Learn · Inventory
Inventory turnover measures how many times you sell through your average stock in a year: COGS ÷ average inventory value. Healthy ecommerce brands typically run 4–8. Low turnover means cash frozen in product; the levers to raise it are better forecasting, tighter reorders, and faster markdowns.
Turnover = COGS ÷ average inventory value. A store with $600k annual COGS holding $100k of stock on average turns 6× — selling through roughly every 61 days (365 ÷ 6). Use cost values on both sides, not retail prices, and average the inventory over the period (start + end ÷ 2 at minimum) so a big December stock-up doesn't distort it.
Inventory is usually a store's single largest use of cash. Two stores with identical revenue and margin can have wildly different bank balances purely on turnover: at 3× vs 6×, the slower store permanently holds twice the cash in stock. Every point of turnover you gain is working capital released — often the cheapest financing a brand will ever get.
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Inventory Turnover = Cost of Goods Sold ÷ Average Inventory Value (both over the same period, usually a year). A turnover of 6 means you sell through your average stock level six times a year — roughly every two months.
Most healthy ecommerce brands land between 4 and 8 annually (selling through every 6–13 weeks). Fashion and consumables run higher; durable or high-ticket goods run lower. The trend matters more than the number: falling turnover means cash is silting up in stock.
Days of Inventory (DSI) = 365 ÷ turnover. Turnover of 6 ⇒ about 61 days of stock on hand. Days are often the more actionable framing for reordering decisions.
Forecast per product so you buy closer to real demand, reorder smaller and more often where lead times allow, mark down dead stock quickly, and cut the long tail that ties up cash. The stockout risk of running leaner is exactly what safety stock and demand sensing manage.
No — past a point, high turnover means you're under-stocked and losing sales to stockouts, or paying rush freight to keep up. The goal is the highest turnover you can sustain at your target service level, not the maximum possible number.
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