Finding The Inventory Sweet Spot: 5 Critical KPIs Every Online Retailer Needs to Track
A new survey of U.S. shoppers reveals that their frustration with "out of stock" items has reached a tipping point. The solution for ecommerce brand operators starts with mastering inventory sales KPIs

Key Takeaways for Ecommerce Brands:
- According to a recent study, 65% of consumers will shop elsewhere if an item is out of stock, making reliable ecommerce inventory management essential for ecommerce brands.
- Efficient inventory management involves analyzing sales data. This type of analysis requires in-depth knowledge of the following inventory sales KPIs: inventory turnover, stock-to-sales ratio, sell-through rate, backorder rate, and days sales in inventory.
- Ecommerce brands need inventory management software integrated into an accounting service to make informed decisions, track costs of goods sold (COGS), and prevent customer dissatisfaction.
“Anyone else hate when they show ‘out of stock’ items???”
The Reddit user who posted this question attached a screenshot of a beauty and lifestyle brand's online store, in which three out of four products were listed as unavailable for shipping. The response was unequivocal: 168 upvotes. “That is SO annoying!” wrote another frustrated user, “If it’s out of stock, and I can’t buy it, why are you showing it to me!? UGH!!!”
According to a new study by global consulting firm AlixPartners, this frustration has reached a breaking point. Drawing on a survey of 9,000 U.S. shoppers, the 2024 Consumer Sentiment Index provides data on customer prioritization of five key pillars:
- Experience: connectivity to the brand, including customer engagement.
- Price: beliefs about realized and perceived value and competitiveness.
- Product: details around the goods, including quality, craftsmanship, trendiness, sustainability, and inclusivity.
- Service: tangible services before, during, and after the sale.
- Access: ease and convenience in shopping, entailing early access to deals, mobile apps, and reliable online store inventory management.
Per the survey, the importance of reliable online store inventory management cannot be overstated: 65% of consumers said they would shop at a different retailer if the item they want is not in stock. “Retailers need to reallocate resources to what matters for consumers – getting the right product in the right place,” said Sonia Lapinsky, Managing Director of Retail at AlixPartners, "or consumers will take their dollars elsewhere.”
Decoding Inventory Sales KPIs: A Matter of Survival
Getting the right product in the right place is easier said than done. “As an online business, there’s an inventory sweet spot you’re always looking to achieve,” explained ecom veteran Eric Youngstrom, founder and CEO of Onramp Funds, a lending platform for DTC brands. “Not overstocking, not understocking, and still managing to keep up with changing buyer demands.”
Finding that sweet spot involves analyzing your sales data. This type of analysis requires, first and foremost, in-depth knowledge of ecommerce accounting and the following inventory sales KPIs:
1) Inventory turnover
The Inventory Turnover KPI tells you how often inventory items have been sold and replaced in a given period. The formula is:
Inventory turnover rate = Cost of goods sold (COGS) / Average inventory
A low (=slow) turnover rate may indicate potential issues in sales or marketing, suggesting that your products are not gaining sufficient traction and you have an excessive amount of unsold stock.
2) Stock-to-sales ratio
Also referred to as inventory-to-sales ratio, this metric measures the amount of stock available for sale compared to the number of items sold:
Stock-to-sales ratio = Units Available / Units Sold
If the ratio is too high, you are paying extra in carrying costs (rent, utilities, salaries) and other expenses related to depreciation, perishability, shrinkage, and insurance. If the ratio is too low, you are about to run out of stock and lose both sales and customers.
3) Sell-through rate (STR)
Typically measured monthly, an STR compares the amount of inventory sold relative to the amount received from the manufacturer or supplier. The calculation is straightforward:
STR = (# Units Sold/# Units Received) x100
A high STR – the benchmark is 80% – indicates that a brand sells most of the inventory it receives in a given month.
Your sell-through rate helps gauge the accuracy of demand forecasting, measure supply chain efficiency, mitigate storage costs, and determine which inventory needs to be increased or decreased based on sales data.
4) Backorder Rate
The backorder rate is the percentage of customer orders a brand can’t fulfill from its current inventory. The formula is as follows:
Backorder rate = (# Orders delayed due to backorder/Total # of orders) X100
This KPI can be positive or negative, depending on the scenario. A high backorder rate can mean either high demand for your products or poor demand forecasting. On the flip side, a low backorder rate can indicate excellent demand planning or low demand for your inventory.
In either case, this metric is a great market research tool, as you can use backorders to test the demand for new products.
5) Days sales in inventory (DSI)
DSI is the rate of inventory turns per day. It is also known as the average days to sell inventory or the average age of inventory. The equation is:
Days sales in inventory = Days in Accounting Period / Inventory turnover rate
A lower DSI is desirable, as it signifies a brand doesn't need much time to sell off the inventory. A high DSI, on the other hand, may suggest inadequate inventory management or that you have inventory that is challenging to sell.
As high-price items tend to sell slower than low-price items, you may want to calculate a separate DSI for each product category.
From Metrics to Strategy: Finding the Right Software
Of course, mastering inventory sales KPIs is only the first step in analyzing your sales data. The next step is automatic data syncing from each sales channel. That requires an ecommerce inventory management software that's built into an ecommerce accounting service, ensuring full consistency with financial transactions and allowing you to track COGS and inventory numbers in real time.
For DTC founders, an ecommerce inventory management software that provides real-time tracking of COGS and inventory KPIs is more than just advantageous. In today’s competitive ecommerce landscape, it's the only way brands can make informed decisions, optimize their inventory, and not drive away customers with items that are “out of stock.”

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