Top inventory management metrics that you should monitor in 2025

The product you thought was a bestseller? It might be quietly draining your profits.

And the one you almost stopped stocking? It’s probably flying off the shelves.

Inventory management in 2025 is about understanding what your numbers are truly revealing.

Every item sitting too long, every surprise stockout, every return, it all ties back to one thing: metrics.

The most successful eCommerce brands aren’t managing inventory by gut feel anymore.

They’re tracking key performance indicators (KPIs) that help them stay lean, avoid stock issues, and maximize cash flow, whether they’re selling on Shopify, Amazon, or both.

In this guide, we’ll break down the most important inventory metrics you should be watching, what they mean, how to calculate them, and most importantly, how to use them to grow a more profitable and predictable business.

Why Inventory Metrics Matter in 2025

With supply chains evolving, customer expectations rising, and multi-channel selling becoming the norm, tracking key inventory metrics has shifted from “nice-to-have” to “non-negotiable.”

Here’s why:

• Customer expectations are higher than ever: Shoppers want accurate stock levels and fast delivery. A single stockout or delay can send them straight to a competitor.
• Cash flow is under pressure: With rising costs and unpredictable demand, holding the right amount of inventory is critical. You can’t afford to overstock or tie up capital in slow-moving products.
• You’re probably selling across multiple channels: Shopify, Amazon, retail, maybe even Etsy and each platform needs real-time inventory visibility to avoid overselling.
• Data-driven decisions outperform guesswork: When you monitor metrics like sell-through rate, inventory turnover, or forecast accuracy, you’re able to make smarter calls on what to restock, what to clear out, and where to invest.

Inventory Metrics at a Glance

Inventory Turnover Ratio

Inventory Turnover Ratio tells you how often your inventory is sold and replaced within a specific period, usually monthly, quarterly, or annually.

It's one of the most important metrics for understanding how efficiently your inventory is moving.

Why does it matter?

A high turnover ratio usually means your products are selling fast, great for cash flow and reducing storage costs.

A low turnover ratio, on the other hand, could mean you’re overstocking or that demand is lower than expected, tying up money in unsold goods.

In short, this metric helps you identify what’s working and where your inventory strategy might need a tweak.

Formula:

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

For example:

If your annual COGS is $100,000 and your average inventory is $25,000:

Inventory Turnover = 100,000 / 25,000 = 4

This means you sold through your inventory 4 times in a year.

What’s a good benchmark?

• Retail & fashion: 4 to 6 is considered healthy.
• Electronics or furniture: 2 to 4 is more common due to higher unit costs.
• Fast-moving consumables: Can range from 8 to 12+.

But remember, it varies by industry. What matters most is improving your own baseline.

How to improve your inventory turnover:

• Identify and push high-performing SKUs.
• Avoid over-purchasing slow sellers.
• Use demand forecasting to stock smarter.
• Run promotions to clear aging inventory.

Sell-Through Rate

Sell-through rate tells you how much of your inventory actually sold compared to how much you originally received, during a specific period (usually monthly).

It’s a great way to measure how efficiently your products are moving after they arrive in stock.

Why does it matter?

If you’re selling out quickly, it means you’ve nailed demand forecasting and likely priced the product right.

But if your sell-through is sluggish, it could be a sign of overstocking, poor demand, or missed marketing opportunities.

A healthy sell-through rate means:

• Less cash tied up in unsold goods.
• More accurate restocking decisions.
• Better visibility into which products deserve shelf space.

Formula:

Sell-Through Rate = (Units Sold / Units Received) × 100

For example, if you received 300 units of a new product and sold 180 in the first month, your sell-through rate is 60%.

What’s considered “good”?

That depends on what you sell. Fast-fashion stores typically aim for 70–90% market share within the first month of launch.

Electronics brands may be comfortable with 30–50%, especially for big-ticket items. For consumables or beauty products, a range of 60–80% is considered strong.

Ultimately, your goal is to optimize for faster-moving stock without creating frequent stockouts.

How to improve your sell-through rate:

• Promote new arrivals right after launch to build early momentum.
• Bundle slower products with bestsellers.
• Use data to avoid over-ordering on unproven SKUs.
• Run clearance offers on aging inventory before it becomes dead stock.

Days of Inventory on Hand (DOH)

Days of Inventory on Hand (DOH) tells you how long your current inventory will last based on your average sales rate. It’s like a countdown timer, showing how many days you can keep selling at your current pace before you run out of stock.

Why does it matter?

This metric helps you strike a balance between excessive inventory (which consumes cash and storage space) and insufficient inventory (which risks stockouts and lost sales). DOH also helps you plan when to reorder and how much buffer stock you really need.

If your DOH is too high, your money is sitting on shelves and not in your bank account.

Too low? You might be a viral post away from running out of stock.

