Sell-through rate is units sold in a period divided by units available at the start of it, expressed as a percentage. It measures how well a buying decision worked out, which makes it a purchasing metric rather than an operational one. Days of cover tells you what to do this week; sell-through tells you whether to buy that product again.
In more detail
The two rate metrics get conflated constantly and they answer different questions. Days of cover looks forward from where you are now. Sell-through looks back at a decision you already made.
It is most useful in comparison rather than in isolation: this product against that one, this season against last, this supplier's lines against another's. An absolute sell-through figure without a comparison is difficult to act on.
A very high sell-through is not automatically good news. It can mean you bought well, or it can mean you under-bought and left money on the table, and the two are distinguishable only by whether you ran out.
How it is calculated
Sell-through rate = (units sold ÷ units available at period start) × 100
Worked example
You received 200 units of a product at the start of the month and sold 150 by the end. Sell-through is 75 per cent.
Whether that is good depends on what happened at the end. If you still had 50 on the shelf on the last day, 75 per cent is a healthy result. If you sold out on day 22 and turned away demand for a week, the same percentage describes an under-buy.
The figures above are invented to make the arithmetic legible. They are not a benchmark and should not be cited as one.
Where people get it wrong
- Reading high sell-through as unambiguous success. Selling everything quickly may mean you should have bought more.
- Comparing across periods of different length without normalising them.
- Ignoring the discount. Stock cleared at half price sold through, but that is a different outcome from stock sold at full margin.
- Using it to make operational decisions. It is a backward-looking purchasing metric, and reordering off it without checking current cover gets the timing wrong.
Common questions
What is the sell-through formula?
Units sold in the period divided by units available at the start, times 100. Keep period length consistent or the comparison is meaningless.
Is high sell-through always good?
Not necessarily. It can mean a good buying decision or an under-buy that cost you sales. Check whether you ran out before treating it as a success.
How is it different from days of cover?
Sell-through looks backward at how a purchase performed. Days of cover looks forward at how long current stock lasts. One informs buying, the other informs this week.