Reaching Towards 10% Inventory Sell Through
A small but significant number of great importance.
A key metric in any product based business the inventory sell through rate. This is the amount of inventory that sells through in a given period.
This is one metric I have been keeping top of mind, although maybe not measuring quite as consistently. Even though it can be a key indicator of how well the business is performing.
Early on I was struggling to get above 2% stock sell through per month. This was on a fairly small inventory of around 40,000 parts which grew to over 100,000 parts in the first six months.
Although I do not appropriately track this metric, I have an idea in my mind where it should be. Currently, I am no where near the 40,000 parts I should be moving a month with my current inventory.
How To Calculate Inventory Sell Through
Different companies may look at the stock sell through calculations difference. But I try and keep this simple and have two different ways I can calculate it.
1. Quantity Base
The quantity approach takes the number of parts in stock agains the number of parts sold. In January 2025, I had 418,416 parts in stock and I sold 12,639 parts. Giving me a stock sell through of 3.0%
2. Inventory Value Base
The inventory value approach takes the value of my inventory against the value of parts soldIn January 2025, my stock holding was valued at $112,793 in final sale value, and I sold $3,392 in parts. Giving me a stock sell through of 3.0%
What’s The Difference
You might look at both of these and question why bother, when they both give the same result?
Although I do not have the exact numbers, December 2024 would have shown a difference between the two numbers. The inventory make up would have not been significantly different, yet I only sold about $100 different in value. However, that was on almost 4,000 less parts. This would have brought the parts sell through down around 2%.
My Past And Goals
Over the past two years this is a number I wish I had paid closer attention to. It would be a great piece of data to look at over time. But unfortunately would be near impossible to recreate, due to so much data that does not remain after the fact. For example the inventory value on any particular day.
I do know from roughly what my inventory was at the very beginning, my stock sell through was around the 1% mark. While I also have a recollection early in 2024, I was seeing the number tracking between 1.5% and 2.0%.
Currently as you can see above my stock sell through rate has reached 3%. This is still significantly lower then where it needs to be. Ideally, my goal is still the same as when I first got started, which is a stock sell through rate of about 10%.
Achieving 10% Stock Sell Through
To achieve a stock sell through rate of 10% or more, there are likely a three things that need to happen.
- Increase the product diversity with a focus on products that have high customer demand.
- Improve the sourcing of product, to have greater quantity of products available when buyers are looking for them.
- Additional promotion to attract more buyers.
There is one other quick and easy approach I could take to increase my stock sell through rates. This would be to identify some of the slower moving stock and high quantity stock items and sell in quantity lots.
I currently have 25 items with more then 1,000 units in stock and a further 150 items with more then 500 units. Pre packaging these into 100 or 1000 unit bundles and offering a better price could help them more quicker.
However, this approach is only a short term method to potentially decrease the stock on hand. If this was a ongoing part of my sales process I would also need to consider resupplying this stock.
Your Approach
I would be interested to hear from other business owners how they approach stock sell through. Do you track this metric? What are some approaches you have taken to move the needle on stock sell through?
Thank you for reading.
