Inventory Management KPIs Every Ecommerce Seller Should Track

You’re running a growing ecommerce store and sales are booming. So far so good, right? But suddenly, you run out of stock on your best-selling item. Customers are frustrated because they can’t order what they want, and you’re scrambling to restock while missing out on sales. 

Meanwhile, you ordered too much of another slower-selling product and it’s been sitting in your warehouse for months, costing storage fees and tying up capital.

Sound familiar? 

Inventory management is one of the most challenging aspects of running an ecommerce business, and many sellers struggle with it because they aren’t tracking the right key performance indicators (KPIs). Without these crucial insights, you’ll risk stockouts, excessive carrying costs and inefficient operations. 

The good news? By tracking the right inventory management KPIs, you can make data-driven decisions that reduce costs, improve cash flow and ensure your business operates smoothly. This guide will break down essential inventory KPIs, explain why they matter, show you how to track them and help you use them to optimize your ecommerce operations. 

Why Inventory KPIs Matter for Ecommerce Sellers

Why track inventory KPIs? Because they tell you so much valuable information about the health of your business and without paying attention to them, you risk serious issues. 

Tracking inventory KPIs can help you:

• Prevent stockouts and lost sales, avoiding disappointed customers and missing revenue opportunities. 

• Stop overstocking, so you can reduce excess inventory and free up capital to reinvest elsewhere. 

• Improve cash flow and profitability, helping you optimize your spending and maximize your return on investment.

• Enhance forecasting accuracy by predicting demand more effectively, so you can make smarter purchasing decisions.

• Streamline supply chain and fulfillment efficiency, so you can ensure smooth operations from order placement to delivery.

Inventory management tools, such as Goflow, make tracking these KPIs easier by giving you real-time insights that will help you manage your inventory more effectively.  

Essential Inventory Management KPIs for Ecommerce Sellers

When it comes to tracking inventory management KPIs, they aren’t all created equal. Below are the key inventory KPIs every ecommerce seller should track, along with the formulas for tracking them, why they matter and tips on how to improve them. 

1. Inventory Turnover 

One of the most essential metrics you should be paying attention to as an ecommerce seller is Inventory Turnover. In other words, “How often am I selling through my inventory?”

It’s an important KPI because it measures whether your business has an excessive inventory in comparison to your sales level. If you’re ordering too much too often, you could be tying up cash in unsold products. If you’re not ordering often enough, you risk running out of stock and missing sales. Tracking inventory turnover helps you strike the right balance. 

Definition

Inventory turnover refers to the number of times inventory is sold or used in a specific time period, such as a year. It shows how efficiently you're managing stock relative to your sales.

Higher turnover = fast-moving inventory.
Lower turnover = stock that may be sitting around for too long.

Formula

Inventory Turnover = Cost of Goods Sold (COGS) / Average Inventory

You can calculate this monthly, quarterly, or annually depending on how often you want to review performance.

Example

Lucas sells wireless earbuds through his Shopify store. Last year, his cost of goods sold was $125,000, and his average inventory value during that time was $25,000.

Inventory Turnover = $125,000/$25,000 = 5

This means Lucas sold and replaced his entire inventory five times in that year, a healthy sign he’s managing stock well and keeping up with demand.

Why It Matters

Inventory turnover is a strong indicator of sales efficiency. A high inventory turnover (e.g. 6-10) indicates strong sales and efficient inventory management. A low turnover (e.g. 1-2) may signal overstocking or slow-moving products, tying up capital. 

Be wary, however, of a turnover that is too high, as this might indicate that your company isn’t purchasing enough inventory to support the rate of sales and you may not be realizing as much profit as you could. The ideal inventory turnover rate depends on factors like your industry, product type and business model. 

Generally, a turnover rate of 4-8 times per year is seen as healthy for an ecommerce business, but if you sell high-demand items like fashion, electronics or consumables, turnover rates of 10 or more times per year aren’t unusual because these items typically move much faster. 

2. Inventory-to-Sales Ratio 

Knowing your inventory-to-sales ratio is essential for keeping the right balance of inventory to meet customer demand. It’ll also help you understand how the amount you’ve invested in your inventory compares to your revenue. 

Note: While it might seem similar to the inventory turnover metric above, inventory-to-sales ratio focuses on stock levels compared to revenue, while inventory turnover tracks how quickly inventory is sold. 

