“Of all the important sales measures, velocity can feel like the most complex to understand. The word itself may remind you of high school physics class! But in our normal daily lives, we use velocity every day. When you’re driving a car, how do you tell someone how fast you are going? You use miles (or kilometers) per hour; distance over time.
Just as we can tell how fast our car was going using miles per hour, we can tell how “fast” a product is moving by looking at velocity in sales data. There are 8 different ways to calculate velocity but they all take into account two major measures: sales, usually as Dollars or Units, divided by distribution, usually represented as either Number of Stores Selling, Maximum % All Commodity Volume (Max % ACV), or Total Distribution Points (TDP). Velocities with Store or ACV denominators only consider the amount of retail locations selling, while velocity metrics that include TDP also consider the number of items a brand is selling. Velocity is important because it tells retailers how frequently a product sells. Retailers want to sell through inventory quickly, and some have velocity targets for each category. If a brand doesn’t consistently meet the velocity threshold, the product is at risk of discontinuation.”