Building a successful Amazon business requires making decisions based on solid metrics, such as the Amazon sell-through rate.
Familiarizing yourself with your Amazon FBA sell-through rate will allow you to have a better grasp of your audience’s product preferences. It’ll also protect you from overspending on inventory costs.
But how do you calculate sell-through rate, and what’s the best score to aim for to keep an Amazon business thriving?
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What Is Sell-Through Rate?
A sell-through rate, also abbreviated as STR, is a metric used in retail to assess the amount of inventory sold in a given period relative to the amount of inventory received from the manufacturer during the same period.
STR is expressed as a percentage and provides insight into the sales performance and demand for a product.
To calculate sell-through rate in general, you need to take note of the sell-through rate formula, which is the number of units sold divided by the number of units received times 100.
In the context of Amazon, however, the marketplace uses a more specific formula in computing the FBA sell-through rate. It’s the total number of units shipped in the past 90 days divided by the average number of units in your FBA inventory over the same period.
Let’s say that you shipped 150 units in the last 90 days and had an average of 120 units during that period. If you divide 150 by 120, you’ll get an Amazon sell-through rate of 1.25.
If you’re intimidated by computations, don’t fret. You can see this metric in your Inventory Performance Dashboard under Ways to Improve Your Performance.
A good Amazon sell-through rate indicates that a product is selling well and that demand is meeting or exceeding the supply. In addition, it can also improve your Inventory Performance Index or IPI.
Conversely, a low sell-through rate suggests a product is not selling as expected, which could lead to surplus inventory.
However, it’s crucial to note that Amazon’s sell-through rate is not the same as the sale metric on the Selling Coach page. While the sell-through rate counts shipped units, the sale metric counts only ordered units, regardless of whether they’ve been shipped.
Why Is The Sell-Through Rate Important?
Here are a few factors that illustrate the importance of this eCommerce metric.
Inventory efficiency
A healthy sell-through rate indicates that inventory levels are well-matched with consumer demand. This means you are stocking the right product amount without overestimating demand. Efficient inventory levels help maintain a lean operation, minimizing the capital tied up in unsold goods.
Storage cost reduction
A good STR also prevents the business from bleeding through long-term storage fees. After all, Amazon charges for storage space, and fees can increase for inventory that remains unsold for an extended period, typically over 180 days.
A good sell-through rate ensures inventory moves quickly through Amazon's fulfillment centers, reducing these long-term storage costs.
Improved visibility on Amazon
The sell-through rate impacts how Amazon's search algorithm prioritizes product listings. High sell-through rates can signal that a product is in demand, leading to higher placement in search results.
This increased visibility can attract more potential buyers, sustaining or increasing the sales velocity.
Improved marketing tactics
The sell-through rate can guide sellers on when to adjust their marketing tactics. For products with slower sell-through, merchants might consider time-sensitive promotions, like flash sales or targeted advertising campaigns, to increase visibility and stimulate demand. Products with faster sell-through rates might benefit from sustained ad campaigns to maintain sales momentum.
These adjustments can be pivotal in aligning marketing efforts with consumer demand and inventory levels.
What Is A Good Sell-Through Rate On Amazon?
What is a good sell-through rate? There are two ways to answer this question.
In general, a reasonable sell-through rate can vary depending on the industry, product category, and other factors such as price point and demand. For eCommerce platforms, including Amazon, eBay, and Shopify, you can consider a rate of around 50-80% generally good.
However, Seller Central displays the sell-through rate Amazon metric not in percentages but in whole numbers.
An Amazon sell-through rate above seven is Excellent, meaning you’re selling seven times more units compared to how many you hold on average.
Three to seven is Good, while one to two is Fair. In the context of our earlier example, the Amazon sell-through rate of 1.25 falls under fair. Your Amazon sell-through rate falls under Poor if it’s less than one.
The FBA sell-through section has a bullet graph showing how well your sell-through rates fare against the benchmark. It’s best to keep your score within the green part of the performance bar.
How to Improve Your Amazon Sell-Through Rate
Here are a few tips on improving your Amazon sell-through rate:
Consider Seasonality
Effective inventory management on Amazon requires understanding and anticipating customer demand, which can fluctuate due to:
- Seasonality
- Trends
- Other market forces
For seasonal products, it’s crucial to increase inventory ahead of the anticipated demand surge and scale down as the season wanes to avoid excess stock. This approach helps maintain a healthy sell-through rate by ensuring products are available when customers are looking to buy them, without the burden of long-term storage fees for unsold inventory.
Data analytics can be instrumental in predicting these patterns and helping sellers make informed decisions about stock levels.
Price Competitively
It’s all about finding the right balance between attracting customers and maintaining a healthy profit margin. Regular monitoring of competitor pricing is essential because the marketplace is dynamic, with prices changing frequently.
However, it’s not just about being the cheapest; value perception, brand strength, and customer loyalty also play roles.
During seasonal peaks or for products with high demand, sellers might not need to compete aggressively on price. Instead, focusing on differentiators like faster shipping or better customer service can justify a higher price point while improving the sell-through rate.
Bundle Products
Offering product bundles can enhance the sell-through rate by providing customers better value and convenience, encouraging them to make larger purchases.
Bundles can combine complementary items or multiple units of the same item, increasing the perceived value and reducing shipping costs and handling time for both the seller and the customer.
When creating bundles, remember to:
- Identify items customers frequently buy together.
- Ensure the bundle offers a clear benefit or savings over purchasing items separately.
- Use bundles to introduce customers to lesser-known products in your catalog.
- Monitor bundle performance and adjust offerings based on customer feedback and sales data.
By thoughtfully combining products, you can increase the average order value and move inventory more quickly.
The Bottom Line
Just as you would try to grow your Amazon venture by finding the right supplier or working with an expert accelerator, familiarizing yourself with key metrics is crucial in catapulting your business to success.
Mastering the Amazon sell-through rate can boost your IPI, help you navigate seasonality, optimize marketing efforts, and open up a whole new level of opportunities for your business.
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