If you're in the CPG world, you've probably heard the term "sales velocity" thrown around. But what does it really mean, and why does it matter for your brand? Whether you're selling snacks, beverages, or personal care items, understanding sales velocity is essential.
What Is Sales Velocity?
Sales velocity is one of the most important CPG metrics. It measures how quickly your product is selling in stores. It’s essentially your sales rate, and it's often expressed as units sold per store per week.
The basic formula for calculating sales velocity is:
Sales Velocity = Number of Units Sold / Time Period
Let’s say you're selling protein bars. If Store A sells 10 bars a week and Store B sells 20 bars a week, Store B has a higher sales velocity because your protein bars are moving faster in Store B.
You can also calculate sales velocity across numerous stores, which is useful for comparing regions. Here’s how to calculate it:
Sales Velocity = Number of Units Sold / (Number of Stores x Time Period)
Let’s say you're selling protein bars in 50 stores in Los Angeles and 30 stores in San Diego. In the last four weeks, you sold 10,000 units in L.A. and 7,200 in San Diego. Despite selling more total units in Los Angeles, your sales velocity is higher in San Diego.
Why Does Retail Velocity Matter?
Sales velocity helps you (and retailers) understand how popular your product is where it's currently available.
High sales might look good on paper, but if you're in a ton of stores, you might be missing key opportunities. Similarly, if you’re just starting out, you might not have millions of sales yet. But if your product is selling out everywhere it’s in stock, that’s a good sign (and could impress future retail partners).
In the CPG world, it's not just about being everywhere—it's about selling well where you are, which is why retailers love velocity data. When you're trying to get more shelf space or expand to new stores, a healthy velocity shows retailers that your product is in demand.
You can also use velocity to spot trends and make informed decisions. Maybe your protein bars are flying off the shelves in urban areas but collecting dust in suburbs. That's valuable info for your distribution and marketing strategies.
Factors Influencing Retail Velocity
Understanding what drives sales velocity can help you boost product performance. Here are some key factors that can impact your velocity:
- Product Quality and Appeal
- Pricing Strategy
- Shelf Placement
- Seasonality
- Competition
- Store Traffic
- Product Availability
By keeping an eye on these factors and optimizing where you can, you'll be in a better position to improve your sales velocity and overall performance.
How to Understand and Utilize Retail Velocity
To use velocity data effectively, you need to dive deeper than just one overall number. Velocity varies by product, region, chain, and other factors. Understanding these nuances is key to building a compelling case for buyers and driving growth.
With Daasity, you can easily slice and dice your velocity data—without advanced Excel skills.
Daasity's Velocity Tertile Chart ranks your velocity against the top, middle, and bottom third of your category, helping you quickly identify your velocity hotspots. It’s also easy to drill down by location, product, or retailer.
This enables you to:
- Identify underperforming items that need attention
- Spot products with high velocity but low distribution, which are prime for growth
- Compare across retailers to understand how performance by store or chain
- Create data-driven pitches showing buyers where and why your products excel
For instance, instead of simply saying, "We'd like to expand in the Northwest," you can tell a buyer, "Here are the specific retailers where our product outperforms the category, and here's our average weekly velocity in those stores." This level of detail can be a game-changer, especially for growing brands.
Take Sanzo, for example.
The Asian-inspired sparkling water brand used to struggle with understanding the nuances of their data. Analyzing distribution discrepancies or drops in sales velocity required hours of complex, manual work. With Daasity, they get the info they need in minutes.
By leveraging sales velocity and other insights, Sanzo was able to make data-driven decisions that supported their rapid growth. In just a few years, they saw their annual revenue skyrocket from under $2 million to an estimated $12-15 million.
Leverage Sales Velocity and More with Daasity
At Daasity, we empower CPG brands to unlock the full potential of their data. With Daasity's retail analytics, you can easily identify your top performers, spot expansion opportunities, and make data-driven decisions that impress buyers and boost your bottom line.
Ready to take your CPG strategy to the next level? Your data holds the key to growth—let Daasity help you unlock it. Get in touch today to chat with our team.
