, how early, and whether some of the units belong in another channel. Marking down at week 6 costs less per unit than marking down at week 10, and it gives the lower price time to work.

When the markdown price needs a margin check

Check that the marked-down price still covers the cost. The trench coat costs $70, and at 25% off its $189 price is $141.75, still $71.75 above cost. At 50% off it is $94.50, $24.50 above cost. The markup vs. margin calculator converts between the two ways of stating a price above cost.

Three measures describe how stock moves, over different windows. Sell-through is a percentage of available units sold in a period of weeks. Inventory turnover is the cost of goods sold divided by average inventory over a year. Days inventory outstanding is the same idea expressed as days of stock. They agree in direction, since a business with fast sell-through will have high turnover and low days of stock, and they answer different questions.

Sell-through is the early warning. It tells a buyer at week 4 that a style is behind, when something can still be done. Turnover and days of stock tell the owner at year end how much cash the stock tied up. The jacket line turned its average stock 2.97 times in six weeks, 1,064 units sold on an average of 358 on hand, which would annualize to 25.8 turns. For a seasonal line, that annualized number means nothing, since the stock is bought up front and sold over a season. This is why turnover is a poor guide to a single season and sell-through is a good one. What the unsold stock costs to hold is covered by the inventory carrying cost calculator.

For brands and wholesalers: sell-in and sell-through

A brand that sells to retailers tracks two numbers. Sell-in is what it ships to the retailer, and sell-through is what the retailer sells on to customers. A retailer that bought 500 units and sold 400 has sold through 80% of that purchase, and a brand looking at that figure knows whether its next order is likely to be repeated or cancelled. Shipments that look strong while sell-through is weak often come back later as returns, markdown support or a smaller reorder. The formula is the same, with the retailer’s purchase as the units available.

One guide says a rate below 20% is a common threshold for concern and above 80% may indicate a stockout risk. Another shows a scale marked at 40%, 70% and 80% and calls a 75% result healthy for apparel. I could not trace either to a source, and both are rules of thumb. They describe a wide range of products and periods.

The right target depends on the category, the season and the point within it. A fashion line that reaches 85% by the end of a season has probably sold well and left little stock to mark down, and it may also have sold out of the best sizes early. A staple that sells 20% of its stock in a month may be fine if it is restocked each week. Judge a rate against last season’s curve for the same product, against the plan for this point in the season, and against how long the stock takes to replace.

A very high sell-through is not automatically good. It can mean that the buy was too cautious, that sales were lost to stockouts, and that the best styles ran out at full price when a larger buy would have earned more. The stockout column in the calculator is there to put a number on that.

See the annual view with the inventory turnover calculator, or work out how much of the shelf’s price is margin with the retail break-even calculator.