FIFO, or First In, First Out, is an inventory management method where the oldest inventory items are sold first. For ecommerce businesses, this means that products purchased earliest are the first ones to be shipped out to customers. FIFO is commonly used in industries where products have expiration dates or a risk of becoming obsolete, such as food or electronics.
For ecommerce businesses, FIFO helps ensure that inventory is rotated efficiently, reducing the risk of holding outdated or expired products. This method is simple to apply and aligns with the way most businesses naturally sell products. FIFO is especially useful when inventory costs are rising, as it helps businesses avoid overvaluing older stock while ensuring that products are sold in the order they were purchased.
In other words, FIFO can be both an operational and an accounting methodology accounting for COGS and making sure ecommerce inventory management and accounting are up to date.
Read our in-depth article about First In, First Out.