Connect with us

The Five Things You May Not Realize About Stock Turn

mm

Published

on

Knowing your turn ratio is one thing, but understanding how to use it is another.

Stock turn: that elusive nirvana between having too much and not quite having enough products to drive your sales. Getting the balance right can be challenging because it is always a moving target.

You may have a good grasp of stock turn and how to calculate it, but here are a few significant facts that may affect how you look at it.

1. Stock turn is only one part of the return on investment equation. The other is margin. You can afford to have your inventory sit around a while if you have the profitability to handle it. The lower the margin on an item, the faster you have to turn it over to achieve the same profit.

2. Freight needs to be part of the equation. All too often, I see jewelers who don’t add freight in as part of the cost of the item. The problem with leaving it out is that the faster your stock turn, the more it will cost you as each item gets shipped. Ignoring it will distort the profit on your product and give you an artificially higher margin than you really have.

3. Fast stock turn can be as bad as slow. If your inventory is turning over too quickly, don’t celebrate — it is possibly a sign that demand is beginning to exceed supply and you will be losing sales as a result of this. 

4. Accurate stock turn can only be measured over time. Take a snapshot of a week or a month and the figures can deceive you. Stock turn is calculated using your average inventory holding between two periods. If those periods are seasonal, such as December, the numbers can deceive if you don’t take this into account.

Advertisement

5. Stock turn can predict the future as well as show the past. Too often, I see retailers who analyze their stock turn but don’t use it as a basis of prediction. History does repeat, and if you find trends developing around certain areas, it helps to use them to plan future inventory levels across that area.

An awareness of stock turn is one thing, but knowing how to manage it and use the information to drive your business is the secret to getting the most value from this key financial variable.


David Brown is president of the Edge Retail Academy. To learn how to complete a break-even analysis, contact [email protected] or (877) 569-8657.

This article originally appeared in the April 2017 edition of INSTORE.

Advertisement

SPONSORED VIDEO

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.”

Promoted Headlines

Most Popular

David Brown

The Five Things You May Not Realize About Stock Turn

mm

Published

on

Knowing your turn ratio is one thing, but understanding how to use it is another.

Stock turn: that elusive nirvana between having too much and not quite having enough products to drive your sales. Getting the balance right can be challenging because it is always a moving target.

You may have a good grasp of stock turn and how to calculate it, but here are a few significant facts that may affect how you look at it.

1. Stock turn is only one part of the return on investment equation. The other is margin. You can afford to have your inventory sit around a while if you have the profitability to handle it. The lower the margin on an item, the faster you have to turn it over to achieve the same profit.

2. Freight needs to be part of the equation. All too often, I see jewelers who don’t add freight in as part of the cost of the item. The problem with leaving it out is that the faster your stock turn, the more it will cost you as each item gets shipped. Ignoring it will distort the profit on your product and give you an artificially higher margin than you really have.

3. Fast stock turn can be as bad as slow. If your inventory is turning over too quickly, don’t celebrate — it is possibly a sign that demand is beginning to exceed supply and you will be losing sales as a result of this. 

Advertisement

4. Accurate stock turn can only be measured over time. Take a snapshot of a week or a month and the figures can deceive you. Stock turn is calculated using your average inventory holding between two periods. If those periods are seasonal, such as December, the numbers can deceive if you don’t take this into account.

5. Stock turn can predict the future as well as show the past. Too often, I see retailers who analyze their stock turn but don’t use it as a basis of prediction. History does repeat, and if you find trends developing around certain areas, it helps to use them to plan future inventory levels across that area.

An awareness of stock turn is one thing, but knowing how to manage it and use the information to drive your business is the secret to getting the most value from this key financial variable.


David Brown is president of the Edge Retail Academy. To learn how to complete a break-even analysis, contact [email protected] or (877) 569-8657.

This article originally appeared in the April 2017 edition of INSTORE.

Advertisement

Advertisement

SPONSORED VIDEO

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.”

Promoted Headlines

Most Popular