Leverage Sales Velocity Reordering to Make Smarter Data-Driven Business Decisions
With every passing month, the numbers of sales transactions continue to grow for each Finale customer. We have unlocked this valuable data by providing insightful sales velocity data to allow you to quickly learn how well a product is selling and to leverage sales velocity reordering to make smarter data-driven business decisions.
What Is Sales Velocity?
Sales velocity refers to the speed at which products move through your business and produce revenue for your company. You can use sales velocity to predict how much your company can expect to earn during a particular period and to get an estimate of the appropriate amount of product to order.
Some products always have a high sales velocity, while others have a higher velocity seasonally. For example, Halloween costumes sell quickly in October but probably don’t sell much — if at all — during the other eleven months of the year. Understanding when a product is most likely to fly off the shelves allows you to make plans for purchasing based on demand.
Benefits of Mastering Sales Velocity
Understanding your products’ sales velocity delivers many benefits to your company. Some of the reasons why it’s worthwhile to pay attention to sales velocity include:
- It helps you plan for the future: When you know when products are most likely to sell or to linger on shelves, you can make appropriate estimates when stocking your shelves for the future. To return to the Halloween costume example, understanding the speed at which costumes sell in September and October lets you purchase enough to avoid stockouts during that time. Seeing how the sales drop off in November and throughout the rest of the year allows you to purchase just enough costumes so you don’t have to mark many down or have them take up valuable space in a warehouse.
- It gives you an idea of where you stand: Mastering sales velocity gives you a good idea of where your business stands and whether it’s doing well, improving or declining. For example, you might notice that products are moving more quickly, meaning that demand for what you sell is growing. Or, it could be that the market has become saturated, and sales of your products have slowed to a crawl.
- It helps you avoid ordering mistakes: When you know when products sell and how quickly they move, you can avoid ordering too much of something at a particular time of year or too little of it at other times. Understanding sales velocity also helps you see when a product might be losing appeal, meaning you can stock less of it.
- It can help you grow your business: Your sales might not align with your initial expectations for your company, and that’s all right. Recognizing the speed at which products sell and giving time and attention to those that are selling the quickest lets you grow your business. It might be that smaller, less expensive products are the fastest movers. By keeping those products in stock or by stocking similar products, you create more opportunities for your company to grow.
Why High-Velocity Sales Matter for a Growing Business
Getting the reordering process right is perhaps one of the trickiest things for a growing company to master. At first, you are likely to find yourself in a situation where you have too much or too little inventory. Tracking the speed at which products move lets you reach a “just right” point, so inventory doesn’t linger on shelves or in the warehouse and you aren’t left with stockouts or bare shelves.
How to Use Finale Inventory for Sales Management
Being able to access historical inventory levels and analyze what products tend to stay on the virtual shelves longest provides valuable insights that help you make sales velocity reordering that will grow your business.
In addition to product sales velocity, we have all added a “Days Until Stockout” metric to quickly provide you insight into how many days before you run out of stock:
These metrics can be turned on and made visible on the “View Stock Screen” by clicking on the ‘Customize this screen’ link located at the Application Settings drop-down menu.
Additionally, the sale velocity time frame can be configured. The default is set to 30 days and can be changed at Application Settings >> Products:
With the product sales velocity data, customers can go beyond the static min/max reordering method and set up sophisticated dynamic reordering points to make smart purchasing decisions.
Purchasing is one of the most critical and challenging tasks in any retail organization. You want to make customers happy by stocking the products that match their demand while meeting your company’s financial targets.
If you over-purchase, then you’ll have inventory taking up real estate in your warehouse and you’ll spend precious dollars that could have been reinvested elsewhere. If you purchase too little, then you’ll miss sales opportunities by stocking out and frustrating customers in the process.
Leveraging the sales velocity of a product, Finale will automatically calculate dynamic reorder points based on your inputs – supplier lead time, desired safety stock, and expected sales growth — to make smarter, faster purchasing decisions.
Take a look at how our customer, Manscaped, leverages the sale order velocity in its daily business operations.
Use Finale Inventory to Master Sales Velocity
Finale Inventory makes it easy for your company to track sales velocity and set up automated dynamic reordering based on sales velocity. To learn more, start a free trial or contact us to schedule a free demo.