What is Inventory Turnover Ratio?

The inventory turnover ratio tells you how many times you sell and replace your inventory within a given period (typically a year). The simplest way to calculate it is:
Inventory Turnover = Cost of Goods Sold (COGS) ÷ Average Inventory.

You can also use net sales instead of COGS depending on your reporting preferences.

Average inventory is what you started with plus what you ended with over the period, divided by two.

Why Retailers Should Care

Cash is freed up faster when inventory turns quickly. The faster you sell through stock, the less capital you have tied up in unsold goods.
Less risk of obsolescence or markdowns. Stock that sits too long can become stale or unappealing—especially in trend-driven retail.
Better use of floor space and labour. Moving inventory efficiently means you aren’t storing as much stock, reducing overhead and making room for fresh items.
Insight into buying and merchandising. A low turnover generally signals you’re overbuying, under-pricing, or selling items that lack appeal. It gives you clear direction for adjustment.

What Is a “Good” Turnover Ratio?

There is no one-size fits all number because retail sectors vary widely. A fast-moving consumables store might turn inventory 10+ times a year, while a specialty goods retailer might operate at 3-4 turns. What matters more is your trend: are you improving over time, and are you tracking your ratio relative to your peers and historical performance?

How to Improve Your Inventory Turnover with Vibe

Here are practical steps you can take using the Vibe system to increase your turnover ratio.

Use real-time data to spot slow-moving stock
Your POS sales and inventory dashboard shows what is not selling. Identify those items quickly and take action—promote them, bundle them, or reduce prices.
Order smaller, more frequent batches
Rather than placing large orders and risk tying up cash, buy in smaller quantities based on actual demand. Smaller batches reduce risk and improve responsiveness.
Optimize pricing and promotions
Use your data to pinpoint items that are underperforming and adjust pricing accordingly. Perhaps you discount early or bundle to stimulate movement.
Prioritise top sellers
Your data will show which products generate the bulk of your revenue. Allocate more resources to these items—keep them in stock, increase visibility, and reorder intelligently.
Align inventory with demand
Use historical and real-time sales data to forecast upcoming trends, peak periods, and adjust your purchasing plan. Inventory matched to demand drives faster turns.

The Bottom Line

Tracking and improving your inventory turnover ratio isn’t a finance exercise—it’s strategic retail control. The faster you move inventory, the more agile your business becomes, the less cash you have tied up, and the more opportunity you have to reinvest in growth. With Vibe, you not only look at this metric—you act on it. Because when your data drives your buying, your business doesn’t wait for change, it creates it.

Sell smarter. Buy smarter. Track smarter. Let’s Vibe.