Definition

Your inventory-to-sales ratio represents the relationship between the capital you’ve allocated to inventory and your total number of sales during a given period. 

Why it Matters

A higher inventory-to-sales multiple ratio means that your company has more inventory on hand than you need to meet demand (overstock). A lower ratio indicates that you have less inventory than you might need (understock). You want to aim for just the right ratio, which means you’ve been efficient in allocating capital to inventory. 

Formula

There are two ways to calculate Inventory-to-Sales Ratio: by units or by value.

When you calculate this ratio by value, you’ll find out how many dollars of inventory you’re holding for every dollar of sales. If you calculate the ratio by units, you’ll learn how many units of products or inventory you’re holding for every unit sold. 

Inventory-to-Sales Ratio By Value = Average Inventory Cost of Goods Sold Value/Net Revenue Dollar Amount

OR

Inventory-to-Sales Ratio By Unit = Average Inventory Units / Net Sales Units

Example

Elliot sells gourmet coffee. It costs him $5 to produce a 1kg bag, which sells for $16. During the last month, he sold 5,000 bags, generating $80,000 in sales. In the same 30 day period, the business carried an average of 5,000 units of inventory, at a total cost of $25,000. 

Elliot’s inventory-to-sales ratio is $25,000/$80,000 = 0.31

In other words, for every $1 sold, Elliot had 31 cents invested in inventory. This is a bit high, and Elliot may be investing more capital than he needs to and running the risk of dead stock that reduces profit margins. 

But what if Elliot’s business had only carried an average of 2,000 units of inventory during that 30 day period, at a total cost of $10,000?

$10,000/$80,000 = 0.125

This might seem better, but with this low level of inventory Elliot’s gourmet coffee business would likely run out of stock. 

How to Use It

Don’t aim for the lowest inventory-to-sales ratio. Instead, shoot for the healthiest one. For most ecommerce businesses, the ideal inventory-to-sales ratio is between 0.167 and 0.25. 

Inventory-to-sales ratio is best tracked over a long period of time, so you can gain insights and optimize stock levels while taking seasonal variations into consideration. You can use historical sales data to adjust your ordering cycles to keep the ratio healthy, and implement real-time inventory tracking to keep an eye on this metric. 

3. Carrying Cost of Inventory

Inventory carrying costs are often one of the major expenses that an ecommerce business needs to deal with. What’s it really costing you to hold onto all this inventory? 

Buying your products is just the beginning. The longer those products sit unsold, the more they cost your business, sometimes in ways that aren’t immediately obvious. 

Definition

Carrying Cost of Inventory (also known as Holding Cost) refers to the total cost of storing unsold inventory. This includes things like warehousing fees, insurance, depreciation, shrinkage, and the opportunity cost of capital.

In other words, it’s what it costs you to keep products on the shelf before they’re sold.

Formula

Inventory Carry Costs = Inventory Holding Costs / Total Annual Inventory Value x 100

For “Inventory Holding Costs”, you’ll need to calculate all expenses associated with keeping your inventory, including storage, transportation, labor, fees, insurance and more. You’ll also need to add in the cost of theft, damage and expired goods. 

Depending on your product there may be other expenses involved, such as the cost of keeping perishable goods at a certain temperature before shipping. 

Why It Matters

Many ecommerce sellers don’t factor in the costs of carrying inventory and the impact on profitability. If you can’t quantify the cost of keeping stock, you could end up with cash flow problems. 

Remember, when you have a high amount of your resources tied up in inventory you’ll also have an “Opportunity Cost” of the investment possibilities that you’ll need to decline because you don’t have enough free capital. 

Understanding your carrying costs helps you spot hidden drains on profitability. If you’re holding too much inventory, these costs can pile up fast—especially if products are slow-moving, bulky, or have a short shelf life.

Most ecommerce businesses aim to keep carrying costs between 20–30% of total inventory value. Any higher, and your stock could be eating into your margins.

By keeping carrying costs under control, you’ll free up capital, reduce waste, and improve overall efficiency.

Example

Roberta’s ecommerce business sells outdoor clothing. As the weather gets warmer, her warehouse is still full of winter jackets. She wants to understand the cost of having so much inventory in stock while she aims to make room for spring and summer items. 

