Meaning
Performance standards define the expected velocity at which a product moves through a retail environment over a specific period. The rate of sale benchmark is established by analyzing historical data from similar products or geographical regions to create a target for existing items. It serves as a tool for inventory planning and for evaluating whether a product deserves its current shelf space allocation.
Inventory Planning
Procurement levels are adjusted based on how the actual volume compares to the predicted speed of movement. Any deviation from the rate of sale benchmark triggers a review of the ordering cycle.
Merchandising Decision
Items that consistently fall below the established target are often flagged for promotion or removal from the assortment. The rate of sale benchmark allows a buyer to compare the performance of a high priced item with a lower priced one on a level playing field by focusing on units sold per store per week. This objective measurement removes the bias of total revenue and focuses on the efficiency of the shelf space.
Because retail real estate is limited, maintaining a high velocity across the entire category is essential for maximizing the total return on the investment in stock.
Category Growth
Strategic adjustments to the product mix are driven by the comparison of these benchmarks across different brands. The rate of sale benchmark identifies the potential for volume expansion.
