Re-Inventing Retail

From the Co-Founders of The Retail Owners Institute.
Tips | Tactics | Insights on the Business of Retailing.

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Of course you do! Doesn't everybody?

But as pressures grow to raise wages, increase benefits, renew leases, improve technology, and oh yes, pay taxes, many businesses find their profits diminishing.

But retailers have a special advantage. An often under-utilized  pocket of profit growth potential. 

Yes, we're talking about your inventory! 

For each $100 of inventory @cost, as it sells, its markup (margin dollars) helps cover expenses and adds to profit.

Even a modest increase in inventory turnover rates per year can yield a dramatic increase in margin dollars and net profits. (For the formula for turnover and more perspective, see the Retail Benchmarks section at The ROI.)

Take a look at this chart.

How inventory turns affect retail profits

See how turnover is dramatically related to your profits?!

When turnover is properly focused on, it produces more sales by keeping a fresh flow of new merchandise coming into your store. As well as increasing margin dollars.

Maximizing turnover reduces markdowns. When turnover is too slow, the results are excessive markdowns – poor cash flow – higher operating expenses – and even lost sales! Inventory and sales determine turnover.

Improvements in payroll, rent markups, and freight are controlled by competitive or fixed expenses. But turnover is directly within your control! And should never be neglected.

All of which helps explain why Michael Gould, when Chairman of Bloomingdales, so famously exclaimed to his buyers:

"No retailer ever went bankrupt because their turns were too high!"


The ROI is wondering: If you really want to grow profits, are you focusing enough attention on your inventory turnover?

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About The Co-Founders

Pat Johnson and Dick Outcalt, The Co-Founders of The Retail Owners Institute®, have been called "The Zen masters of retail finance!"

Since 1999, they have been assembling  their proprietary content into a unique self-help website. The Retail Owners Institute is an unmatched resource that assists retailers worldwide with basic financial training, assistance and easy-to-use tools.

Their engaging and empowering how-to resources about the financial levers in retailing are informative, fun(!), and retailer-friendly. Their promise: "Everyone will 'get it'!"

Pat and Dick are recognized experts in strategic retailing. Working only as a team – Outcalt & Johnson: Retail Strategists, LLC – they have been consulting, publishing, and speaking professionally throughout North America since 1990.

They focus exclusively on retail, or wherever retail is involved. They work with CEOs, CFOs, boards and owners of retail operations, as well as manufacturers or wholesalers expanding into retail. And they also are Retail Turnaround Experts.

Since 1999, empowering retailers and store owners to "Turn on your financial headlights!"