Sell-in vs sell-through is the difference between what a supplier sells to its retailers and what those retailers sell to their own customers. Sell-in counts deliveries into the shops; sell-through counts goods leaving them. The gap is stock sitting on the shops' shelves, and for a supplier who sells on credit it is money not yet safe.
This guide is for distributors, wholesalers and makers who sell through shops. It works the gap for one distributor and five shops in Kenyan shillings. It then shows when the gap warns of late payment, and when sell-in isn't revenue yet.
What is the difference between sell-in and sell-through?
Sell-in is a sale from a supplier to a retailer; sell-through is the retailer's sale of the same goods to the end customer. The first is a sale between businesses, the second a sale to the public.
| Question | Sell-in | Sell-through |
|---|---|---|
| Who buys | The retailer | The end customer |
| Who sells | The maker, importer or distributor | The retailer |
| Where it is recorded | The supplier's invoices | The retailer's till |
| What it measures | How much stock went into the shops | How much stock customers wanted |
| When the supplier sees it | The day it invoices | When the retailer shares its figures, or a rep counts the shelf |
| Who carries unsold stock | The supplier, if the shop may return it | The retailer, if it may not |
| Who books the revenue | The supplier | The retailer |
| Used for | Production plans, sales targets and credit | Reorders, markdowns and the next order |
The words shift with your place in the chain. For a maker who sells to a distributor, sell-in is the sale to the distributor, and sell-through can mean the distributor's sales to shops. Sell-out is the last step, the shop's sale to the shopper, and many brands use it where retailers say sell-through.
A retailer measures its own sell-through rate as units sold ÷ units received × 100, for one delivery or season. This page takes the supplier's side.
The channel stock equation: how the two connect
Sell-in minus sell-through is the change in the stock your retailers hold. Over any period, a shop's closing stock = opening stock + sell-in − sell-through.
Turn it round, and a supplier can work out sell-through without seeing the till: sell-through = opening stock + sell-in − closing stock. All it needs is a shelf count at each visit and its own delivery notes in between.
Weeks of cover turns the shelf count into time: closing stock ÷ weekly sell-through. It says how long the shop can sell before it needs another delivery, and how long before it can pay for the last one.
A worked example: a cooking oil distributor and five Nairobi shops
For example, a distributor in Nairobi, Kenya, sells cartons of twelve 1-litre bottles of cooking oil to five shops. It charges KES 3,600 a carton, on 30 days' credit, and its rep counts each shop's cartons at the first visit of each month. These are illustrative figures, not a real business's.
| Shop | Opening stock | Sell-in | Closing stock | Sell-through | Sell-through rate | Weeks of cover |
|---|---|---|---|---|---|---|
| Shop 1 | 10 | 40 | 10 | 40 | 80% | 1 |
| Shop 2 | 8 | 30 | 6 | 32 | 84.2% | Under 1 |
| Shop 3 | 12 | 40 | 28 | 24 | 46.2% | 4.7 |
| Shop 4 | 5 | 20 | 5 | 20 | 80% | 1 |
| Shop 5 | 15 | 50 | 41 | 24 | 36.9% | 6.8 |
| All five | 50 | 180 | 90 | 140 | 60.9% | 2.6 |
The distributor's sell-in was 180 cartons, KES 648,000, its best month on paper. The shops sold 140 of them on, worth KES 504,000 at the distributor's price.
The other 40 cartons, KES 144,000, now sit in the shops, whose stock grew from 50 to 90 cartons. Shop 2 sold more than it received, so its shelf is nearly empty. Shops 3 and 5 took half the month's sell-in and sold barely half of what they took.
What the gap costs a supplier
A gap that keeps growing is a loan to your customers, not a sale. A shop can only pay you from what it has sold on.
Shop 5 owes KES 180,000 for this month's 50 cartons, due in 30 days. It sold 24 cartons in the month and holds 41, nearly seven weeks of stock. Unless its sales jump, it will pay late or ask to send goods back.
A working rule follows from it: when a shop's weeks of cover exceed your credit period in weeks, expect late payment. Thirty days is about 4.3 weeks, so Shop 5 at 6.8 weeks fails the test, and Shop 3 at 4.7 weeks only just fails it.
Pushing stock in ahead of demand also borrows from next month. Shops 3 and 5 need no oil for a month or more, so next month's sell-in will fall whatever the rep does.
At its worst, sell-in pushed ahead of demand becomes a fraud charge. The US Securities and Exchange Commission said Bristol-Myers Squibb had been "stuffing its distribution channels with excess inventory near the end of every quarter".
It charged that $1.5 billion of revenue from sales to its two biggest wholesalers was improperly recognised. The company agreed in 2004 to pay $150 million to settle.
When sell-in is not revenue yet: sale or return, and consignment
If shops may send unsold goods back, part of your sell-in is not revenue yet. IFRS 15, the revenue standard of full IFRS, sets the rules for both cases below.
