Why improving stockturn is key to a healthy cash flow

As a retailer in today’s unstable economic climate, improving your stockturn is one of the most effective ways to build profitability and business resilience. To thrive in the retail industry, especially in e-commerce, it’s imperative that you efficiently and frequently turnover your stock (inventory) to increase revenue, boost cash flow, and move forward into new levels of growth. So, what does it mean to improve stockturn, and how does it help you as a business?

What is stockturn and why is it important for retailers?

Stock turn, or stock turnover, refers to how quickly and efficiently you’re able to sell your entire inventory in a given period of time. In simple terms, improved stockturn means you’re increasing the number of times you’re selling and replacing your stock.

Stockturn is the central cog of a retail machine – every other process in a retail business is essentially working to ensure inventory is being turned over swiftly and regularly, across all product lines. When stockturn is sluggish, resulting in an inventory full of slow-moving products or duds, business can become financially stunted.

Recent Inventory Planner research (2023) found this to be a common problem for retailers, with the average merchant claiming to be overstocked by around 30%, trapping thousands in cash.

An additional hindrance; when their only option is to do mass discounts or liquidate the items that won’t sell, retailers are significantly hit in the pocket, not to mention at risk of brand damage as customers get used to promotional sales and expect to spend less every time.

Overall, it’s essential to cultivate a streamlined, profitable inventory that is smartly replenished more often in line with stockturn, to protect cash flow and cultivate growth opportunities.

The benefits of improved stockturn

So, when stock turnover is frequent and reliable, how does this benefit a retail business? 

  • Sell more quickly, gain more revenue

The most obvious benefit of improved stockturn means your goods are selling at a higher pace, so you’ll be receiving cash from sales more quickly to then reinvest into the business: replenishing products, paying staff wages and improving operational processes, for instance. 

  • Reduced holding costs

When products in your itinerary are quickly selling instead of taking up space in the warehouse and gathering dust, you won’t have to pay through the nose for holding it there. If you’re holding a lot of unnecessary overstock, improved stockturn could even mean reducing warehouse size and saving money that way.

  • Lower risk of obsolescence

Obsolescent products are those which are out of date, expired or discontinued – many of which end up trapping your cash if they aren’t identified to be sold off or liquidated in good time. When stock doesn’t turn over quickly, items are more likely to expire and become a deadweight on your bottom line.

  • Competitive advantage

A company whose products turn over regularly can afford to be more agile, responding more quickly to sudden trends and market changes than a company with a slow-moving, heavy itinerary full of unsold products.

  • Healthier cash flow 

When all of the above factors coincide in synergy, cash flow for your business will massively improve. When your products are selling and replenishing with pleasing regularity, releasing cash to be invested into other parts of business; you’ll be well on your way to growing your retail brand without anything blocking the path.

How technology can help with improved stockturn

A data-fueled, smart inventory planning tool like Inventory Planner helps retail businesses turnover stock quickly and efficiently, without spending hours of staff time in spreadsheets doing manual data scouring, forecasting and purchasing.

For a start, full inventory visibility means you can target products right down to variant level, so you’ll be well informed about your bestsellers, slow-movers and dud items even as granular as style, color or size – and can choose to promote them and/or discontinue certain lines to improve selling potential across your entire inventory.

Custom reporting with over 200 metrics including location, vendor, means you can analyse product performance and change inventory in line with your own business KPIs.

Data-fueled forecasting can offer accurate sales predictions and accurate purchasing recommendations for incoming demand. Without the human error and time investment involved in manual sales forecasting and purchasing, you’ll always have the right amount of products at the exact time you’ll sell them – so you won’t need to bother with safety stock and will have the capacity to replenish inventory more often.

Risk of overstock and stockout warnings allow you to amend and refine purchase orders ahead of time, lowering the chance of making incorrect orders due to guesswork.

SitStay turns over and over

Using Inventory Planner, working dog gear company SitStay was able to improve its stock turnover by 8 times. The retailer did this by targeting its inventory overhang, liquidating unsellable items and making sure that the right products were available to customers when and where they wanted them.

With a newly streamlined inventory full of viable products, their inventory investment turned into profits significantly faster. They were also able to predict sales more accurately for all sales channels, adjust pricing to meet targeted margins, and conduct in-depth analysis for all SitStay’s channels and locations.

To see how Inventory Planner can transform your inventory processes and improve stock turnover with reliable, data-led forecasting and purchasing recommendations, get in touch today.