3 Tips to Improve Retail Inventory Turnover

Maintaining a high inventory turnover is one of the key measurements that retail consultants use to determine the overall health of a retail business.  Defined as the number of times a store’s inventory is sold within a given period of time, some retailers are able to turnover their inventory as much as 12 times a year!

Why is this metric so important?  Having the ability to sell your inventory quickly helps cash flow thereby allowing you to invest in new items, marketing programs, employee development and, ultimately, customer satisfaction.  That is because you are now able to buy the latest and best products, advertise them and train your people to sell them…all at full price!

So what can you do to drive your inventory turnover? Here are 6 ideas that you can apply to your business:

Buy your inventory more frequently:  When you purchase just a few times a year – at the beginning of key drive periods like back to school or holiday, you have to buy more product.  This increases your exposure to making big (vs. little) mistakes and extends the amount of time you have to sell out of a particular sku.  It also means that you are unable to drive foot traffic by teaching and marketing “new” products to your customers on a monthly or bimonthly basis.  Finally, it forces you to discount old inventory in order to move it out.  This reduces the value of your brand in your customer’s eyes.

Buy inventory in smaller quantities:  Ask yourself, what happens when you “Stack it high to let it Fly,” but the product does not sell?  Now you are stuck with large quantities of old merchandise that you have to discount in order to move it out.  Plus you are tying up money that could be used to buy the latest and best products that your customers want.

 Don’t buy too broadly:     Many years ago I ran consumer electronics store and my parent company offered walkie-talkies in 8 different models.  I restricted the selection in my store to three “good, better and best” models and guess what happened?  Sales went up!  That is because customers prefer simpler choices and my customers know that I had selected only the best products for them!

There you go!  Buy less, buy more frequently, and buy right.  A simple three step formula that will help you to increase inventory turnover and increase cash flow!

Would you like assistance with increasing revenue, reducing costs and optimizing you profits?  Contact us today for a free one-hour consultation!

-          David Goodwin is the Principal of the Retail Advocacy Group.  As a 30 year veteran of the retail industry he has directed the activities of hundreds of retail locations and thousands of retail sales representatives and store managers.  RAG offers consulting services, retail sales training and management training programs.   You can learn more at www.retailertrainingservices.com.