Inventory Turnover Ratio
Calculate how fast you sell and replace inventory.
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The Flow of Goods: Inventory Turnover Explained
Even though dropshippers don't hold physical inventory, you are still managing a 'virtual' inventory from your supplier. The Inventory Turnover Ratio measures how many times you sell through your 'stock' in a given period. It's a key indicator of product popularity and sales efficiency.
Formula: `Cost of Goods Sold / Average Inventory Value`. For dropshippers, 'Average Inventory' can be seen as the value of the products you actively market.
A high turnover ratio indicates strong sales. A low ratio might mean a product is not selling well, and you should consider discontinuing it or changing your marketing strategy. This tool helps you calculate this vital health metric for your products.