When it comes to retail success, it’s all about Sell-Through, not Sell-In!
The retail world is, in a word, BRUTAL. It’s the epitome of “dog eat dog,” with tens of thousands of new upstart brands vying for limited shelf space, all while jockeying for attention against the larger, entrenched brands with their marketing war chests. Industry research puts the failure rate of new CPG brands at around 85%, which is why when it comes to successfully launching your product, you’re not only competing against, the marketplace… you’re competing against the clock.
Veteran retail guru and co-host of the Road2Retail podcast, Bruce Montgomery, summarizes it this way:
“Too many brands celebrate when ending a call or in the parking lot of a retailer. Congratulations- you have gained distribution. But now the real work starts. Sell-in is important, but selling your product through to the consumer (moving it off the shelf by creating demand) is vital! If you don’t drive demand and hit velocity hurdles ahead of schedule- you run the risk of discontinuation. Awareness fast and almost immediate demand are the retailer’s expectations in today’s retail environment”
In the world of Consumer Packaged Goods (CPG), the journey from product creation to consumer purchase is intricate and involves various stakeholders. Manufacturers, retailers, and distributors all play a role in bringing products to market.
Traditionally, the focus has often been on "sell-in" – the process of selling products from manufacturers to retailers. However, in today's retail environment, a shift has occurred, and "sell-through" – the actual sale of products from the retailer to the consumer – has become far more crucial to the long-term success of CPG products.
Here's why sell-through should be prioritized over sell-in and why it directly impacts retail success.
Understanding Sell-In vs. Sell-Through
Before diving into the reasons why sell-through matters more, let’s first clarify the terms:
Sell-In refers to the process where CPG manufacturers or suppliers sell their products to retailers, distributors, or wholesalers. It measures the volume of products moved into a retailer’s inventory, but not necessarily how quickly those products will sell to end consumers.
Sell-Through refers to the actual sale of products from the retailer to the final consumer. This metric tells you how well a product is performing on the shelves, reflecting the demand from the end customer.
Sell-through is ultimately the most telling indicator of how well your product resonates with consumers, which is why it should be prioritized in measuring retail success.
Why Sell-Through Matters More Than Sell-In
Consumer Demand Drives Profitability: When you focus on sell-in, you are primarily concerned with getting your products into the retailer's warehouse or onto their shelves. However, this doesn’t necessarily guarantee that the products will reach consumers. If products do not sell well once on the shelves, retailers will discount them, discontinue them, or return unsold stock to the manufacturer. This leads to inefficiencies, lost revenue, and potentially damaged relationships with retailers. Sell-through is a direct measure of consumer demand, and, as such, it is more closely tied to profitability. If consumers are purchasing your product at a high rate, retailers will take notice. Products that sell through quickly are more likely to be restocked, promoted, and featured in high-visibility spots within the store, which leads to further sales and higher revenue for both retailers and manufacturers.
Retailers Are Focused on Sell-Through: Retailers are ultimately concerned with keeping their shelves stocked with products consumers want. While they are certainly interested in initial orders (sell-in), they are far more concerned with sell-through rates. A product that sells through slowly creates dead stock, which means reduced shelf space and potentially lower profits for the retailer. If a product doesn't move, retailers will lose interest, and the likelihood of getting additional shelf space diminishes. However, if your product is selling through at an impressive rate, retailers are more inclined to offer prime shelf space, extra promotions, and better placement in-store, which leads to an even stronger sales performance.
Sell-through is an Indicator of Product Success: While sell-in is important for initial distribution, it doesn't accurately show how well the product will perform in the long term. High sell-in numbers may provide short-term success, but a product that doesn't sell through quickly will eventually face problems, including being delisted or forced into discounting. Sell-through, on the other hand, provides a clear indication of how well the product is resonating with consumers. A product that consistently moves off shelves indicates consumer acceptance and demand. It reflects that your product is solving a problem, meeting a need, or fulfilling a desire in a way that makes it attractive to shoppers.
Effective Sell-Through Improves Brand Health: A high sell-through rate directly reflects a brand’s health in the market. It means that consumers choose your product over competitors and that your marketing, packaging, and positioning work. When a product consistently sells well, it builds brand loyalty, improves consumer recognition, and drives repeat purchases. Conversely, poor sell-through means your product is not gaining traction or loyalty, which could impact your brand’s perception. Retailers and consumers alike are likely to view your brand negatively if your products are continually sitting on shelves.
The Impact of Data and Analytics: Data is king in today’s retail environment. Retailers have access to real-time sales data and consumer behavior insights, making sell-through a crucial metric. Manufacturers can use these insights to adjust their strategies, optimize inventory, and tweak marketing campaigns in response to shifting consumer preferences. Focusing on sell-through allows CPG companies to leverage this data to make smarter product placement, promotions, and product development decisions. If a product is not performing well in terms of sell-through, it might indicate that changes are necessary—whether a marketing strategy shift or a tweak to the product itself.
Sustainability in Retail Relationships: A strong sell-through rate fosters a long-term, sustainable relationship between CPG manufacturers and retailers. When products perform well on the shelves, retailers are more likely to trust the manufacturer with more prominent shelf space, larger orders, and more favorable contract terms. On the other hand, a focus on sell-in can lead to short-lived relationships. Once the initial product order is made, the focus quickly shifts to how much inventory remains unsold, which might damage your retailer relationships if sell-through is low.
How to Drive Sell-Through
Now that we’ve established why sell-through is vital to retail success, how can CPG companies improve their rates?
Here are some strategies to consider:
Marketing and Promotions: Strong in-store and online marketing campaigns can drive consumer awareness and interest in your product. Offering promotions and discounts can also encourage trial and repeat purchases.
Retailer Partnerships: Collaborating with retailers on unique displays, promotions, or exclusive offers can help improve visibility and sales performance.
Product Education: Educate both consumers and retailers on your product's value and benefits. The more consumers understand why they need your product, the more likely they will purchase it.
Optimize Inventory Management: Ensure that retailers have the right amount of stock to meet demand but avoid overstocking, which can lead to markdowns and reduced profitability.
Conclusion
While sell-in is essential for getting your product into retail channels, sell-through is ultimately the true measure of retail success. It reflects consumer demand, informs retail decisions, and directly impacts profitability. By prioritizing sell-through, CPG brands can create stronger retail partnerships, drive sustained growth, and build long-term market success. Retailers are watching the sales floor, and the products that fly off the shelves are the ones that win. So, if you want to succeed in the CPG world, focus on ensuring that your product gets in the door and keeps moving off the shelves. Ready to increase your retail success? Let’s Talk.
