Inventory turnover measures how many times a business sells through and replenishes its stock within a given period. Common synonyms include: stock turn and stock velocity.
Why Inventory Turnover Matters
Inventory turnover shows how efficiently a business converts stock into sales. It helps teams understand:
- How quickly products move through the business
- Whether buying decisions matched real demand
- How much cash is tied up in inventory
- Where assortment or forecasting may need adjustment
- How healthy the balance is between availability and efficiency
High turnover suggests strong demand and lean operations. Low turnover signals excess stock, slow movers, or misaligned buying.
How Inventory Turnover Is Calculated
A common formula is:
Inventory Turnover = Cost of Goods Sold/Average Stock Holding
Example: If COGS is £500,000 and average stock holding is £100,000, turnover is 5, meaning the business sold through its inventory five times in the period.
Common Use Cases
- Buying and merchandising: adjusting order volumes and timing
- Assortment optimisation: identifying fast vs slow movers
- Cash‑flow management: reducing capital tied up in stock
- Markdown planning: spotting categories at risk of ageing
- Operational efficiency: improving replenishment cycles
- Forecasting: validating demand assumptions
Related Terms
- Sell‑Through
- Cover
- Replenishment
- Demand
- Stock Ageing
What Inventory Turnover Really Tells Us
Inventory turnover is one of those metrics that quietly reveals the rhythm of a retail business. It shows whether products are flowing through the system at a pace that matches how customers actually shop, not how the business hoped they would.
A high turnover rate often reflects clarity: the right product, at the right depth, at the right moment. A low turnover rate often reflects friction: hesitation from customers, misjudged demand, or stock that has lost relevance. In both cases, turnover exposes the gap between intention and reality.
It also highlights the tempo of decision‑making. Fast‑moving stock demands agility. Quick replenishment, responsive forecasting, and confident trading. Slow‑moving stock demands reflection, what story didn’t land, what assumptions were off, what signals were missed?
Beneath all of that, inventory turnover is about momentum. It shows whether the business is moving with customers or lagging behind them. When teams use turnover as a lens rather than a scorecard, they start to see patterns: emerging demand, fading trends, and the subtle shifts in what people value.
That’s the heart of modern merchandising, not just counting how often stock moves. Understanding what its movement says about the people you serve.
