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David Brown: Measure Your Key Performance Indicators

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David Brown: Measure Your Key Performance Indicators

David Brown: Measure Your Key Performance Indicators

Part 2 of 2: Combine markup and stockturn to know your gross profit.

BY DAVID BROWN

David Brown: Measure Your Key Performance Indicators

Published in the March 2012 issue

Last month we talked about retail sales, which consist of average sale multiplied by the quantity of items sold. This month, we want to talk about two other key performance indicators: markup and stockturn, which combined produce your gross profit and return on investment.

David Brown: Measure Your Key Performance Indicators

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The sales figure above of $978,899 is made up of the 10,651 items sold multiplied by the average sale value of $91.90.

This month, our emphasis is on return on investment, or ROI. This is a measure of how much you get back for every $100 invested in inventory. It is a multiplier of markup and stockturn — in other words, how much profit you make on each item you sell times how often you can sell it.

ROI is an important measurement because it determines how effective your investment has been. In the same way that annual interest rate measures how effective your money has been performing for you at the bank, ROI determines how effective your money has been invested in stock for your store. An ROI of 200 means the owner has generated $200 of gross profit for every $100 invested in stock.

In the above statistics, the average ROI across the stores measured is 106, or a return of $106 for every $100 invested in stock. This is calculated by multiplying the markup of 100 percent by the  stockturn of 1.06 times per year.

As the saying goes, there is more than one way to skin a cat, and likewise, there is more than one  way to achieve a return on investment. Two stores may achieve an ROI of 200 in the following way:

David Brown: Measure Your Key Performance Indicators

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The key to using this information each month is to compare it to your own store’s performance in each area and to identify opportunities.

As we discovered in last month’s article, a 10 percent increase in both stockturn and markup will provide a better result than making a 20 percent increase in just one area or the other. Let’s illustrate using an example that has 100% markup and 1 stockturn as its starting point:

David Brown: Measure Your Key Performance Indicators

A strategy that combines an increase in both areas can be easier to manage and give a slightly better return on investment than a large increase in just one area.

The important thing is to measure. Look at your year-todate reports to determine the current markup and quantity being achieved — once your strategy is in place you can then use the monthly reports to track how you are going.

About the Author: David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact Carol Druan at [email protected] or Phone toll free (877) 5698657 Edge Retail Academy, 1983 Oliver Springs Street Henderson NV 89052-8502, USA

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Wilkerson Testimonials | C. Aaron Peñaloza Jewelers

Wilkerson Paves the Way for the Future

After serving the San Antonio, Texas community for decades, C. Aaron Peñaloza Jewelers closed its doors earlier this year. Aaron and Mary Peñaloza, the store’s owners, chose Wilkerson to handle their retirement sale. “In the first six days, we did six months’ worth of business,” says Aaron. “In the first three weeks, we did a year’s worth of business.” Mary Peñaloza says Wilkerson’s ability to tailor the sale to their store’s requirements really made it all so much easier. “They are professionals,” she says. “They know what they’re doing. They have a plan, but they will listen to you and adjust that plan to your needs.”

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David Brown

David Brown: Measure Your Key Performance Indicators

Published

on

David Brown: Measure Your Key Performance Indicators

David Brown: Measure Your Key Performance Indicators

Part 2 of 2: Combine markup and stockturn to know your gross profit.

BY DAVID BROWN

David Brown: Measure Your Key Performance Indicators

Published in the March 2012 issue

Last month we talked about retail sales, which consist of average sale multiplied by the quantity of items sold. This month, we want to talk about two other key performance indicators: markup and stockturn, which combined produce your gross profit and return on investment.

Advertisement

David Brown: Measure Your Key Performance Indicators

The sales figure above of $978,899 is made up of the 10,651 items sold multiplied by the average sale value of $91.90.

This month, our emphasis is on return on investment, or ROI. This is a measure of how much you get back for every $100 invested in inventory. It is a multiplier of markup and stockturn — in other words, how much profit you make on each item you sell times how often you can sell it.

ROI is an important measurement because it determines how effective your investment has been. In the same way that annual interest rate measures how effective your money has been performing for you at the bank, ROI determines how effective your money has been invested in stock for your store. An ROI of 200 means the owner has generated $200 of gross profit for every $100 invested in stock.

In the above statistics, the average ROI across the stores measured is 106, or a return of $106 for every $100 invested in stock. This is calculated by multiplying the markup of 100 percent by the  stockturn of 1.06 times per year.

As the saying goes, there is more than one way to skin a cat, and likewise, there is more than one  way to achieve a return on investment. Two stores may achieve an ROI of 200 in the following way:

Advertisement

David Brown: Measure Your Key Performance Indicators

The key to using this information each month is to compare it to your own store’s performance in each area and to identify opportunities.

As we discovered in last month’s article, a 10 percent increase in both stockturn and markup will provide a better result than making a 20 percent increase in just one area or the other. Let’s illustrate using an example that has 100% markup and 1 stockturn as its starting point:

David Brown: Measure Your Key Performance Indicators

A strategy that combines an increase in both areas can be easier to manage and give a slightly better return on investment than a large increase in just one area.

The important thing is to measure. Look at your year-todate reports to determine the current markup and quantity being achieved — once your strategy is in place you can then use the monthly reports to track how you are going.

Advertisement

About the Author: David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact Carol Druan at [email protected] or Phone toll free (877) 5698657 Edge Retail Academy, 1983 Oliver Springs Street Henderson NV 89052-8502, USA


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Wilkerson Testimonials | Sollberger’s

Going Out of Business Is an Emotional Journey. Wilkerson Is There to Make It Easier.

Jaki Cowan, the owner of Sollberger’s in Ridgeland, MS, decided the time was right to close up shop. The experience, she says, was like going into the great unknown. There were so many questions about the way to handle the store’s going-out-of-business sale. Luckily for Cowan, Wilkerson made the transition easier and managed everything, from marketing to markdowns.

“They think of everything that you don’t have the time to think of,” she says of the Wilkerson team that was assigned to manage the sale. And it was a total success, with financial goals met by Christmas with another sale month left to go.

Wilkerson even had a plan to manage things while Covid-19 restrictions were still in place. This included limiting the number of shoppers, masking and taking temperatures upon entrance. “We did everything we could to make the staff and public feel as safe as possible.”

Does she recommend Wilkerson to other retailers thinking of retiring, liquidating or selling excess merchandise? Absolutely. “If you are considering going out of business, it’s obviously an emotional journey. But truly rest assured that you’re in good hands with Wilkerson.”

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