The Month-Seven Test: How to Tell Whether Your Distributor Is Actually Selling

A distribution business can look healthy for a surprisingly long time while nothing is being sold.

Shipments go out. Invoices get paid. The revenue line in your regional P&L grows. Then somewhere in the second year the reorders stop, and you discover the partner has been sitting on most of what you shipped since launch. Nobody lied. You were just reading the wrong number.

Sell-in, sell-out, sell-through

Sell-in

Units you shipped and invoiced to the distributor.

Yours. It appears in your revenue.

Sell-out

Units the distributor sold to retailers or end consumers.

Theirs. It appears in their revenue.

Sell-through

Sell-out as a percentage of what was available to sell.

The health metric — and the one nobody volunteers.

Your P&L is built on sell-in. The business is built on sell-out. In a domestic business the gap between them is a few weeks. In cross-border distribution the gap can be most of a year, and the whole risk of the relationship lives in that gap.

Why the standard benchmark misleads you

Look up sell-through benchmarks and you will find something like this: a monthly sell-through rate of 80% or higher is excellent, and anything below 40% signals a problem — calculated as units sold in the period divided by units on hand at the start of it (inFlow Inventory).

That benchmark is built for a retailer buying into a season. It is close to useless for judging a new distribution partner in a new market, for one structural reason: a cross-border distributor cannot run at 80% monthly sell-through without going out of stock permanently. Their job requires holding buffer inventory a retailer never holds.

Applying a retail benchmark to a distributor produces one of two wrong answers. Either you panic in month three at a number that was never achievable, or you accept "it's still early" with no idea when early ends.

Where the honest read actually starts

A distributor entering a new market with a new brand needs to hold roughly three months of safety stock. That is not padding; it is what protects against a single delayed shipment killing the listing ranking they spent the launch budget building.

On top of that sits the replenishment cycle, and this is where brand-side planning is most often wrong — because people plan on sailing time. Sailing time is the smaller half. Maersk's own transit guidance puts the US-to-Singapore lane at 15–25 days port to port but 27–46 days door to door, attributing the difference to customs clearance and loading/unloading (Maersk). On short intra-Asia lanes the sailing leg shrinks but the clearance and inbound legs do not, so door-to-door converges on roughly a month almost regardless of how close the two ports are. For cosmetics and personal care, add product registration and import-permit checks, and a month is optimistic rather than conservative.

HOW MONTH SEVEN IS DERIVED

3

months
safety stock

+1

month freight
and clearance

+3

months of
actual trading

= 7

first honest
read

Three months of buffer plus roughly one month of replenishment lead time means about four months pass before the first shipment has genuinely had a chance to move. Anything measured before that is measuring your own shipping schedule, not their selling. Add a quarter of actual trading on top, and you arrive at the rule I use.

By month seven, cumulative sell-through should be at least 40%. If it is not, the problem is real and it is not going to fix itself.

This is my own working benchmark, not an industry standard — there isn't one. But it is derived rather than guessed, and the derivation is the part worth copying even if you land on a different number for your category.

What you should see, month by month

Month	What you should see	What it means	Action if it's off
1–2	Landing, registration cleared, listings live	Nothing about demand yet	If listings aren't live, this is an execution problem, not a demand one — escalate now, it is the cheapest month to do it
3–4	First sell-out data; single-digit to low-teens cumulative sell-through	Buffer stock is still being absorbed	Do not read demand from this. Read data quality: can they give you sell-out at all?
5–6	Cumulative sell-through climbing into the 20s–30s; a reorder conversation starting	The launch push is converting or it isn't	No reorder conversation by month six is the leading indicator. It arrives before the bad number does
7	Cumulative sell-through ≥ 40%	First honest read on demand	Below 40%: stop the next shipment and diagnose before you ship more
8–12	Reorder cadence stabilising; sell-through trending up quarter on quarter	The business is real	Flat sell-through with a rising SKU count means they are solving a range problem that is actually a demand problem

The most useful line in that table is the month-six one. The reorder conversation is a leading indicator; the sell-through number is a lagging one. A partner who is selling starts talking about the next shipment before you ask. A partner who is not gets quiet, and the quiet arrives a full month before the data does.

Make the reporting a contract term, not a favour

You cannot run this test if you cannot get the data, and you will not get the data by asking nicely in month five. Put it in the distribution agreement as a numbered clause with a monthly delivery date.

1. Sell-out by SKU, by month
Not quarterly, not aggregated. Aggregated data hides the SKU carrying everything.

2. Closing inventory by SKU
At the distributor, split between warehouse and in-transit. Without this, sell-through cannot be computed at all.

3. Channel split of sell-out
Online platform / offline retail / wholesale. A partner selling only to sub-wholesalers has moved your inventory without building your brand.

4. Retail price actually realised
Average selling price after promotions, not list price. This is where price architecture erodes first.

5. A named person and a fixed date
Reporting obligations with no named owner are reliably the first thing to lapse.

If a candidate partner resists these five during negotiation, that resistance is itself the finding. Every distributor with a functioning operation already produces this data for themselves. Refusal is not a systems limitation; it is a preference for you not to have it. This belongs alongside the rest of the pre-signature work — see How to Evaluate a Distributor Before You Sign.

When the number is bad

The reflex is to reach for the contract. That is usually the wrong first move, because "sell-through below target" is an outcome, not a diagnosis. Three very different problems produce the identical number.

1

Price

The product landed at a shelf price the market won't pay. Fixable, and fastest to test.

2

Coverage

The product is fine but is in too few doors or listings to be found. Fixable, costs money — and it is usually a marketing-funding question before it is a partner question: Marketing Money in a Distribution Agreement.

3

Demand

The market does not want this proposition at this price. Not fixable with the same partner, the same range, or the same year.

Distinguish them before you escalate. The remedy for the first two is a joint plan; the remedy for the third is an exit — and starting with the exit when the answer was price is how brands burn a partner they will need again.

The short version

01  Your revenue line runs on sell-in. The business runs on sell-out. In cross-border distribution those two can diverge for most of a year.

02  The published retail benchmark — 80% monthly good, under 40% bad — does not apply to a distributor who must hold buffer stock.

03  Roughly three months of safety stock plus roughly one month of freight and clearance means nothing meaningful can be measured before month four.

04  Month seven, 40% cumulative sell-through is my working test. Derive your own if your category differs — but derive it, don't guess it.

05  The absence of a reorder conversation by month six tells you the answer a month before the data does.

06  Put the five reporting lines in the agreement. A partner who won't report is telling you something more useful than the report would.

Sources

• inFlow Inventory — What is sell-through rate
• Linnworks — Sell-in vs sell-through
• Maersk — Quick guide to ocean freight transit times

Cases are drawn from real appointments with countries, companies, brands, individuals and proprietary figures removed; only the structure remains. This is not legal advice.