Sell-through rate: the formula and what it tells you
Sell-through rate is units sold divided by units you had, over a stated period. Receive 140, sell 42 in the first 30 days, and the sell-through is 30%. The number only becomes useful when you turn it round: the 98 units left are going out at 9.8 a week, which is 10 weeks of cover, and that is the figure that tells you whether to reorder, leave it alone or mark it down. This page works the formula, applies it across four product lines, and prices a markdown decision properly rather than guessing at it.
The formula, and the two versions people mix up
The arithmetic is trivial. The ambiguity is in the denominator, and it is the reason two people can quote wildly different sell-through figures for the same product.
Sell-through % = units sold in the period ÷ units available in the period × 100
“Units available” has two common readings:
- Against the delivery. Units sold since the stock arrived, divided by the number that arrived. This is the version buyers and suppliers use, and it answers “was this order the right size?” It only ever rises, and it is meaningless without saying how long it has been on sale.
- Against the period. Units sold in a month, divided by the units you had available during that month, which is the opening stock plus anything received. This is the version worth running regularly, because it is comparable from month to month and across products.
Both are legitimate. Mixing them is not. A product quoted at “70% sell-through” might have sold 70% of a delivery over eight months, which is poor, or 70% of everything available in one month, which is strong. A sell-through figure without a period attached is not a number.
Everything below uses the period version, stated in 30-day months.
Four lines, worked
Marlow and Pike is an invented homewares shop. Four lines, one 30-day month, all four delivered at the start of it.
| Line | Received | Sold in 30 days | Sell-through | Left | Units a week | Weeks of cover |
|---|---|---|---|---|---|---|
| Stoneware mug | 240 | 168 | 70.0% | 72 | 39.2 | 1.8 |
| Wool throw | 60 | 33 | 55.0% | 27 | 7.7 | 3.5 |
| Linen napkin set | 140 | 42 | 30.0% | 98 | 9.8 | 10.0 |
| Brass candle holder | 90 | 9 | 10.0% | 81 | 2.1 | 38.6 |
The sell-through column on its own invites the obvious conclusion: mugs good, candle holders bad. The right-hand column is the one that actually tells you what to do, and it is derived like this:
Units a week = units sold ÷ 30 × 7
Weeks of cover = units left ÷ units a week
For the napkin set: 42 ÷ 30 × 7 = 9.8 a week, and 98 ÷ 9.8 = 10.0 weeks. Read down the cover column and four different decisions appear:
- Stoneware mug, 1.8 weeks. A 70% sell-through looks excellent and is actually an alarm. If the supplier takes four weeks, this line runs out well before the next delivery lands, and the sale you lose is not recorded anywhere. High sell-through frequently means the order was too small. When to place that order is the reorder point.
- Wool throw, 3.5 weeks. Healthy, assuming a lead time under three weeks. Reorder now.
- Linen napkin set, 10 weeks. Fine, and no action needed beyond not reordering yet. Ten weeks of cover is comfortable rather than a problem.
- Brass candle holder, 38.6 weeks. Nine months of stock. This is the one that needs a decision, and the next section makes it.
Note that the two lines needing attention are the highest and the lowest sell-through in the table. The measure is not a scale from bad to good; it is a way of finding both ends.
Sell-through and inventory turnover are not the same measure
The two get used interchangeably and they answer different questions on different timescales.
| Sell-through rate | Inventory turnover | |
|---|---|---|
| Measured in | Units | Money, at cost |
| Usual period | A week or a month | A year |
| Denominator | Units available in the period | Average stock value held |
| Answers | Is this line moving, and how long will it last? | How hard is the money tied up in stock working? |
| Best for | Reordering and markdown decisions on one product | Judging a whole range, and comparing lines against each other |
Sell-through is the fast, local instrument: it works on a single line, from one delivery, within weeks, and it is what you use to decide what to do on Monday. Turnover is the slow, comparative one: it works in money over a year and it is what tells you whether a line deserves its shelf space at all. The full version of that second calculation, including what holding the stock costs, is in inventory turnover.
Use them together. A line with high sell-through and low turnover is cheap stock moving fast without earning much. A line with low sell-through and high margin might still be worth keeping. Either measure alone will mislead you about a third of the range.
Pricing the markdown decision
The brass candle holder has 81 units left, 38.6 weeks of cover, a cost of £8.20 and a price of £24.00. The instinct is to wait, because selling at full price earns more per unit. The instinct is measuring the wrong thing.
The right comparison is profit per week of shelf space, because shelf space and cash are what the stock is consuming while it waits.
