Inventory Turnover

It tells you how fast product moves through your store — high turnover means cash is not stuck on shelves.

Formal definition

Inventory turnover equals cost of goods sold divided by average inventory value, measuring how many times stock is sold and replaced in a period.

Why it matters

Slow turnover ties up cash and leads to markdowns; most healthy retailers turn inventory 4–6 times per year depending on category.

Where you see it

• Retail buyer meetings
• Annual store audits
• Inventory financing applications
• Merchandising textbooks
• POS analytics dashboards

Worked example

1. COGS: $300,000.
2. Average inventory: $60,000.
3. Turnover = $300,000 ÷ $60,000 = 5×.
4. Interpretation: Inventory fully cycles about five times per year.

How Business metrics calculates it

COGS ÷ Average inventory value.

The range we use for status labels

On Business metrics, the status band for this KPI is roughly 4 to 6. Higher values are generally healthier in this band. Your niche can sit outside it honestly — the label is a prompt to read the coaching, not a certificate.

Where people fool themselves

Turns using retail value in the inventory denominator look fantastic. Cost is the usual COGS match. Mixing them is how a shop “turns 12 times” on paper.

Run it on your own numbers: the Retail & E-Commerce calculator.