What is it?
Velocity is a measure of how quickly a product sells once it is available on shelf. Think of it like driving a car: just as speed is measured in miles per hour (distance over time), velocity in sales shows how “fast” a product is moving through stores.
At its core, Velocity = Sales ÷ Distribution
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Sales are usually measured in Dollars or Units.
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Distribution can be expressed as:
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Number of Stores Selling – how many retail locations carry the product.
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Maximum % ACV (All Commodity Volume) – percent of total market volume where the product is sold.
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Total Distribution Points (TDP) – accounts for both the number of stores and the number of SKUs a brand sells.
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Key distinction: Store Count and ACV focus only on where a product is sold, while TDP also reflects the breadth of items offered.
Why is it important?
What are some examples?
Let’s look at an example comparing two products. They were in the same stores and the data is from the same time period, and had somewhat similar sales. Product A is value-oriented, and Product B is premium, and has a slight edge in dollar sales. When ranked on unit velocity, the value brand wins; when ranked on dollar velocity, the premium brand comes out on top.
| Metric | Value Brand | Premium Brand |
|---|---|---|
| Total Sales ($) | $200,000 | $240,000 |
| Total Units Sold | 100,000 | 60,000 |
| Avg. Stores Selling | 500 | 500 |
| Time Period | 4 weeks | 4 weeks |
| $ per Store per Week Selling | $100 | $120 |
| Units per Store per Week Selling | 50 | 30 |
| Avg. Price per Unit | $2.00 | $4.00 |