Roberta calculates that her annual storage costs are $12,000, she has labor costs of $2,500, $3,500 for shipping, $2,000 for insurance and $1,000 for depreciation and shrinkage. In total, Roberta’s inventory carrying costs are $21,000. Her inventory has a cost of goods of $89,000. 

($21,000/$89,000) x 100 = 23.59%

Roberta’s business has a carrying cost of inventory of 23.59%. 

This means Roberta is spending 23.59 cents for every dollar of inventory she holds. If she can reduce this percentage—by storing less, negotiating better warehouse rates, or improving turnover—she’ll increase profitability.

How to Use It

Tracking your carrying cost regularly gives you valuable insight into how lean and efficient your inventory strategy really is. While your inventory carrying cost will fluctuate throughout the year, an ideal annual inventory carrying cost is between 15-25%. 

Goflow helps you monitor these costs by giving you real-time visibility into stock levels and product performance—so you can make smarter decisions about what to buy, how much to hold, and when to move inventory.

Calculating this KPI can help you see opportunities for reducing your carrying costs. For example, you can improve the layout of your warehouse to increase the productivity of your labour and decrease holding costs, or sign long-term agreements with suppliers to get better prices. You could even consider downsizing your warehouse space to decrease the cost of storage. 

4. Sell-Through Rate

Another important KPI to keep an eye on is your Sell-Through Rate. Often calculated on a monthly basis, this metric helps you spot sales trends and understand how different sizes, styles or variations of the same product are competing against each other. By keeping track of it, you’ll get to know your customers better and reduce your risk of overstocking. 

Definition

Your sell-through rate measures the percentage of inventory you sell, relative to the amount of inventory received from manufacturers during the same period. 

Formula

Sell-Through Rate % = (Number of Units Sold/Number of Units Received) x 100

Why It Matters

If your sell-through rate is too low, this suggests that you’ve ordered too much product or you have poor product demand. A high sell-through rate is desirable, because it means that you are selling inventory quickly at full markup, which keeps your gross profit margins as high as possible. 

Example

Anne has an ecommerce shop where she sells dog toys. Last month, her warehouse received 800 units of products from its supplier and she sold 650 units of products during that same month. 

Sell-Through Rate = (580/800) x 100 = 72.5%

A sell-through rate of 72.5% is pretty good! If Anne wants to improve this KPI in the future she can either accelerate sales by adding some promotions and discounts on dog toys. Or, she could order less from her suppliers in the future to create a higher sell-through percentage. 

How to Use It

Your sell-through rate gives you insights into what you need to do next - whether it’s adjusting your marketing strategies or your ordering levels. It’ll also tell you which products are yielding you the best ROI and which are currently in demand. It won’t tell you why your products aren’t selling however, to learn that you’ll need to get feedback from your customers. 

Note: Depending on the type of products you sell, they may be influenced by seasonal trends - which could explain fluctuations in your sell-through rate. 

5. Reorder Point 

One of the big questions you’ll be asking yourself is, “When should I be ordering more products from my suppliers?” Whether you’re a small boutique or a huge online retailer, this is a universal problem. 

Instead of just guessing, having a systematic way to calculate this recurring question can help you lower costs and make sure there’s always enough inventory for your customer’s needs. 

Definition

The Reorder Point (ROP) is the level of inventory at which a business should place a new order. Let your stock dwindle below this level and you’ll run the risk that customers will leave unhappy and orders will be unfulfilled. 

Formula

Reorder Point = (Daily Sales Velocity) x (Lead Times in Days) + Safety Stock. 

Why It Matters

This KPI is important because it allows you to make a fast data-based decision about ordering inventory, eliminating stress, guesswork and operational friction. 

If your reorder point is too high, excess stock will accumulate and this will lead to higher storage costs and a risk that products stored for a long time will become obsolete. If your reorder point is too low, the product may become unavailable during periods of high demand and this can negatively impact your company’s reputation. 

Example

Sara runs an ecommerce store that sells organic skincare products. One of her best-selling items is a Vitamin C Serum, which sells an average of 20 bottles per day. Her supplier takes 10 days to deliver new stock, and Sara always keeps a stock of 50 bottles to avoid stockouts. 

Sarah’s Reorder Point = (20 x 10) + 50 = 250

This means that Sarah should place a new order when her inventory level reaches 250 bottles. This will make sure she always has enough stock to last during the 10-day supplier lead time, plus also keeping a buffer in case of unexpected delays or increased demand. 

