Inventory Management: Stay On Top of the Metrics

Now Add Margin and Sell Ratio

In Figure 3 (below), there’s an added margin (product initial margin) and sell ratio. Sell ratio — also called “ad to sales” ratio — is the cost of the allocated space or catalog costs shown as a percentage of the demand generated. The industry sell ratio generally is in the upper 20 percent to low 30 percent range. Should sell ratio begin to approach the upper 30 percent range, it becomes almost impossible for a cataloger to stay profitable. The last column in Figure 3 simply is the margin available to cover all remaining operational costs after selling costs.