TL;DR
- Inventory turnover ratio equals COGS divided by average inventory. Use COGS, not revenue. Revenue inflates the ratio because it includes markup you never paid to acquire.
- Good ecommerce turnover is 6 to 12 turns per year for most categories. Food and beverage hits 12 to 15. Fashion and apparel runs 4 to 7. Home goods and furniture averages 3 to 5.
- A $10M brand at 50% gross margin can free $1.23M in working capital by cutting days sales of inventory from 180 to 90 days, per 2026 working capital research.
- Days sales of inventory should not exceed two times supplier lead time. If your supplier takes 45 days, your DSI should be under 90. Anything above that is excess buffer you are financing.
- Seven ways to improve: shorten lead times, reduce SKU count, forecast demand, ABC analysis, promote slow stock, connect sales and marketing data, and review safety stock quarterly.
Inventory turnover is the number of times a business sells and replaces its stock in a given period. For ecommerce operators, it is the single metric that tells you whether your working capital is productive or trapped.
Most DTC brands under $20M revenue do not calculate inventory turnover at all. They know their monthly revenue. They know their stock level from the Shopify dashboard. They do not know how many times per year that stock actually turns into cash. That gap is where working capital disappears.
A brand with $2M in inventory that turns twice per year has $1M in capital sitting idle at any given moment. The same brand at 6 turns frees $667,000 for marketing, product development, or debt reduction. The difference is not revenue. It is inventory discipline.
This post covers the exact formula, benchmarks by vertical and revenue stage, and the seven methods operators use to improve turns without stockouts. If you are building a complete unit economics picture, inventory turnover connects directly to COGS tracking, contribution margin, and D2C unit economics.