Formula:

DOH = (Average Inventory / Cost of Goods Sold) × 365

Example:

You hold $50,000 in average inventory and your annual cost of goods sold is $200,000:

DOH = (50,000 / 200,000) × 365 = 91.25 days

That means, at your current pace, you could keep selling for about 3 months before running out.

What's a healthy range?

It really depends on your industry and sales velocity. Fast-moving goods might have a DOH under 30 days. Seasonal or luxury products might hover around 60–90 days.

The key is consistency and avoiding massive swings that mess with your supply chain.

How to optimize DOH:

• Track sales trends and adjust reorder points regularly.
• Use demand forecasting tools to predict spikes or slow periods.
• Reduce over-ordering by tightening purchase quantities on slow movers.
• Move excess stock with bundles, discounts, or limited-time sales.

Stockout Rate

Stockout rate measures how often you run out of inventory for products your customers want to buy. It's the percentage of time (or SKUs) when an item was unavailable when someone was ready to purchase.

Why does it matter?

Every stockout is a lost opportunity. Not only do you miss out on sales, you also risk frustrating loyal customers, losing new ones to competitors, and damaging your brand’s reliability.

And in 2025, when same-day delivery and real-time availability are becoming the norm, "Out of Stock" is the quickest way to lose a sale.

Formula:

Stockout Rate = (Number of Stockouts / Total Demand Instances) × 100

For example:

If 15 out of 100 purchase attempts couldn't be fulfilled because of stockouts,

Stockout Rate = (15 / 100) × 100 = 15%

A high stockout rate is a red flag that indicates your forecasting, purchasing, or inventory management processes need improvement.

What causes high stockout rates?

• Inaccurate forecasting or seasonal demand spikes
• Delays from suppliers or manufacturers
• Poor inventory syncing between your Shopify store and marketplaces like Amazon or eBay
• Not setting reorder points or safety stock thresholds

How to reduce stockouts:

• Use automated reorder points to trigger purchase orders before stock gets low.
• Sync inventory across all channels in real-time so sales on Amazon don’t impact your Shopify numbers.
• Forecast based on past sales, not gut feeling, and update frequently.
• Monitor fast-moving SKUs daily, not monthly.
• Add buffer stock for your top sellers or during peak seasons.

Gross Margin Return on Inventory Investment (GMROI)

GMROI stands for Gross Margin Return on Inventory Investment. It tells you how much gross profit you’re earning for every dollar you’ve invested in inventory.

Think of it as the ROI of your inventory. Are you making enough margin on your products to justify the cost of holding them?

Why does it matter?

You might have a high sales volume, but if your margins are thin or your stock is sitting too long, your inventory could actually be dragging your business down.

A strong GMROI means your inventory is:

• Priced right
• Turning over fast enough
• Bringing in solid profits

A low GMROI means your capital is tied up in stock that’s not generating returns — either because it’s overpriced, underperforming, or moving too slowly.

Formula:

GMROI = Gross Profit / Average Inventory Cost

Example:

You make $60,000 in gross profit over a period, and your average inventory cost during that time was $30,000:

GMROI = 60,000 / 30,000 = 2.0

That means for every $1 of inventory you invested, you earned $2 in gross profit. Solid.

What’s a good GMROI?

• Above 1.0 is essential, it means you're making more than you're spending.
• 2.0 or higher is generally healthy in retail and e-commerce.
• It varies by industry, but the goal is always to grow your margin while managing stock levels wisely.

How to improve your GMROI:

• Focus on higher-margin products and reduce reliance on low-margin SKUs.
• Move stagnant inventory faster with discounts or bundles.
• Reduce overstocking to lower holding costs.
• Improve pricing strategy to boost gross profit without killing conversions.

Backorder Rate

The backorder rate measures how often customers place orders for items that are temporarily out of stock but will be shipped once they are restocked. It shows the percentage of orders that couldn’t be fulfilled immediately due to inventory shortages.

Why does it matter?

Backorders are a double-edged sword. On one hand, they show demand, people want the product enough to wait. On the other hand, delays can frustrate customers, lead to cancellations, and put pressure on fulfillment operations.

Formula:

Backorder Rate = (Number of Backordered Orders / Total Orders) × 100

Example:

You received 500 orders in a month, and 40 of them included at least one backordered item.

Backorder Rate = (40 / 500) × 100 = 8%

What causes high backorder rates?

• Inaccurate demand forecasting
• Supplier or manufacturing delays
• Overselling due to poor inventory sync across platforms
• No reorder point or safety stock buffer

How to reduce your backorder rate:

• Set automated reorder points so stock gets replenished before it runs out.
• Use inventory forecasting tools to predict spikes in demand better.
• Implement real-time sync between your store, warehouse, and marketplaces.
• Communicate clear ETAs on product pages when backorders are unavoidable.
• Prioritize fast-selling SKUs for frequent replenishment.

