Raise Turns...and Raise Cash!

Looking for ways to get more cash out of your retail business? Start focusing on raising turns! Here's why.

For every $1 million of annual sales, assuming 40% Gross Profit (Margin), the difference between 2 inventory turns and 3 turns is…$100,000 in cash!   

(Have a $3 million operation? That's $300,000. $5 Million in sales? That would be $500K cash. And so on.)

The dynamics of improved inventory turnover are impressive indeed!  And well-known to successful merchants. The Retail Owners Institute believes that all retailers should know and use this powerful cause-effect lever.  

Want an Example? Here Are Two: H&M and Zara 

Consider two retailers that are re-inventing apparel retailing worldwide, H&M and Zara.  By effective use of technology, both are raising inventory turns in their stores to unprecedented heights. And now, consider the ripple effect of that management focus:

• The high turns have reduced markdowns
• thus raising margins. 
• Meanwhile, stores always full of very fresh merchandise 
• excite and please their customers! What a concept!

Cause-effect, cause-effect. It all starts at the top, with the discipline to focus on ever-increasing inventory turns. H&M and Zara offer powerful examples for all retailers.

Or, as Michael Gould, Chairman of Bloomingdale's, so famously said:

"No retailer ever filed bankruptcy because their turns were too high." 

"So, what should my turns be?"

Wonder what your turns "should" be? Or, how your store compares to others like yours?

The ROI posts 5-year trend charts of 6 Key Ratio Benchmarks that retailers should be monitoring. These trend charts are available for 55 retail verticals. One of those key benchmarks is inventory turnover. 

To see how your operation compares to other stores like yours, check out the Key Ratio Benchmarks at The ROI site. Go to this page on The ROI site to find your retail segment.