Imagine this crazy day:
You go to market, you walk into one of your favorite vendor’s showrooms and every item seems the same as last Market! The displays, the styles, the color scheme, EVERYTHING! Then, just like the movie Groundhog Day, your rep. excitedly tours you around and asks what you love, and what you want to write! You sputter a bit, then say something like,
“Isn’t this what we shopped last Market?”
And your rep. says,
“Is it? Really? ... Just LOOK at all this wonderful merchandise!"
Now, fast forward to your store…
Is that what you and your staff are showcasing for your clients? Are you presenting a light layer of newness, then a WHOLE bunch of older and what you consider “still OK” merchandise? Are you reliving Groundhog Day with your staff and customers? If you feel a bit edgy, then let’s study and create Retail’s Magic Profit Wizard, TURN!
Quite simply, TURN is described by how much inventory on average that it takes you to create how much in sales. It’s a ratio! The faster your inventory TURNs, the more efficiently the business operates, and the higher gross profit a company experiences on equity and other assets. There are multiple formulas for calculating Inventory TURNover Ratio. We prefer the most time-tested formula, as this works for any selected period of time: Simply divide the On Hand Retail Inventory by the Annual Sales.
Here’s an example:
Current Inventory at the "out the door" price $1,000,000
Annual Sales at $ 2,500,000
Inventory Turn = 2.5
Better, faster TURN cures Groundhog Day inventory and bank account shortfalls! First, begin a merchandise diet of JUST what you need monthly to generate that particular average month’s sales, including projected markup and markdowns. Then, add some “wiggle room” to reorder what’s performing, keeping fresh merchandise flowing monthly. Then, JACKPOT Strategy!
Many times, your reorder can be bought at a discount, fueling better mark-up! How? Just ask when you write the reorder! Even 10% helps, and most vendors today are EXCITED about a reorder! So start asking for 25% first - you might get it!
Your new “lean plan” also includes a wicked willingness to examine your sales floor EVERY. SINGLE. WEEK. to mark down and clear stragglers and non- performers. Soon, your sales floor is fresher, your clients shop more often for regular price, new items AND sale merchandise, and you are TURNing your merchandise 3-5 times making EVERYONE more money on what you’ve bought to sell! This focused practice, plus celebrating frequent, unique events, will keep your store and bottom line healthier.
For Waldoff Group’s in-depth analysis on TURN, open to buy planning and profit ratios, Click HERE!