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Volo Know Your Data Series – Sales Velocity

By Chris Dawson May 26, 2020 - 12:00 pm

In our monthly series Know your data series, penned by Scott Bagnall, Head of Product at Volo we are looking at how you can use data to grow your business. Following on from our recent webinar with Volo, “Automate to Accumulate – How to Scale your Business“, there was a lot of interest in the various reports and feeds available to Volo users. If you’re a Volo customer then the reports are all available to you in the Vision reporting and analytics module, but for non-Volo users you should still be considering the same factors in order to scale and grow your business.

Last month we covered best sellers, probably one of the first things a business owner-manager or manager will check on a regular basis. Best sellers are close to our hearts and wallets and it’s great to know what items are selling well so you can double down on those. But how fast are they selling? Perhaps that’s the second thing to check.

Velocity is a function of measurement over time, as in miles per hour or dollars per day. An item selling 500 units a day has a far greater velocity than an item selling 500 units a week. We all feel the need for speed in ecommerce, and we’ve seen enough of that in ecommerce over the last couple of months, but the question to append here is compared to what? The key aspect is not so much at what rate are your items selling but whether this rate is trending up or down compared to a previous period. Are your items increasing or decreasing their velocity?

Product Velocity

You’re looking for a change in sales rate over a period of time. Over the last two months, in many cases these changes have been extremely pronounced, with some items seeing massive increases and some items falling off a cliff. The obvious place to start is at a product level. What SKUs are on an upward trend, and are likely to become or remain your best sellers? Similarly, what items are on a downward trend and not selling so well, and what can you do about them? Thirdly, what items are flatlining? Don’t forget to think too about the seasonality of your items, which might provide the evidence of why the velocity is better or worse than you were expecting.

Ideally, you should be able to analyse your sales velocity by SKU in a filtered and automated fashion, comparing for example the last 7 days’ velocity with the previous 7 days, the previous 28 days, or maybe the same period last year. You can measure the change in velocity as a percentage change from one period to the next. Established products, new products, non-selling products: figuring out which direction they’re moving in can help you with your planning.

So what does an increase or decrease in velocity mean for your business and what should you do? This, of course, could depend on a host of factors particular to your business, your category and the relative uniqueness of your products.

For example, it helps you with your competitive strategy. If your product has a high price point and you see a sudden large increase, this might be because other competitors have run out of stock, leaving you with a virtual monopoly on the SKU in question. If you and your competitors then make a large re-order and you maintain the same price point, your offer may become undesirable until your lower price competitors run out of stock again or you price match the competition.

Supplier velocity

Although the obvious data area to check for velocity is products, there are other areas where keeping an eye on velocity can be important. For example, you can also analyse velocity by supplier. A lot of sellers like to analyse by supplier – at least across our customers this is the case – and it’s a good place to start with new suppliers to see how quickly they’re becoming important suppliers. From there you can drill into your SKU velocity stats to see how their products are performing. Again, you’re looking for the change indications over 2 comparison periods.

You don’t have to stop at suppliers either. Studying your sales velocity across regions, channels, and even within channels is great intel for your business. Perhaps your sales velocity for the same important product is trending up on your Amazon store but flatlining or even trending down on your eBay shop. Knowing this is half the battle. Then you can deal with other half and fix it.

One further thought on this: once you’ve looked at your sales velocity, do look at your refund reports as well. Do commonly returned and refunded items also figure in your improver and disimprover shortlists? You don’t want your fast growing items to develop a margin-threatening issue. Conversely, there may be a causal connection to your declining items.

Stock Velocity

Once you’ve checked the direction of velocity on your sales, you also need to make sure you have adequate stock to service the demand. This is where stock levels and re-order times come into play. We recommend you do your sales velocity analysis in tandem with your stock analysis and stock forecasting. For example, look at your 7-day sales, look at the stock run rate, and check when you need to re-order stock at the current levels of depletion.

This is where automation can help save you time and spare your blushes if there’s a run on one or more of your products. An automated stock forecast report can take into account the speed at which you’re moving stock and calculate your days left at current rates. If you know your re-order times, perhaps you can plug these into your system and get a daily email if any of your items go into the re-ordering ‘red zone’. This will prompt you to re-order, and if you automate even further, perhaps the system can automatically do the re-ordering for you as well.

We’ll cover stock velocity reporting in more detail in a future article.

Checking velocity

So how often should you check your sales and stock velocity? This is a particularly topical question given current events. The more tumultuous or uncertain the times, the more your own ‘checking velocity’ should increase. Most Volo customers are in their reporting and analytics module at least weekly, and sales and stock velocity reports tend to figure heavily in that time.

Finally, we find with data analysis that once you get into the data you’ll want to do more and more analysis, as long as it’s easy for you to extract what you need. It pays therefore, to have a reporting system that all of your key individuals can access and which is flexible enough to avoid the need for exporting and further manual work.

Look out for our next monthly article when we talk about your ‘dead stock’ report.

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