The Basics of eBay Inventory Managemen
Calculating and Understanding eBay Inventory Turnover
Calculating and Understanding eBay Inventory Turnover
One of the most important aspects of eBay inventory management is being aware of metrics. These are data points that give you information about your inventory and assist in making the best decisions about your stock. Things like inventory turnover can impact how many products you purchase, how often you make purchases, which products are considered priorities, and which items you may stop offering or buy less.
What eBay Inventory Turnover Means
The inventory turnover for your eBay business is how much stock you sell over a specific amount of time. When you know what the turnover rate is for your eBay business, you can determine which items are selling best, how you are managing costs, and more.
A seller who has a low turnover ratio likely has some changes to make to be successful. This might occur if items are restocked slowly or products are overstocked that rarely sell. On the other hand, high inventory turnover indicates excellent cash flow and increased demand for the products you offer.
eBay inventory turnover ratio determines how well your inventory is being managed. This is done by comparing the cost of the items you sold with the typical inventory during a specific period. The ratio gives you an idea of how many times inventory was sold. For example, a business with $5,000 in average inventory and $50,000 in sales on an annual basis has turned over the inventory 10 times.
Calculating eBay Inventory Turnover
On eBay and any eBay alternative, the calculation for your inventory turnover will give you insight into how well you are managing the products you sell. The calculation is relatively simple:
$$Inventory\ Turnover = {Cost\ of\ Sold\ Goods \over Average\ Inventory}$$
Where:
$$Average\ Inventory = {Beginning\ Inventory + Ending\ Inventory \over 2}$$
Sellers can do the math independently or use one of the many inventory turnover calculators online to get accurate calculations about inventory turnover on eBay.
Checking Your Turnover Rate on eBay
It varies based on the business, but a good ratio is around four to six in most cases. This indicates that you have a balanced inventory for restocking and sales of items. When you have an impressive turnover ratio, it shows that you are excelling in sales, while the opposite is true with a lower ratio.
For example, if an eBay seller has a ratio of two, 200 items were sold while 100 were in stock. If 1,000 items were sold and 100 were kept in stock, your eBay inventory ratio would be 10.
It’s possible to calculate the inventory turnover rate during various periods, but the most common is based on a fiscal year.
Situations Where High Turnover Is Undesirable
While high turnover ratios are typically good, they can become less useful in some situations. This can be the case when it comes to eBay products. If you have extremely high numbers of sales and restock as quickly as you run out of items, you could deal with times when you are out of stock and customers are left waiting to receive their orders. In some cases, it can take weeks or months for items to get to a supplier’s warehouse and a customer might choose to order from a competitor.
When this occurs, it hurts your eBay sales history, which can make your search ranking drop. This is a situation that can take a lot of time to rectify. If you run promotions and underprice products on purpose, stocking up is important to ensure you have an open sales funnel for the more expensive products that customers can buy.
Methods to Improve eBay Turnover Rate
Being able to calculate eBay turnover rate and knowing where you stand is important, but you also need to understand how to improve the turnover if it goes low. Below are a few strategies to help you work on your turnover ratio to success as an eBay seller.
1
Engage in Forecasting
On eBay or an eBay alternative, not all products are created equal in terms of making sales. Items based on trends or related to specific seasons will sell well at some times and not so great at other moments. If you sell any of these items, make sure you watch to see when the items are popular. This can be used to create a yearly or quarterly forecast that lets you know when to sell specific items and when to pull back from that particular market.
2
Create Promotions
You can increase sales and get rid of stock that nobody is buying through the use of promotions. Taking several products and bundling them together can also increase the typical transaction amount at your eBay business while cutting down on costs related to inventory. Discounts are a great way to bring in traffic and make customers happy. Social media shares and word of mouth can create more sales and new customers. Work with your supplier to negotiate discounts on your end so that the cost is negligible for you.
3
Fill Out Item Specifics
When filling out information about the items in your eBay inventory, make sure you fill out all the item specifics. This includes elements like brand, style, color, and country of manufacture. Customers looking for items similar to those you are offering will more likely find your store if the attributes are filled out with all relevant specifics about the product.
4
Remember the 80/20 Rule
Also called the Pareto principle, the 80/20 rule assumes that 80% of the items you sell will be composed of 20% of your product offerings. Knowing that, you can calculate the inventory turnover ratio for the things that sell most quickly to understand what the lower 80% is costing you. This gives you the ability to adjust your eBay inventory management strategy to work best for you.
Inventory sourcing, storage, and turnover are all crucial aspects of eBay inventory management. Next, you may want to learn about eBay inventory management techniques you can put into place.
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