Learning About Inventory Turnover for Your Ecommerce Business

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In the modern era there are numerous ways to earn a living. The rise of technology has led to an increase in the expansion of the job market and this trend only seems to be continuing as the 21st century has progressed. From jobs in the gig economy to professions in technology-based fields like IT and computer engineering, the rise of web technologies has certainly aided the modern economy. One of the most important additions to the economy in recent years has been ecommerce. 

Ecommerce, more colloquially known as online shopping, has risen immensely in popularity in recent years, and as this industry grows, millions of people around the globe are starting their own ecommerce stores online. If you run your own ecommerce store, you already know the numerous challenges that entrepreneurs face in this industry. One of the most difficult facets of running an ecommerce business is effectively handling your company’s inventory turnover.

Learning about Inventory Turnover  

When running an ecommerce business, you are frequently dealing with a myriad of challenges, and your company’s inventory turnover is one of the most important. Inventory turnover is a proportion that measures the amount of times that inventory is sold in a specific time period. This can be calculated using an inventory turnover formula, which is calculated by dividing the cost of goods sold over average inventory. Your ecommerce store’s inventory turnover it critical because your total turnover is dependent on stock purchasing and sales. 

If your business purchases large amounts of stock, you have to sell more of your product in order to improve your turnover. If you are unable to sell your product (and thus make your turnover low), you will have to incur excessive storage and warehousing costs. This is obviously not what you want, so in order to be successful, you need to keep your inventory turnover ratio high and ensure that your business does not overload on stock. 

How Inventory Turnover Can Increase Profitability

Learning about inventory turnover is essential to having a successful business, and understanding this aspect of ecommerce will definitely allow you to increase your company’s profitability. By increasing your company’s inventory turnover rate, you will have faster turnover, which will reduce holding costs. Holding onto stock requires you to continually pay for rent, utilities, insurance, and other maintenance costs on products which you are not selling, so if you lower your stock purchases or increase your sales, your turnover rate will increase and your costs will decrease. As well as lowering costs, inventory that is turned over quickly will improve your responsiveness to customer demands, which will indubitably improve your company’s sales.

Final Thoughts

Ecommerce is a thriving business, and all throughout the globe people are running their own ecommerce stores to make an excellent living. When running your own ecommerce business, it is important to understand the importance of inventory turnover and how it can affect your company. Learning about inventory turnover will certainly aid your business and comprehending how to effectively manage it can increase your business’ sales.