Introduction:

Inventory turnover is like the heartbeat of your ecommerce business, indicating how quickly you’re selling and replenishing stock. Monitoring this rate helps in understanding sales performance and inventory efficiency.

Definition:

Inventory turnover measures how often your inventory is sold and replaced over a specific period. It’s calculated by dividing the cost of goods sold by the average inventory value.

How It Works / Examples:

If your online store sells 500 units of a product annually and maintains an average inventory of 100 units, your inventory turnover ratio is 5. This means you sell and restock that product five times a year.

Why It Matters:

A higher inventory turnover indicates strong sales and effective inventory management, reducing holding costs and the risk of obsolescence. Conversely, a lower turnover may suggest overstocking or weak sales, prompting a need to reassess purchasing and marketing strategies.

Additional Resources:

Learn more about Inventory Turnover.