You would be hard pressed to find a retailer who wouldn't LOVE a high sell-through rate. A high turnover rate means you're doing something right and leads to fresh merchandise and happy customers! Here's a brief primer on sell-through and a couple of techniques that savvy retailers use to move their merchandise!
Agility and responsiveness is directly tied to profitability. The goal is to change the status quo whether that be to add the right inventory or move inventory that’s not performing. When you identify product that is trending well, the ultimate goal is to push your vendors to respond quickly to your replenishment needs. When product is moving slowly, often retailers resort to markdowns as the default mechanism for moving merchandise, but the end result can be poor margin. It’s important to consider the inventory data and evaluate all the different ways to handle under-performing inventory.
Retail Inventory Sell Through Metric
This metric works well for most retailers and is defined as a percentage that compares the amount of inventory a retailer receives against what is actually sold within a specific time period.
Sell-through = units sold / stock on hand x 100
Sell-through helps assess if your investment is performing well. Depending upon the time period, a low sell-through percentage,
say less than 10% per month, might indicate that your price is too high or you overbought and need to take an action to move the merchandise; a higher percentage of 90% can highlight a hot trend, a price that’s too low, or that you were too conservative in your buying.-TIP- Calculating sell-through for brands can help you build a vendor score card which will give you the data you need to negotiate better pricing and terms with your vendors.
6 Fresh Ways to Move Merchandise
Markdowns Although they are a quick way to improve retail inventory turnover, create cash, keep fresh goods flowing and correct buying mistakes, markdowns should solve problems and not create new ones. Retailers need to thoroughly understand margin before “flipping” this switch so as not to create cash flow issues. According to Weiss, “a 2% reduction in markdowns adds almost a 1% increase to your profit”.
Transfers When a retail business has multiple channels or stores, it’s crucial to understand how inventory performs at each and act accordingly. Leveraging a POS system’s ability to initiate transfer requests between stores and the warehouse ensures that stores stay balanced and well stocked.
Reorder Points and Target Quantities As retailers better understand their sell-through rates they can begin to use POS software to set up re-order triggers to prevent bottlenecks. This is a mechanism best suited for merchandise that continually performs well over longer periods of time.
Re-merchandising Merchandising is often an overlooked mechanism for keeping a store fresh and appealing to customers. By using data to understand customers, retailers can see, for instance, what merchandise they buy in tandem and then act to co-locate items. People respond to fresh stimulating experiences so engaging all the senses including sound and smell as well as grouping things around a theme or telling a story can all be highly effective.
Pop-up or event Without another store or online channel to move inventory, a pop-up store or stand at a local event like a farmer’s market are some ways to gain exposure and move inventory. Other options include engaging vendors to create events focused on their brand or leveraging the community to create new avenues for sales. With a mobile cloud-based POS the logistics are affordable and landlords are more willing than ever to consider short-term leases.
Renegotiate with vendors Retailers who have data, have proof, and the smart ones use it. They can share everything from their traffic and conversion rate to their sell-though for each of their brands. Armed with this data they push vendors for better terms, margin or pricing. Requesting merchandise exchanges or returns when an item or brand is not meeting expectations is another tactic.
To learn more about inventory control strategies, download our complementary Retail Inventory Report and learn valuable tips and techniques from the experts!