Inventory turnover expresses how many times per period stock is sold and replenished. It is calculated as the ratio of the cost of goods sold to the average value of inventory. It is one of the most important indicators for an e-shop, because it shows how much capital is tied up in goods that are not selling. Low turnover means dead stock, which, besides tying up money, consumes storage capacity and loses value over time. It is worth tracking by category and by individual item, not for the whole warehouse, because an average also hides extreme cases. It can be improved through more accurate ordering based on actual sales, targeted promotions on slow-turning goods, and a decision to stop holding certain items and order them only on demand.
See also: Inventory tracking and reservations, Seasonal stock, Margin and discount promotions.