Dead Stock Percentage

Dead stock refers to inventory that’s been sitting unsold for a long time, with no signs of moving.

The dead stock percentage indicates how much of your inventory is tied up in forgotten or outdated products.

It’s not just about space, it’s about lost capital. Every unit of dead stock is money that’s no longer working for your business.

Why does it matter?

Dead stock quietly chips away at your profitability. It:

• Eats up storage space (which costs money)
• Becomes harder to sell over time (especially for seasonal or trend-based items)
• Ties up cash you could invest in faster-moving, high-margin products

If you're not tracking this metric, you may be under the impression that your inventory is “full” when, in reality, a significant portion of it is just taking up space.

How to identify dead stock:

• Look for SKUs with zero or minimal sales in the last 90–180 days.
• Check products that haven’t been reordered or promoted recently.
• Monitor your oldest inventory by receipt date, especially items nearing expiration (for consumables) or seasonal sell-by dates.

What’s a healthy percentage?

While there’s no universal benchmark, most well-managed e-commerce businesses aim to keep dead stock at under 10% of their total inventory. If yours is climbing higher, it’s time to act.

How to reduce and prevent dead stock:

• Run clearance sales or flash promos to move stagnant inventory.
• Bundle slow-moving SKUs with popular products to increase visibility.
• Use first-in, first-out (FIFO) inventory methods to prevent aging stock from being forgotten.
• Set up alerts or reports to flag products with low sales over a specific time window.
• Avoid over-ordering unproven SKUs, especially for seasonal trends or low-velocity categories.

Order Cycle Time

Order cycle time refers to the duration from the moment a customer places an order to the moment it’s delivered to their doorstep (or marked as fulfilled). It measures how quickly and efficiently your order processing and fulfillment system runs.

Why does it matter?

In 2025, speed is no longer a nice-to-have, it’s expected.

Long cycle times result in unhappy customers, increased support tickets, and lower chances of repeat purchases.

Short cycle times lead to smooth operations, better reviews, and increased sales.

Whether you’re fulfilling from your warehouse, a 3PL, or dropshipping, tracking this metric helps you identify fulfillment bottlenecks and improve customer satisfaction.

What does it include?

• Order confirmation
• Picking and packing
• Shipping and delivery
• Any warehouse or courier delays

If you sell on multiple platforms (like Shopify and Amazon), cycle times may vary, and it's important to track each channel separately.

Formula:

Order Cycle Time = Delivery Date – Order Date

Track the average over a period (e.g., monthly) to spot trends.

Example:

If your average order was placed on the 1st and delivered by the 4th, your average cycle time is 3 days.

What’s a good cycle time?

• 2–3 days is considered excellent for DTC brands.
• 4–7 days is acceptable depending on product type, location, or shipping method.
• Anything longer than a week? It’s worth digging in.

How to reduce order cycle time:

• Automate order routing and picking wherever possible.
• Use reliable 3PLs or carriers with trackable SLAs.
• Optimize warehouse layout to speed up picking/packing.
• Set clear cut-off times for same-day or next-day dispatch.
• Sync orders across platforms in real-time to avoid delays.

Carrying Cost of Inventory

Carrying cost (also known as holding cost) is the total cost of storing and maintaining your inventory over a period of time. It includes everything from warehousing fees to insurance, depreciation, and even the cost of unsold or aging stock.

It’s the hidden price tag that comes with every product sitting on your shelves.

Why does it matter?

Most eCommerce brands focus on the cost of purchasing inventory, but the longer you hold that inventory, the more it chips away at your profits.

High carrying costs:

• Eat into your margins
• Tie up working capital
• Increase the risk of products becoming obsolete, expired, or unsellable

Understanding your carrying cost helps you make smarter buying decisions and keep your operation lean.

What’s included in carrying cost?

• Storage/warehouse rent or fulfillment fees
• Utilities and labor tied to inventory handling
• Insurance and security
• Inventory depreciation or shrinkage (from damage or theft)
• Opportunity cost of not investing that money elsewhere

Formula (basic):

Carrying Cost = (Total Inventory Value × Annual Carrying Cost Rate)

For example:

If you have $100,000 in inventory and your carrying cost rate is 20% annually,

Carrying Cost = $100,000 × 0.20 = $20,000 per year

How to reduce carrying costs:

• Improve your forecasting to avoid overstocking.
• Reduce excess inventory by identifying slow movers early.
• Negotiate better storage rates or shift to flexible fulfillment solutions.
• Implement just-in-time (JIT) inventory strategies for fast-selling SKUs.
• Regularly audit your inventory to avoid sitting on dead stock.

Rate of Return

The rate of return measures the percentage of sold items that customers send back. Whether it's due to incorrect sizing, damaged goods, or simply buyer’s remorse, returns are a standard part of the e-commerce landscape.

