The value of stock turn for retailers
What is stock turn and why is it so important?
Stock turn indicates how quickly a retailer’s stock is sold and then reordered. A simplistic calculation is: Stock turn = Number of items sold ÷ Average stock level. For example. A retailer sells 10,000 items in a year, and on average holds 2,500 items at one time. 10,000 ÷ 2,500 = 4. Therefore the stock turn rate is 4. This means the retailer is carrying 3 months supply.
2. As a rule of thumb, the cost of owning excess stock is approximately 2½% per month, or 30% per year. This is due to increased expenses such as interest, insurance, buying expense, shipping, storage costs and markdowns. Therefore, a retailer can reduce these expenses by reducing average stock levels. If a retailer reduces £100,000 work of stock to £70,000 through increasing stock turn, the saving is £9,000 a year (£30,000 times 30%).
3. High stock turn allows you to keep on top of new trends and have fresh inventory in to excite customers. Fast Stock Turn Rates are proven to increase sales due to the increased flow of fresh new merchandise.
4. Reduces the need for excessive discounts or carryover of out-of-season stock.
A good stock control system (EPoS software) can make a significant difference in improving stock turn.
