Shopify Inventory Metrics to Track

A low-stock alert tells you one SKU is about to run out. It doesn't tell you that your candle line turns over four times a year while your accessories turn over far more often, or that a fifth of your catalog hasn't sold in months while quietly tying up cash you could put toward something that moves. Those are different problems, and they need different numbers.

The formulas below aren't hard. What matters is what a bad number tells you to actually do next — reorder faster, order less, or stop ordering at all. If you're newer to inventory concepts generally, our inventory management fundamentals guide covers the basics first; this post assumes you're past that and want the specific math.

Why metrics matter

A threshold alert answers one question: are we about to run out of this? It's useful, but it's reactive by design. It only fires once a problem is already close. The metrics in this post answer a different question: is this SKU, or this category, actually working for the business? A SKU can sit comfortably above its low-stock threshold for months while its turnover quietly craters and it becomes dead weight on a shelf. Metrics catch that; a threshold alert never will.

None of these numbers require special software to calculate — a spreadsheet with sales and cost data gets you there. The work is doing it consistently across a real catalog, which is where most stores eventually look for help.

Inventory turnover

Inventory turnover measures how many times you sell through your average inventory over a period, usually a year. It's the single most-cited inventory metric because it captures both overbuying and underbuying in one number.

Inventory Turnover = Cost of Goods Sold ÷ Average Inventory Value

Cost of goods sold (COGS) is what the units you sold actually cost you, not what you sold them for. Average inventory value is typically your opening inventory value plus your closing inventory value, divided by two — or an average across more frequent snapshots if you have them.

A turnover number that's low relative to your own catalog average is a signal that cash is sitting in slow stock: consider a markdown, a bundle, or simply ordering less of it next time. A turnover number that's unusually high relative to your normal pace can mean the opposite problem: you're at real risk of stockouts, and your order sizes or safety stock haven't kept up. There's no universal "good" turnover ratio. A housewares brand and a fast-moving consumables brand will land in completely different places, and comparing your number to a different category's benchmark tells you nothing useful. Compare it to your own history instead.

Sell-through rate

Sell-through rate is the percentage of stock you've actually sold, usually measured against what you started the period with or received into stock.

Sell-Through Rate = Units Sold ÷ Units Received × 100

Shopify's own sell-through report in the admin calculates this a little differently — sold divided by sold plus remaining, rather than sold divided by received — so the two numbers won't always match exactly if you restocked partway through the period. We cover exactly how Shopify computes it, and where to find the report, in our guide to Shopify's inventory reports.

A low sell-through rate on a SKU you deliberately over-bought for a launch or a seasonal push isn't necessarily bad. A low sell-through rate on a SKU you keep reordering at the same volume, period after period, is a clear signal to cut the next purchase order. On the other end, a sell-through rate near 100% on a fast mover can be a stockout warning in slow motion — if that speed wasn't planned, your reorder point is probably lagging your real sales velocity. Our reorder point formula guide walks through recalculating that number.

Days of inventory

Days of inventory estimates how many days your current stock will last at its recent selling pace. It's essentially turnover expressed as a countdown instead of a ratio, which makes it easier to compare against a lead time.

Days of Inventory = 365 ÷ Inventory Turnover

The same number can be reached from average inventory and COGS directly: average inventory ÷ COGS × 365. For a single SKU rather than a whole category, ending quantity ÷ average daily sales gets you a comparable figure.

A days-of-inventory figure that's shorter than your supplier's lead time is an early warning: stock will hit zero before a reorder could arrive if you wait to act on it. A figure far longer than your typical reorder cycle means the opposite — cash parked on a shelf that could be doing something else. This is the same arithmetic your reorder point already runs at the SKU level; days of inventory is the category-level or whole-catalog view of the same problem.

Stockout rate

Stockout rate measures how often you actually ran out of a product customers wanted to buy, over a past period. Unlike a low-stock alert, which fires forward-looking the moment a level crosses a threshold, stockout rate looks backward and tells you whether your alerts and reorder points are actually working.

There isn't one universally standardized formula for it (definitions vary by source), but the common shape is: number of SKUs, or stockout occurrences, that hit zero available stock, divided by total SKUs or total demand instances, over a period. A workable version for a small catalog without lost-sale tracking: count how many of your active SKUs sat at zero available at least once during the period, and divide by your total active SKU count.

A high stockout rate almost always traces back to one of two things: reorder points set too low for current velocity, or a safety stock buffer too thin for how unpredictable a SKU's demand or a supplier's lead time actually is. Both are fixable with the same formula covered in our reorder point guide above.

GMROI and carrying cost

Most day-to-day inventory decisions come down to turnover, sell-through, and stockout rate. GMROI and carrying cost matter more when you're deciding whether an entire category is worth carrying at all — a quarterly review question, not a daily one.

GMROI (gross margin return on investment) measures gross profit generated per dollar tied up in inventory:

GMROI = Gross Profit ÷ Average Inventory Cost

According to some inventory-analytics vendors, a GMROI at or above roughly 2 (two dollars of gross profit for every dollar of average inventory value) is considered healthy, though this varies by margin structure and category and isn't a universal rule to hold every product to.

Carrying cost (or inventory holding cost) captures what it costs you to keep stock around at all — storage, capital tied up, insurance and risk, and the admin work of managing it:

Carrying Cost = Total Annual Carrying Costs ÷ Average Inventory Value × 100

A category with thin GMROI and a high carrying cost is the strongest combined signal to markdown or discontinue it rather than reorder — the two numbers are more useful read together than either is alone.

Once these numbers are flowing, the harder part is building a habit around checking them rather than calculating any single one — our inventory best-practices checklist lays out roughly how often to look at each.

Recalculating turnover, sell-through, and days-of-cover across a real catalog by hand every month is a spreadsheet job nobody actually keeps up with for long. StockCue recalculates its sell-through and days-of-cover numbers from your real sales data automatically — it won't replace a finance team's GMROI review, but it keeps the operational numbers current without you touching a formula.

Frequently Asked Questions

What is a good inventory turnover ratio for a Shopify store?

There's no single healthy turnover number for every Shopify store — it varies enormously by category, price point, and how the business is run, and no authoritative, category-neutral benchmark exists. What matters more than hitting an external number is tracking your own turnover over time: compare a SKU's turnover to your catalog's average and to its own trailing periods, and treat a sudden drop or spike as the signal to investigate, not the absolute figure.

How do you calculate sell-through rate?

Sell-through rate is the percentage of stock you've actually sold, calculated as units sold divided by units received (or your starting quantity for the period), multiplied by 100. Shopify's own sell-through report in the admin uses a close but slightly different version — units sold divided by units sold plus units remaining — so the two numbers can diverge a little if you restocked partway through the period.

What is days of inventory and why does it matter?

Days of inventory (also called days sales of inventory) estimates how many days your current stock will last at its recent selling pace — calculated as 365 divided by your inventory turnover ratio, or equivalently average inventory divided by cost of goods sold, times 365. It matters because a days-of-inventory number shorter than your supplier's lead time is an early warning of a stockout, while a number far longer than your typical reorder cycle points to cash sitting in slow stock.

What's the difference between a stockout rate and a low-stock alert?

A low-stock alert is forward-looking — it fires the moment a stock level crosses a threshold you set, so you can act before you run out. A stockout rate is backward-looking — it measures, over a past period, how often a product actually hit zero available stock, which tells you whether your alerts and reorder points are working or need to be recalibrated.