A sale with a right of return counts as revenue only for the goods you expect the shop to keep. For the goods you expect back, you record a refund liability, and an asset for the stock you will recover (paragraphs B20 to B27).
Take a bookshop. A publisher sells it 500 copies at KES 1,000 each, KES 500,000, and the shop may return what it can't sell. If the publisher expects 100 copies back, it records KES 400,000 of revenue and a KES 100,000 refund liability, not KES 500,000 of sales.
If the shop sells 400 copies and returns 100, the estimate was right and nothing changes. If it returns 150, the publisher's revenue falls by another KES 50,000.
Consignment goes further: goods a dealer sells on your behalf are not revenue until the dealer sells them (paragraphs B77 and B78). The signs are that you control the goods until a set event, can call them back, and aren't paid unless they sell. Consignment inventory covers the arrangement in full.
Businesses that report under IFRS for SMEs follow its own revenue section, so ask your accountant which rules apply to you.
What to do when sell-in and sell-through drift apart
Read the gap shop by shop, against your credit terms. Each pattern below calls for a different visit from the rep.
| What you see | What it means | What to do |
|---|---|---|
| Sell-through above sell-in | The shop's stock is falling | Offer a delivery now, before the shelf empties |
| Sell-in close to sell-through | The shop's stock is steady | Keep the delivery rhythm |
| Sell-in above sell-through, cover within your credit terms | Stock is building, but the shop can pay | Check it again at the next count |
| Sell-in above sell-through, cover beyond your credit terms | The shop is overstocked, and payment will be late | Skip the next delivery, and help the shop sell what it holds |
In the example, Shop 2 needs a delivery this week. Shops 3 and 5 need no oil next month, so the rep's time is better spent on their display and price.
Set sales targets on sell-through or cash collected, not on sell-in. A target on deliveries rewards the rep who fills Shop 5's store room, and the distributor pays for it on the due date.
Shops that hold too little are the other risk, since an empty shelf sells nothing for anyone. Reorder points set from each shop's weekly sales help retailers avoid overstock and empty shelves alike. Suppliers who manage their customers' stock for them do it through vendor managed inventory.
Which matters more, sell-in or sell-through?
Sell-through matters more, because it is the only one that shows demand. Sell-in shows what the shops bought, which can run ahead of what shoppers want for months.
A supplier still needs sell-in: it is the invoice, the stock that left the warehouse and the credit given. Track both, and read them together through the stock in the shops.
The route to market decides how much you can see. A dealer or a distributor between you and the shops adds one more pile of stock to count.
How to track sell-in and sell-through in ArmPOS
ArmPOS records a distributor's sell-in as sales to its shop customers, with their credit. Sell-through comes from the shops' own figures or the rep's counts.
For a distributor or wholesaler
- Add each shop as a customer. Set its Credit Limit: at the POS, ArmPOS refuses a sale that would take the shop's balance above it. See Customers.
- Record each delivery as a sale. In Sales › Add sale, pick the shop and the warehouse the goods leave from, and switch each line to Wholesale Price. Status completed takes the stock out, and Payment Status Pending leaves the amount on the shop's account: Add a sale without the POS.
- Read sell-in by shop. Reports › Customers Report gives each shop's sales, what it paid and its Total Sale Due: Customer and supplier reports.
- Read sell-in by product. Reports › Product sales report lists each product line of each sale, with the customer. Search a product's name to see every shop that bought it: Sales reports.
- Take back what a shop returns. On a sale-or-return deal, open the sale in Sales › All Sales and click Sell Return. Status Received puts the goods back in stock: Returns and refunds.
- Work out sell-through. Export the Product sales report with EXCEL, add the rep's shelf counts, and apply opening stock + sell-in − closing stock for each shop.
For a retailer
Your own sell-through comes from two reports: the Product purchases report for what came in, and the Product sales report for what went out. Sharing that export gives your supplier the sell-through it can't see.
Goods you send back under a sale-or-return deal go through a purchase return. It takes them out of your stock and records what the supplier owes you: Return goods to a supplier.
Frequently asked questions
What is sell-in in sales?
Sell-in is what a supplier sells and delivers to its retailers or distributors, counted from its own invoices. It shows stock going into the shops, not demand from shoppers.
What is the difference between sell-through and sell-out?
Both describe the retailer's sales to shoppers. Retailers tend to say sell-through and measure it as a rate; brands often call the same sales sell-out.
What does it mean when sell-in is higher than sell-through?
Stock is building up in the shops. Before a busy season that can be planned; month after month, it means the shops will order less and pay later.
How can a supplier get sell-through figures?
Ask the shops for their product sales figures, or count their shelves at each visit. Then sell-through = opening stock + sell-in − closing stock.
Is sell-in counted as revenue?
Yes, once the shop controls the goods and can't send them back. Under IFRS 15, goods it may return count only in part, and consignment stock counts only when the dealer sells it.
At your next round of visits, count your five biggest customers' shelves and set their weeks of cover beside your credit terms. Create a free ArmPOS account to record deliveries, credit and returns, shop by shop.
