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Plan what stock you buy for the year ahead based on which way your inventory turnover ratio is trending.Compare yourself to industry averages to see if you are falling behind or leading the pack.Make YOY comparisons to see if your stock is still in demand.You can use your inventory turnover ratio to… So, before we get into calculating our inventory turnover ratio, it’s important to keep in mind why you are doing it.Īs with any data you gather for your eCommerce business, it will be worthless unless you have goals and actions to deliver off the back of it. What Can You Learn From Your Inventory Turnover Ratio?
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Turnover, more specifically, measures the rate at which your investments are translating into revenue. While the two terms are often used in the same way, revenue refers to the total income you earn from your sales. Remember, there is a difference between turnover and revenue. Similar to stock rotation, an inventory turnover calculation lets you know how fast your items are selling – which is essential for ensuring that your eCommerce business is generating profit efficiently. Put simply, your inventory turnover is the number of times your stock is bought and sold in any chosen period of time. So, what exactly is inventory turnover? How do you work it out and what should you do about it? Read our guide to find out… What is Inventory Turnover? One of the most important metrics used for this is the inventory turnover ratio.īy tracking it properly, your inventory turnover calculations can reveal the driving forces behind your revenue, offering valuable insights into where your profit is falling short. Every successful eCommerce business is built on a thorough understanding of what works, what doesn’t and how to put this into action.