Option one: hold at £24.00
| Line | Working | Amount |
|---|---|---|
| Gross profit | 81 × (£24.00 − £8.20) | £1,279.80 |
| Holding cost over 38.6 weeks | average 40.5 units × £8.20 × an illustrative 22% × 0.742 years | −£54.21 |
| Net | £1,225.59 | |
| Per week of shelf space | £1,225.59 ÷ 38.6 | £31.75 |
Option two: clear at 40% off, £14.40
Assume the discount moves the lot in about six weeks. That assumption is the weakest part of the sum and it is the one to test with a small markdown first.
| Line | Working | Amount |
|---|---|---|
| Gross profit | 81 × (£14.40 − £8.20) | £502.20 |
| Holding cost over 6 weeks | average 40.5 units × £8.20 × an illustrative 22% × 0.115 years | −£8.43 |
| Net | £493.77 | |
| Per week of shelf space | £493.77 ÷ 6 | £82.30 |
Clearing earns £82.30 a week against £31.75 — about two and a half times as much per week of shelf space — even though it earns £732 less in total. And it returns £1,166.40 of cash within six weeks rather than over nine months, which can be spent on a line with a 1.8-week cover that keeps running out.
The general form, worth applying to any slow line:
Profit per week = (units × (price − cost) − holding cost) ÷ weeks to clear
The decision is only as good as the estimate of how fast the discount sells. If 40% off takes twenty weeks rather than six, clearing earns £24.69 a week and holding wins. That is a reason to discount in steps and measure the response, not a reason to leave the stock alone for nine months.
What sell-through rate cannot tell you
Sell-through is a ratio of two unit counts. It is quick and honest about what it measures, and it is silent about almost everything that decides whether a product is worth selling.
- It says nothing about money. A 70% sell-through on a line making 40p a unit is worth less than a 20% sell-through on one making £30. The measure counts units and cannot see margin, which is why it must be read next to what each unit actually earns.
- It cannot tell a sold-out line from a slow one. A product that sold every unit in nine days shows 100% and looks perfect, and the lost sales after day nine appear nowhere. High sell-through is as likely to indicate under-ordering as success.
- It assumes the rate continues. Weeks of cover takes the last 30 days and projects them forward in a straight line. For anything seasonal that is simply wrong: a line with 38 weeks of cover in October may have six weeks of cover once December arrives, and marking it down in November would have been the expensive mistake.
- It does not know why. A 10% sell-through could be the price, the photographs, the position on the page, the season, or a product nobody wants. The ratio identifies which line to look at and offers no opinion at all on the cause.
- It is distorted by anything that is not a normal sale. A single wholesale order, a bulk purchase or a returned batch moves the numerator sharply and makes the period figure unrepresentative. Strip those out before reading the number.
- It cannot price the decision on its own. The markdown sum above needed the cost, the price, a holding rate and an estimate of how fast a discount sells. Sell-through supplied none of those; it only pointed at which of the four lines was worth the effort.
Arithmetic and general information only — not financial, tax, legal or investment advice. Your own figures, and your own accountant, decide what any of this means for you.
Do the quick version free
free profit margin calculator — put a unit cost and a discounted price into it and it returns the profit left at the lower price, which is what a markdown decision turns on. It runs in your browser and nothing you type is sent anywhere.
See inside the toolkit first
The Business Sale Readiness Toolkit sample shows every sheet, every row of the inputs sheet and the actual Excel formulas — no email, no account. If the sample is not worth your afternoon, the full workbook will not be either.
The tool for this job
The Small Business CFO Operating System ($39) is a working spreadsheet that holds stock received, units sold and what each line earns, so slow stock shows up in a month rather than at the year end. One-time purchase, instant download.
Frequently asked questions
What is the sell-through rate formula?
Sell-through % = units sold in a period ÷ units available in that period × 100. Selling 42 units in 30 days from 140 received gives 30%. Always state the period, because the same figure means very different things over one month and over eight.
What is a good sell-through rate?
There is no single figure, because it depends entirely on how often you can restock and how long the product stays saleable. The more useful test is weeks of cover: units left ÷ units sold per week. If cover is shorter than your supplier lead time you will run out, and if it runs to many months the cash is stuck, whatever the percentage says.
How do I turn sell-through into weeks of cover?
Divide units sold by the days in the period and multiply by 7 to get a weekly rate, then divide the units remaining by that. With 42 sold in 30 days, the weekly rate is 9.8 and 98 units left gives 10.0 weeks of cover. Cover is the number that tells you whether to reorder, wait or discount.
What is the difference between sell-through rate and inventory turnover?
Sell-through counts units over a week or a month against the stock available, and is used to make decisions on one product. Inventory turnover measures cost of goods sold against average stock value over a year, and is used to judge how hard the money tied up in a whole range is working. One is a fast local signal, the other a slow comparative one.
When should I mark down slow-moving stock?
Compare profit per week of shelf space rather than profit per unit. In the worked example, holding 81 units at £24.00 for 38.6 weeks nets £31.75 a week, while clearing them at £14.40 in six weeks nets £82.30 a week and returns £1,166.40 of cash far sooner. The answer depends heavily on how fast the discount actually sells, so discount in steps and measure.
Does a 100% sell-through mean the product did well?
Not necessarily. It means every unit sold, and it cannot show the demand that arrived after the last one went. A line that cleared in nine days and then sat unavailable for three weeks reports the same 100% as one that sold out neatly on the final day, so pair the figure with how long the stock lasted before treating it as a success.