Question 1

What is a good inventory turnover ratio?

Accepted Answer

A 'good' inventory turnover ratio varies by industry. For retail, a ratio between 4 and 6 is often considered healthy. A low ratio may indicate overstocking or poor sales, while a very high ratio might suggest under-stocking and potential for lost sales.

Question 2

How is inventory turnover different from sell-through rate?

Accepted Answer

Inventory turnover provides a big-picture view of how efficiently you're managing all your inventory over a period (usually a year). Sell-through rate is more specific, typically measured for a particular product or category over a shorter period (like a month) to gauge its sales performance against the initial stock.

Question 3

Why should I track my sell-through rate?

Accepted Answer

Tracking sell-through rate helps you understand customer demand for specific items. A high sell-through rate indicates a popular product that you should keep in stock. A low rate can signal that a product is overpriced, poorly marketed, or not what your customers want, helping you make decisions about discounting or discontinuing it.

Question 4

How can I improve a low inventory turnover rate?

Accepted Answer

To improve a low turnover rate, focus on increasing sales or reducing inventory. Strategies include: targeted marketing campaigns, sales promotions, bundling products, liquidating obsolete stock, and optimizing your purchasing to better match sales velocity.

Question 5

Can my inventory turnover be too high?

Accepted Answer

Yes. While a high turnover is generally good, an excessively high ratio could mean you're not carrying enough inventory (under-stocking). This can lead to stockouts, missed sales opportunities, and an inability to meet customer demand, potentially damaging customer loyalty.

Inventory Turnover & Sell-Through Rate

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Understanding Inventory Metrics

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