Do you know what turnover is? How to calculate it? What it means to your buying? What it means to your bottom line? Do you know how to use it? Do you know your current turnover in your store? In each merchandise department?
I hope you know the answers to all of the above, but if you don’t, you’re not alone. Most retailers concentrate on sales and space. When they buy, they buy to fill space and hope their sales will materialize since they have an abundance of merchandise. Of course, sales are important, but sales are only half the story.
Every store is driven by two elements – sales and turnover. An open to buy system is driven by the same two elements. Space is not a part of the equation. The size of your store should not determine how much you buy. You need to buy to support your anticipated sales. But how do you know how much merchandise you need to support these sales. That’s where turnover comes into the picture.
The big advantage of a retail store over other types of investments (and, yes, your store is very much an investment) is your ability to control your turnover through your buying. This is done with open to buy planning which uses sales and turnover to determine ideal beginning inventories and then calculates a buying plan based on those values. The idea is to turn your invested dollars (and, yes, your merchandise is your invested dollars) as quickly as possible. If you keep a smaller investment in inventory and turn it faster, each of those invested dollars will make multiple contributions to overhead and profit. So, the more you turn, the more you make.
Sadly, it’s not that simple since at the same time you are trying to make as many sales as possible. As it turns out, retailing is a constant juggling act. You are always trying to achieve maximum sales at the highest possible turn rates. If your turn is too high, sales will be missed. If your turn is too low, merchandise sits and must be sold after the season at reduced prices.
So, turnover is a bit complicated, but extremely important. The best possible way to make turnover work for your store, your buying and your bottom line is with open to buy planning. And the easiest, most accurate, best supported open to buy plan is MYOTBPLAN.COM. We’re so confident that you’ll succeed with us that there’s no contract and we offer a Performance Guarantee which is detailed on the Home page of our web site. Subscribe to MYOTBPLAN.COM you will have the key to making money in retail.