Over the years, retailers have asked me, “What turn rates should I use – industry standards, industry averages, or what?”
Your buying must be predicated on projected sales and desired turn rates. An open to buy plan will direct you to buy the right quantities in the right departments to support your sales and actually achieve your desired turn rates.
While it’s important to always try to increase sales, it’s critical to keep your turn rate moving ahead. Your open to buy system is the planning tool that uses sales and turnover to determine ideal beginning inventory figures for each month in each merchandise department, 12 months ahead. Buying according to the plan will make the difference between profits and markdowns.
Also, a good open to buy plan must enable you to evaluate your performance each month and make adjustments based on trends. As you see growth or even decline, you will need to make adjustments to sales and/or turn rates.
Your adjustments to turnover should always be up. If you lower turn, you will raise inventory levels, create additional buying, excess invoices, markdowns and lower turnover.
The ideal turn rate is slightly higher than the turn rate you’re currently achieving. Continue to raise your turn and you’ll continue to grow your profits. It doesn’t matter where you start, it doesn’t matter what the industry says, if you are increasing your turnover, you will be headed toward the ideal turn rate.