What is Sales Volume?
Sales volume is the number of units a company sold during a reporting period.
Sales Volume vs. Revenue
Sales volume is reported in terms of units sold, while revenue is reported in terms of dollar amounts.
For example, if Company ABC generated $1,000,000 in sales in 2021 and the total quantity sold was 1000. Then revenue of this company was $1,000,000, while sales volume was 1000.
Why is Volume Important in Sales?
It is important because it can show if an increase in revenue was due to increase in units sold, or due to an increase in price. Such a distinction can show if the business is actually growing or contracting. This cannot be judged from the revenue metric alone.
This is usually monitored by investors when retail companies raise their prices and the move is followed by an increase in revenue. They want to see if the growth was due to the price increase alone, so they look at the quantity sold.
It can also help while making pricing decisions and calculating price elasticity of demand, by measuring the number of units sold at each price point, to see if the increase in price is affecting demand, and whether or not the company has pricing power.
Tracking this metric also helps the company while planning for clearance of its excess inventory, as it can adjust its markdown levels to the right level needed to clear the excess quantity.
Also, when it’s tracked at product-level, it helps the company identify its best selling products in term of units sold, and align their display on the shop floor accordingly.
Factors That Affect Sales Volume
- Unit price
- Discounts & Promotions
- Economic conditions
- Substitutes and competitors in the market
- Visual display
- Effectiveness of the sales team
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