Inventory turnover: the one number that shows where your cash is stuck

Most ecommerce brands track sales, ad spend and margin every week. Far fewer track how fast stock actually leaves the warehouse. That number is inventory turnover, and it tells you how long your cash sits on a shelf before it comes back.

How to calculate it

Divide the cost of goods sold over a period by your average inventory value over the same period. Do it by SKU, not for the whole catalog: a blended figure hides the products that are dragging it down.

Turnover = COGS ÷ average inventory value

What a healthy range looks like

It depends on category, lead time and how much of your stock sits in Amazon FBA versus your own warehouse. Fast-moving consumables turn several times a year; bulky or seasonal items turn far less. Compare each SKU against its own history and its own lead time before you compare it with anyone else.

Three fixes when turnover is too low

1. Cut reorder quantities on slow SKUs until they match real demand, not the supplier's minimum.
2. Clear dead stock with a bundle or a discount before storage fees do the same job more expensively.
3. Rebuild the forecast from sell-through by channel instead of last year's total.

Turnover is a starting point, not a verdict. It shows you where to look; the inventory audit shows you why.