Periodic Inventory

Periodic inventory is an inventory tracking method where stock counts and records are updated at set intervals — weekly, monthly, or quarterly — rather than continuously. Under this system, businesses physically count their entire inventory at predetermined times and use this data to calculate cost of goods sold and ending inventory values. Between these scheduled counts, inventory records are not updated for individual sales or purchases, making it a simpler but less precise approach than perpetual inventory systems.

Why it matters for e-commerce brands

For Shopify and DTC merchants, periodic inventory can be a cost-effective starting point for small businesses with limited SKUs or lower transaction volumes. However, as brands scale, this method becomes increasingly risky because it provides no real-time visibility into stock levels, making it difficult to prevent stockouts, manage multichannel selling, or make data-driven purchasing decisions. Most growing e-commerce brands eventually transition to perpetual inventory systems to maintain accuracy and meet customer expectations for product availability.

Example

A small candle business selling on Shopify conducts a full physical inventory count at the end of each month. During January, they start with 500 units, purchase 300 more from their supplier, and end the month with 250 units after counting. They calculate that 550 units were sold (500 + 300 - 250 = 550), which they then use to update their financial records and determine cost of goods sold. Throughout the month, their Shopify store doesn't automatically sync with actual warehouse quantities, so they must manually monitor stock levels to avoid overselling popular scents.

Related terms

• Perpetual inventory
• Physical inventory count
• Cost of goods sold (COGS)
• Stock keeping unit (SKU)
• Inventory reconciliation