Last month, Phil Barnard wrote about the importance of good stock management and how holding too much stock can seriously damage your bottom line. Here, in the second of our two-part series, we talk to retailers about stock turn and the changes they've made to improve their magic number.
Fundamentally if you're selling stock you should be making profit but how often should you be turning over stock, and what makes a good stock turn number?
Your stock turn number is a simple ratio based on how many times you turnover stock over a 12 month period. It's a key indicator of retail efficiency, but how do you know whether your number is in line with expectations for your business and industry?
In 2015, the average stock turn for a golf shop was 2.5 and at the end of 2019, this had risen to 2.7. While the increase is positive and the message of good stock management seems to be getting through, on-course golf shops should be aiming for a stock turn of between 3 and 4.
For an average pro shop turning over c. £150,000, increasing your stock turn from 2.7 to 4 could save you about £12,500 per year! If you were to reinvest that into you stock throughout the year, you could increase profit by roughly £4,000.
Lee Brotherhood, Head PGA Pro, Hollywood Golf Club
The stock turn report in XPOS tells us how often stock is being sold and replaced within a 12 month period. When we first began to use this report, we realised there were a number of categories where we were overstocking.
When I really started to really understand how to manage stock in the business, it was almost a revelation. I could really see how cash tied up in non-moving stock was really adding up!
To improve our stock turn, we created a plan to tackle each category that had a stock turn of less than "1" - Gloves being the first one. Using the sales analysis reports, we could see how many gloves were being sold by size over a 12 month period. We now have a more strategic stocking approach to buying gloves, which is based on size, and has seen stock turn for this category increase from 0.8 to 2.0. We expect that figure to move up to 4 by the Spring, which will free up cash for us to use elsewhere.
"To improve our stock turn, we created a plan to tackle each category that had a stock turn of less than '1'."
We have developed similar strategies for the other struggling categories including tees, socks and trousers. I went to a retail CPD run by Mark Hopkins at XPOS last November which provided more great tips and, since then, our overall stock turn has increased from 3.9 to 5.
Alistair Welsher, Head PGA Pro, Tiverton Golf Club
I admit I didn't know what stock turn was until I started using XPOS. And in the early days, I saw references to stock turn on the system but I didn't understand it. Seminars at the TGI Conference, along with some on site training really helped me to get to grips with it.
"Apparel has the slowest stock turn so we really try to get behind new stock"
Because I'd never focussed on it before, my overall stock turn number was pretty initially pretty bad. The big thing was trying to reduce stock holding and placing smaller pre-orders with some of my suppliers. Gloves is a great example. Generally we now display a holding of all sizes at the front of the shop with next to no stock in the back. We just replenish as we sell. We've really paid attention to that over the last 2 years and run regular stock turn reports.
Certain categories have a higher stock turn than others, but I know this is normal. Apparel has the slowest stock turn so we really try to get behind new stock that we feel should sell. Balls can be slow so we aim to really improve that category and I'm pleased we manage to get stock turn as high as 6 or 7 at times.
Our overall stock turn can be as good as 3.6 but it does fluctuate. Last year, I really noticed the benefit of having less money tied up in stock. It gave me the flexibility to manoeuvre later in the season if something came out that I wanted to go for.
Stock management is a priority and I hold weekly meetings with the team where we pick apart the sales reports. We also use the XPOS scanner and stocktaking App to count everything in the shop at least once a month.
Darren Everett, Head PGA Pro, Exeter Golf and Country Club
When you join a new club, it takes a while to get to know the customers and what they're likely to buy. We were definitely guilty of overstocking in the early days. Right now, our stock turn is around 2.3 but we've just had some deliveries and haven't had the sales to back that up. I know it's key to growing the business and needs to be better than it is now. This year, we are aiming to improve our stock turn number and I'm aiming for a stock turn of 4.
We've streamlined pre-books so we aren't as committed to as much stock and we've cut down on the number of brands we stock. It's now a nice, neat shop.
We have a very active playing membership and our customers are really keen on the technical side of the game. As a result, hardware brings in twice as much turnover as any other category, so much so, that apparel has really fallen back. Basically we aren't selling enough clothing and there's a real risk to the business if hardware doesn't do that well one year. The guys in the team here are really into the equipment so hardware is something they enjoy talking about. They're passionate about it so it makes it easier for them to sell clubs and irons. The same passion just isn't there when it comes to clothing. One of our goals now is to focus on selling and we're reviewing staff targets to try to push clothing more.
We've cut down on the number of brands we stock. It's now a nice, neat shop."
I've got to get the team to buy into the clothing brands. We're bringing in Adidas for our younger customers and we'll look to balance that out with higher-end brands: possibly Hugo Boss or Peter Miller.
If you'd like to know more about how to manage your stock turn and a more detailed look at your numbers, contact XPOS for help. We can help you get to grips with your reports and help you improve the efficiency of your business.