But they can also be a goldmine for insights if you track them right.

Why does it matter?

Returns aren’t just a logistical hassle, they can be a hidden margin killer. High return rates inflate shipping costs, increase handling time, and often leave you with unsellable inventory.

Even worse?

They usually signal a deeper issue, such as product quality, inaccurate listings, poor packaging, or unmet customer expectations.

On the flip side, a low and stable return rate means you’re delivering what customers want, and that’s a significant win.

Formula:

Rate of Return (%) = (Returned Units / Total Units Sold) × 100

Example:

If you sold 1,000 units and 80 were returned:

Rate of Return = (80 / 1,000) × 100 = 8%

You can track this per product, category, channel (Shopify vs Amazon), or even customer segment to identify problem areas.

What’s a normal return rate?

• Apparel & fashion: 10–30% (often due to sizing or style preferences)
• Electronics: 5–10% (defects or changed mind)
• Beauty/consumables: <2% (often non-returnable)
• Home goods/furniture: 5–10% (size, fit, or shipping damage)

These vary by industry, but anything above your category average should trigger investigation.

How to reduce your return rate:

• Encourage customer reviews and UGC to build buyer confidence.
• Improve packaging and QC to avoid damage-related returns.
• Analyze return reasons and flag recurring issues per SKU.
• Offer size guides or virtual try-ons for apparel and accessories.

How to Track These Metrics Efficiently

Tracking inventory metrics is one thing. Tracking them consistently, accurately, and in real time, that’s what gives you the edge.

Here’s how to track your inventory metrics without the chaos:

1. Use an Inventory Management Software

The right tool like Sumtracker pulls real-time data from all your sales channels, warehouses, and purchase orders then translates it into clean, actionable metrics.

You can:

• View dashboards with real-time inventory turnover, sell-through, and stockouts
• Set alerts for low-stock levels or dead stock
• Track performance by SKU, location, or channel

This gives you clarity, not just data.

2. Integrate Across Channels

If you sell on multiple platforms (Shopify, Amazon, eBay, Etsy), syncing inventory and order data into one system is a must. Without it, your numbers will always be out of sync, and your reports won’t reflect reality.

With a centralized system, your forecasting, reorder points, and GMROI calculations are always based on accurate, up-to-date information.

3. Automate What You Can

Set up automated reports for:

• Weekly sell-through and stock levels
• Monthly GMROI and DOH summaries
• Real-time stockout or return rate alerts

This saves hours of manual work and makes it easier to spot trends early, before they become problems.

4. Review Metrics Regularly, Not Just at Month-End

• Daily or weekly: Stockouts, order cycle time, backorders
• Monthly: Turnover, GMROI, dead stock, return rates
• Quarterly: Forecast accuracy, long-term trends, vendor performance

5. Turn Metrics Into Action

Metrics aren’t just for reporting. Use them to:

• Adjust pricing or bundles
• Cut underperforming SKUs
• Restock your top sellers ahead of time
• Negotiate better terms with suppliers

Conclusion

Inventory management today isn’t just about knowing what’s in stock, it’s about using data to make better decisions across your business.

Metrics such as turnover rate, sell-through, GMROI, and forecast accuracy provide real visibility into what’s working, what’s not, and where your money is being invested.

When tracked consistently, these numbers help you reduce stockouts, avoid overstocking, speed up fulfillment, and protect your margins. They’re not just operational tools they’re strategic drivers of growth.

With the right system in place, tracking and acting on these insights becomes part of how you scale, not just something you check once a month.

In 2025, inventory metrics aren’t optional. They’re how smart eCommerce brands stay lean, agile, and profitable.

FAQS

What are the most important inventory metrics to track for an e-commerce business?

The most critical metrics include Inventory Turnover Ratio, Sell-Through Rate, Days of Inventory on Hand (DOH), Gross Margin Return on Inventory Investment (GMROI), and Stockout Rate. These metrics help you manage stock efficiently and make informed purchasing decisions.

How often should I review my inventory metrics?

Ideally, you should review fast-moving metrics like stockouts, order cycle time, and backorders weekly. Broader metrics like turnover, GMROI, and forecast accuracy should be reviewed monthly or quarterly to identify long-term trends and adjust strategies.

How can inventory metrics improve profitability?

By identifying which products are moving slowly, where you're overstocked, or where you're missing sales due to stockouts, inventory metrics help reduce waste and maximize ROI. Metrics like GMROI and Carrying Cost directly tie inventory performance to profit margins.

What tools can I use to track inventory metrics accurately?

Using an inventory management system like Sumtracker allows you to track real-time data across channels, automate reports, and monitor KPIs like stockouts, dead stock, and forecast accuracy. It eliminates guesswork and manual errors, giving you clear insights for better decisions.

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