RETAIL GLOSSARY

# Prepack Sell-Through Rate

The percentage of units in a prepack that are sold compared to the initial stock on hand, used to evaluate the performance of specific prepacks.

## What is Prepack Sell-Through Rate?

Prepack Sell-Through Rate is a retail metric that measures the percentage of preconfigured product packages (prepacks) that are sold within a given period. It indicates the effectiveness of prepack assortments in driving sales and gauges how well these bundles align with customer preferences and demand. A higher Prepack Sell-Through Rate suggests that the prepacks are resonating with customers and contributing positively to sales, while a lower rate might indicate the need for adjustments to prepack assortments or marketing strategies.

## How Prepack Sell-Through Rate works

• Calculation: Calculate the total number of prepacks sold within a specific time frame, such as a week or a month.

• Total Prepacks Available: Determine the total number of prepacks that were available for sale during the same time frame.

• Formula: Divide the number of prepacks sold by the total number of prepacks available, and then multiply by 100 to get the percentage. Prepack Sell-Through Rate = (Number of Prepacks Sold / Total Prepacks Available) * 100

• Interpretation: A higher Prepack Sell-Through Rate indicates that a significant portion of the prepacks offered to customers were sold. This suggests that the assortment and packaging of products in prepacks are attractive to customers and meet their preferences, resulting in higher sales and potentially reducing excess inventory.

• Analysis and Adjustments: Retailers can analyse the Prepack Sell-Through Rate over time and across different prepack assortments. If the rate is consistently low, it might indicate that the prepacks are not resonating with customers or that there is an issue with pricing, placement, or product selection. Retailers can then make informed decisions to adjust prepack configurations, marketing strategies, or pricing to improve the sell-through rate.

• Optimisation: The goal is to continually optimise prepack assortments based on customer preferences and market trends. By tracking the Prepack Sell-Through Rate and making necessary adjustments, retailers can maximise sales and minimise excess inventory, contributing to overall profitability.
For example, if a retailer introduced a summer-themed prepack of sunscreen and beach towels and sold 80 out of 100 prepacks in a month, the Prepack Sell-Through Rate would be 80%.

If another retailer offered a winter clothing prepack and sold only 20 out of 100 prepacks in the same time frame, the Prepack Sell-Through Rate would be 20%, indicating that adjustments to the prepack assortment might be needed.

## Pros of Prepack Sell-Through Rate

1. Inventory Optimisation: Prepack Sell-Through Rate helps retailers optimise their inventory by identifying which prepack assortments are selling well and which are not. This information allows them to adjust future orders and production to match customer demand accurately, reducing excess inventory and associated carrying costs.
2. Profitability Improvement: A high Prepack Sell-Through Rate indicates that the prepack assortments are aligned with customer preferences and are effectively driving sales. This can lead to improved profitability as more prepacks are sold at their full price, reducing the need for markdowns or clearance sales to move unsold inventory.
3. Customer-Centric Assortments: Monitoring the Prepack Sell-Through Rate provides insights into customer preferences and buying behaviour. Retailers can use this information to design prepacks that cater to customer needs and desires, ultimately enhancing the shopping experience and building customer loyalty.

## Cons of Prepack Sell-Through Rate

1. Limited Flexibility: Prepacks are typically designed and assembled in advance based on certain assumptions about customer preferences and demand. If these assumptions are incorrect or if market conditions change, retailers might be stuck with prepacks that are not selling well, leading to potential losses.
2. Complexity of Analysis: Calculating Prepack Sell-Through Rate involves tracking individual prepack SKUs and their sales performance, which can become complex as retailers deal with multiple assortments and variations. Managing and analysing this data accurately can be challenging and time-consuming.
3. Risk of Overstock or Understock: Depending solely on Prepack Sell-Through Rate might lead to overstocking or understocking of certain assortments. If a prepack has a high sell-through rate, but the retailer hasn't stocked enough quantity, they might miss out on potential sales. Conversely, if they overstock a prepack with low sell-through, they might face excess inventory.

## FAQ

Below you will find answers to common questions
How can Prepack Sell-Through Rate help us make better inventory decisions?
Prepack Sell-Through Rate is a valuable metric that indicates the percentage of units sold from a prepackaged assortment. By analysing this rate, we can understand which prepacks are performing well and which ones are not. This insight allows us to make informed decisions about restocking successful prepacks and making adjustments to underperforming ones. It helps us optimise our inventory by focusing on what our customers are actually buying.
What should we do if a Prepack Sell-Through Rate is consistently low?
A consistently low Prepack Sell-Through Rate indicates that the prepack assortment is not resonating well with customers or that the product mix might not be aligned with current demand. To address this, we can take several steps. First, we should analyse customer feedback and sales data to identify any specific issues with the prepack. Then, we can consider adjusting the assortment mix, revising product quantities, or even rethinking the overall design of the prepack. If necessary, we may choose to discontinue prepacks that consistently underperform to avoid tying up inventory and resources.