How to Use It

Reorder points are vital to keeping your business running smoothly. Goflow can suggest reorder points based on your data, then automate those reorders so you never run out of stock. 

6. Order Fill Rate

Another important aspect of inventory management is how well you’re meeting customer demand with the stock you have on hand. Whether you're fulfilling hundreds of orders a day or just getting started, ensuring customers receive what they ordered, on time and in full, is key to building trust and loyalty.

Instead of relying on gut feelings or anecdotal reports, tracking your Order Fill Rate gives you a clear, data-backed view of how effectively your inventory is serving your customers.

Definition

The Order Fill Rate is the percentage of customer orders that are fulfilled completely from available stock, without any backorders or delays. A high fill rate means you're meeting customer demand efficiently; a low fill rate means you’re leaving money, and customer satisfaction, on the table.

Formula

Order Fill Rate (%) = (Number of Orders Completely Fulfilled / Total Number of Orders) x 100

Why It Matters
This KPI is essential because it directly reflects your ability to meet demand in real time. A high order fill rate means smoother operations, fewer frustrated customers, and fewer costly follow-ups or refunds.

If your fill rate is too low, customers may turn to competitors, trust in your brand can erode, and you could see rising support costs. On the other hand, maintaining an excessively high fill rate at all times might lead to overstocking, increasing storage and holding costs.

Example
Let’s say Marcus runs an ecommerce business that sells home fitness gear. Over the past month, his team received 500 customer orders. Out of those, 425 were fulfilled in full and on time, using inventory available on hand.

Marcus’s Order Fill Rate = (425 / 500) x 100 = 85%

This means that 85% of the time, Marcus’s warehouse was able to completely fulfill customer orders without delay. The remaining 15% were either partially shipped or delayed due to stockouts, revealing opportunities for improvement.

How to Use It
Monitoring your Order Fill Rate over time helps you identify inventory gaps, supplier issues, or demand planning missteps. Goflow tracks this KPI automatically and gives you actionable insights so you can fine-tune purchasing, stocking, and fulfillment processes and deliver a better customer experience.

7. Gross Margin Return on Investment (GMROI)

“Am I actually making money on the inventory I’m buying?” 

Now that’s an important question, and it’s where Gross Margin Return on Investment comes in. Whether you’re moving products fast or sitting on slow sellers, it’s important to know if your inventory is pulling its weight financially.

Instead of just looking at sales volume or profit margins alone, GMROI gives you a clearer picture: for every dollar you invest in inventory, how much gross profit are you making in return?

Definition

Gross Margin Return on Investment (GMROI) measures how efficiently your inventory generates profit. It tells you how much gross margin you earn for every dollar you invest in inventory.

In short: It’s not just about how much you sell, it’s about how smart those sales are.

Formula
GMROI = Gross Margin / Average Inventory Cost

Or, in other words:
GMROI = (Sales – Cost of Goods Sold) / Average Inventory Cost

Why It Matters
GMROI is a powerful KPI because it helps you understand the profitability of your inventory, rather than your business overall. A high GMROI means you’re generating strong returns on what you stock. A low GMROI might mean you're tying up money in products that aren’t pulling their weight.

If your GMROI is below 1, you're losing money on your inventory investment. If it’s above 1, you’re making more than you spend, and who doesn’t want that?

Example
Tanya owns a boutique that sells handmade leather bags. Last quarter, she sold $60,000 worth of bags, which cost her $30,000 to purchase. Her average inventory cost during that time was $20,000.

Tanya’s GMROI = ($60,000 - $30,000) / $20,000 = $30,000 / $20,000 = 1.5

This means that for every $1 Tanya invested in inventory, she earned $1.50 in gross profit. That’s a healthy return and a good sign that her pricing and purchasing strategy is working.

How to Use It
Tracking GMROI helps you see which categories or products are most profitable, so you can double down on the winners and rethink the underperformers. It’s worth tracking GMROI across your catalog, so you can make smarter decisions about inventory, pricing, and product strategy.

8. Lead Time

One of the big questions you’ll be asking yourself is, “How long does it actually take to receive the products I order?” When it comes to keeping inventory flowing and customers happy, timing is everything.

If you’re not keeping a close eye on lead times, you might find yourself out of stock just when demand spikes or over-ordering just to play it safe.

