Over the years, retailers have asked me, “What turn rates should I use?” They’ve asked about industry standards, industry averages, and about everything else you might imagine to give them a handle on what they should be doing.
Turnover is a moving target and a retailer needs to use it to help him constantly grow his business. While it’s important to always try to increase sales, it’s critical to keep moving your turn rate ahead.
Your buying is predicated on projected sales and desired turn rates. Controlling your turn rates will enable you to buy the right quantities in the right departments to support your sales and actually achieve your desired turn rates.
Your open to buy system is the planning tool that uses sales and turnover to determine ideal beginning inventory figures for each month, 12 months ahead in each merchandise department. Following the resultant buying plan will make the difference between profits and markdowns.
So, you need to have a solid open to buy plan, you need to have a realistic sales plan (desired growth can work to your disadvantage if it doesn’t materialize), and you need to be able to evaluate your performance within your open to buy plan and have the ability to make adjustments based on trends. As you see growth or even decline, you will need to make adjustments to sales and 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 even lower turnover.
So, 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 all about increasing your turnover, you will always be moving toward the ideal turn rate.