Inventory turnover

Inventory turnover is the ratio of cost of goods sold (COGS) for a period to the average inventory for the same period. The metric shows how many times stock converts into sales during the period and how many days of sales the inventory covers.

How turnover is calculated and related metrics

Key formulas that apply to any marketplace, including Kaspi.kz:

• Turnover (Turnover) = Cost of goods sold for the period / Average inventory for the period.
• Days of inventory (Days of Inventory) = 365 / Turnover. Alternatively: Days of inventory = Average inventory / Average daily COGS.
• Reorder point (ROP) = Average daily demand × Lead time (in days) + Safety stock.
• EOQ (economic order quantity) = sqrt(2 × D × S / H), where D — annual demand in units, S — cost per order, H — annual holding cost per unit.

Example in KZT. Suppose the annual COGS for an SKU = 36 000 000 KZT, average inventory = 6 000 000 KZT. Then turnover = 36 000 000 / 6 000 000 = 6 turns per year. Days of inventory = 365 / 6 ≈ 61 days.

Why turnover matters for a seller on Kaspi.kz

Practical consequences of low or high turnover for Kaspi.kz sellers:

• Low turnover ties up capital. For example, inventory worth 6 000 000 KZT with a cost of capital of 15% per year costs the seller about 900 000 KZT annually in foregone returns or alternative uses.
• Stockouts reduce availability on the product page, lowering CTR and conversion. Sellers report that losing availability can cut sales by 1.5–2× until stock is restored.
• Storing stock in the marketplace warehouse (FBO) reduces delivery time, increasing the chance to win impressions and orders, but raises storage costs and the risk of excess inventory.
• Operating via FBS gives the seller control over stock but risks losing buyers to long delivery times and frequent cancellations.

Calculation examples and scenarios for Kaspi.kz

Let’s look at two typical SKUs from a Kazakhstan seller and how to calculate metrics.

Scenario 1. Fast-moving SKU, accessories

• Average daily sales: 10 units.
• Purchase price: 2 000 KZT per unit, monthly COGS = 10 × 30 × 2 000 = 600 000 KZT.
• Average inventory value = 1 200 000 KZT.

Monthly turnover annualized: 600 000 × 12 / 1 200 000 = 6 turns per year. Days of inventory ≈ 61 days. If supplier lead time is 14 days, a simple ROP calculation:

• Lead time 14 days: ROP in units = 10 × 14 = 140 units.
• Add safety stock — for example, 30 units to cover variability → ROP = 170 units.
• In cost terms: 170 × 2 000 = 340 000 KZT as the reorder point value.

For a fast SKU it often makes sense to keep higher service level, consider FBO placement for better conversion, and set more frequent, smaller replenishments to avoid excess stock.

Scenario 2. Slow-moving SKU, low turnover category

• Average daily sales: 0.5 units (≈15 units/month).
• Purchase price: 10 000 KZT per unit, monthly COGS = 0.5 × 30 × 10 000 = 150 000 KZT.
• Average inventory value = 1 500 000 KZT.

Annualized turnover: 150 000 × 12 / 1 500 000 = 1.2 turns per year. Days of inventory ≈ 365 / 1.2 ≈ 304 days. Implications:

• Capital is tied up for a long time — consider reducing order quantities or negotiating lower minimum order sizes.
• FBO may be costly for such SKUs due to storage fees; keeping them on own fulfillment or using marketplace only for visibility can be preferable.
• Use promotions or bundle offers to increase velocity, or delist items with persistently negative GMROI.

Practical tips for managing turnover

• Segment your assortment by turnover and margin. Apply different replenishment rules for fast, medium and slow movers.
• Prioritise placing high-turn SKUs in FBO to win Buy Box and faster delivery, but calculate storage costs versus incremental sales.
• Reduce lead time: work with local suppliers, split shipments, or increase delivery frequency to lower safety stock needs.
• Use dynamic reorder points: update average daily demand and lead time frequently, especially before campaigns.
• Apply EOQ where fixed ordering costs are significant and demand is stable; for highly variable demand prefer more flexible ordering policies.
• Monitor GMROI (gross margin return on inventory) to understand profitability per unit of inventory capital.
• Before promotions, pre-stock expected incremental demand and set a dedicated safety buffer for the promotion period.

Common seller mistakes and how to avoid them

• Using sales price instead of COGS in turnover calculations — always use cost values when assessing capital tied to inventory.
• Ignoring seasonality — calculate EOQ and ROP by seasonal periods, not only on annual averages.
• Not updating reorder points after lead time changes or supplier issues — make ROPs dynamic and reviewed regularly.
• Over-relying on FBO for all SKUs — storage fees can negate benefits for slow or low-margin items.
• Tracking only aggregate metrics — analyse turnover, DIO and fill rate by category or SKU to make actionable decisions.

Brief conclusion and a practical tip

Turnover is a core metric for inventory efficiency: it shows how effectively stock turns into sales and how much capital is tied in inventory. For Kaspi.kz sellers, balance faster delivery and availability (often improved with FBO) against storage costs and the risk of excess stock. Regularly monitor turnover, days of inventory, fill rate and GMROI by SKU groups, and adjust reorder rules before peak campaigns.

Practical tip: start by segmenting the top 200 SKUs by revenue and turnover. For those with high turnover and predictable demand, test FBO and shorter replenishment cycles. For slow movers, reduce order sizes and reconsider marketplace stocking to free up capital.