What it means
A supplier can place a large quantity of goods with a retailer without an immediate sale. If those goods move slowly, the supplier has cash tied up and the retailer has shelf space occupied.
Turnover connects a period's movement with the average consigned stock sitting in the channel. Start with the specific stock pool: product, reseller, site and dates.
Use net units sold or used under the chosen convention, and an average of opening and closing balances if detailed daily stock is not available. A simple two-point average can mislead when a large replenishment arrives at period end, so daily or weekly averages are more precise.
Distinguish end-customer sales from delivery to the reseller, because moving goods from the supplier warehouse to a consignment location is not turnover through to the customer. Returns, transfers, damage and stock-count corrections change the physical pool and should be recorded separately.
Turnover and sell-through are related but not identical: sell-through usually compares units sold with available units from a defined period or cohort, while turnover compares sales over time with average stock held. A high rate may mean strong demand, but it may also mean the store routinely runs out and misses sales, so look at availability and margins.
Contractual settlement timing can differ from the movement date; the supplier may be paid after a monthly sale report, while a reseller may report use at installation rather than at checkout. Reconcile the stock and amounts due, and state whose perspective the turnover figure represents.
A unit-based measure suits a single comparable product, but if items have very different values, aggregating units can obscure the stock tied up. A value-based measure must use the same valuation basis in both numerator and denominator; do not compare retail-price sales with inventory measured at cost.
A zero or tiny average balance can make a ratio meaningless or unstable, so investigate stock-record gaps and stockouts before celebrating a very high turnover figure. For managers, the metric helps decide allocation and replenishment.
It should not be used to pressure a reseller to report sales early or hide stock that remains unsold, and the measurement period should be reported so a monthly turnover is not mistaken for an annual one.
In practice
Real-world examples.
Example
A supplier's consigned spare parts sell 600 units in a quarter while average consigned stock is 300 units, giving two turns for that quarter. The supplier compares the figure with the previous quarter before changing the delivery schedule. The two-turn result is only meaningful because both quarters use the same counting method.
Example
A boutique transfers unsold consigned garments between locations; the transfer changes site balances but not total end-customer sales. The supplier's report therefore shows lower stock at one shop and higher stock at another with no change in group turnover. Recording the transfer separately prevents either shop from being credited with a sale that never happened.
Example
A supplier compares turnover at two similar retailers and checks stockouts before moving more goods to the faster one. The faster shop sold out twice during the month, so its high figure partly reflects empty shelves. The supplier increases deliveries in smaller, more frequent batches rather than simply sending more stock.
Formula
Calculation
Consignment stock turnover = Net end-customer units sold or used during period / Average consigned units held during period
Simple average units held = (Opening consigned units + Closing consigned units) / 2
Worked example. A fictional supplier has 400 consigned units at period start and 200 at period end, while 600 net units were sold to end customers.
- Simple average stock = (400 + 200) / 2 = 300 units.
- Turnover = 600 / 300 = 2 turns during the stated period.
If the period is a quarter of 90 days, average stock cover is 90 / 2 = 45 days of selling. Annualising by multiplying 2 turns by 4 quarters gives 8 turns a year, but only if the quarterly pattern is assumed to repeat, so label that figure as an assumption.
A value-based version follows the same logic. If net sales at cost were $30,000 and average consigned stock at cost was $15,000, turnover is $30,000 / $15,000 = 2 turns, matching the unit measure only because both figures use the same cost basis.
If receipts and sales fluctuate sharply, use a more frequent average rather than treating two end points as a perfect description.Case study
Seen in the real world.
This illustrative and entirely fictional example follows Juniper Stationery, an invented supplier of notebooks placed on consignment at independent shops. It sent the same quantity to every store. One shop held a large unsold balance and asked for new designs, while another frequently ran out. Juniper calculated turnover by shop and product, checked delivery and sale reports, and visited both stores. The slow shop had poor display placement; the fast shop needed smaller but more frequent replenishment.
The supplier changed allocations and monitored availability as well as turnover. Juniper still reconciled physical stock to sales and returns monthly. The turnover metric guided planning but did not replace the contract's settlement records. Juniper also agreed with both shops that turnover would always be quoted with its period and counting method. That small rule stopped a monthly figure at one shop being compared with a quarterly figure at the other, a mistake that had caused an awkward conversation earlier in the year.
Watch out
Common mistakes.
- Counting deliveries to a reseller as final sales and inflating turnover.
- Comparing a monthly turnover figure with an annual figure without stating the period.
- Celebrating a high rate without checking lost sales from stockouts or discount-driven low margins.
Questions
People also ask.
Is it the same as consignment sell-through?
No. Sell-through compares sales with an available pool; turnover compares sales with average stock held over time.
Can it be calculated by value?
Yes, using a consistent cost or agreed settlement basis for both sales and average stock. Do not mix retail and cost values.
Who owns the stock while it is at the reseller?
The consignment agreement defines ownership and sale triggers. The metric does not change those legal or accounting terms.
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