Definition

Lead Time is the amount of time it takes between placing an order with a supplier and receiving the goods. It includes everything from order processing to production to shipping and delivery.

The longer your lead time, the earlier you’ll need to reorder to avoid stockouts. The shorter your lead time, the more agile and responsive your business can be.

Formula
Lead Time = Order Delivery Date – Order Placement Date

(You can track this at the supplier level or even by product for more precise planning.)

Why It Matters
Speeding up your lead time is not just important because your customers expect to get their purchases quickly, but also because many ecommerce marketplaces have strict lead time requirements.

If you’re selling on a platform like Amazon, eBay, or Walmart, meeting these deadlines is essential. Otherwise, it can negatively impact your Late Shipment Rate (LSR) and your Pre-Fulfillment Cancel Rate (PFCR), both of which play a major role in your seller account health.

Beyond marketplace metrics, a faster lead time also means improved customer satisfaction, better cash flow, and a more efficient, resilient supply chain. In short: shorter lead time = smoother operations.

Example
Helena runs a growing online store that sells home office furniture. She placed an order for 200 ergonomic chairs with her supplier on March 1. The chairs arrived at her warehouse on March 18.

Helena’s Lead Time = March 18 – March 1 = 17 days

With this knowledge, Helena can make sure her reorder points reflect a 17-day delivery window. That way, she won’t run out of stock while waiting on the next shipment.

How to Use It
Tracking lead time helps you forecast more accurately, maintain ideal inventory levels, and avoid last-minute scrambles. Goflow automatically suggests the ideal quantity to purchase in order to meet predicted sales, as well as the best vendor to purchase from. 

Want to learn how to shorten your lead time? Check out our post: Reducing Lead Time: How to Speed Up This Important KPI

9. Days Sales of Inventory (DSI)

How long is your inventory sitting on the shelf before it sells? 

Whether you manage a fast-moving product line or seasonal goods, understanding how quickly your inventory turns over is key to making smart purchasing and cash flow decisions.

If you’re holding on to stock for too long, it might be costing you more than you think.

Definition

Days Sales of Inventory (DSI) measures the average number of days it takes for your inventory to be sold. It tells you how long your cash is tied up in unsold products, and it helps you evaluate how efficiently your inventory is moving.

Formula
DSI = (Average Inventory ÷ Cost of Goods Sold) × Number of Days

Typically, this is calculated over a 30-day or 365-day period, depending on your reporting needs.

Why It Matters
A lower DSI means products are selling quickly, freeing up cash and reducing storage costs. A higher DSI might signal that inventory is moving slowly, which could lead to overstock, markdowns, or even obsolescence.

Tracking DSI helps you balance product availability with financial efficiency. It’s a crucial KPI for managing working capital, planning reorders, and improving profitability. Studies have shown that if a company has reduced their Days Sales of Inventory, this is connected to a positive impact on the company’s profit margins.

For ecommerce sellers, a healthy DSI also contributes to better fulfillment speeds, fresher inventory, and improved customer satisfaction.

Example
Emily runs a business selling premium beach towels. Over the past month, she had an average inventory value of $30,000, and her cost of goods sold (COGS) during that time was $60,000.

DSI = ($30,000 ÷ $60,000) × 30 = 15 days

This means it takes Emily an average of 15 days to sell through her inventory. This is a good sign that her stock is moving efficiently.

How to Use It
Monitoring DSI regularly helps you spot slow-moving items, optimize purchasing decisions, and reduce cash tied up in inventory. Goflow automatically calculates DSI using real-time sales and inventory data, giving you the insight you need to act fast and stay lean.

If your DSI is creeping up, it might be time to reassess your product mix, improve marketing efforts, or run a promotion to move older stock.

Stay Data-Driven for Ecommerce Success

The key to success in inventory management is being proactive and staying on top of your KPIs. Regular tracking and adjustments will help you make sure you’re meeting your goals and driving the growth of your business. 

Keep optimizing based on the insights your KPIs provide and you’ll be able to make smart data-driven decisions, maintain control over your inventory and maximize your profitability. 

Start today by scheduling a demo!

Days Inventory Outstanding and Firm Performance: Empirical Investigation From Manufacturers: https://www.researchgate.net/publication/343419621_Days_inventory_outstanding_and_firm_performance_Empirical_investigation_from_manufacturers