How much stock should you have?

Inventory management is a balancing act but, luckily, there is a way to work out what’s right for you. Here, Xpos’s Mark Hopkins looks at how golf retailers can stay on top of stock turn to ensure a thriving business.

WHAT IS STOCK TURN?

Your stock turn number is a simple metric that helps you identify if you are over, or under-stocked.  Also known as inventory turnover, stock turn relates to the amount of stock you have now and divides it by the cost of sales over the past 12 months. For example, you hold £50,000 stock (cost price) right now and, in the past 12 months, you’ve made £100,000 of sales (cost price). Now divide 100 by 50 and you get a stock turn of 2.

This simple number is a great indicator of your pro shop’s retail efficiency.

HOW DOES MY STOCK TURN NUMBER HELP ME?

A high stock turn indicates stock is sold and replenished quickly, while a low stock turn rate suggests slower sales and potential overstocking. For example, an antiques shop may have a stock turn of one as each unit is unique. On the other hand, a grocery shop needs to ensure product is moved on quickly to avoid rotting fruit and vegetables and might have a stock turn over 50, or more.

For pro shops, holding too much stock damages margins. With limited distribution channels, golf retailers who buy too much stock can damage profits and disappoint customers in the process.

INDUSTRY NUMBERS

At the end of last year, the average stock turn for UK on-course pro shops was 2.5. Ideally, we should be aiming for between 3.5 and 4, although it’s worth noting that the number does vary across categories.

Take a look at your Xpos reports. If your stock turn is lower than 3.5- 4, it’s likely your shop is over-stocked. And, while there’s no need for panic, it’s a good idea to look at how you can slim down stock, which will also help when it comes to buying for next season.

Let’s take an example. If you have a golf bag that doesn’t sell for a year, it has a stock turn of one. However, if you sell it within three months and make 30% profit, you can reinvest the profit and buy another golf bag … sell that, reinvest the profit …  Do that four times a year across your product range and you’ll be running a great business.

RETAILER POV

Lee Brotherhood is Head PGA Professional at Olton Golf Club and says it was almost a revelation when he finally understood how to keep stock moving in the business.

“Cash can really get tied up in non-moving stock before you know it.  I use the Stock Turn report in Xpos to tell me how often stock is being sold and replaced within a 12-month period.  It shows you which categories are overstocked and might be a problem if you don’t address it.

If we spot a category with a poor stock turn, we’ll make a plan to sell product on and it’s really made a difference”.

STOCK TURN TACTICS

  • Run the Sales Analysis report weekly
  • Focus on selling techniques such as merchandising, upselling and bundling
  • Work with suppliers to deliver fewer items more frequently
  • Cancel pre-books if initial orders aren’t selling
  • Hold short-term sales with small discounts on certain items
  • Use the Price Bands in Xpos to set up and manage your discounts

Our retail experts are here to help. Contact us via hello@xpos.co.uk. For technical queries email support@xpos.co.uk