To adapt to the changes in today’s retail landscape, it is important to back your business decisions with data.  Knowing the right inventory performance metrics to evaluate and what they mean will allow you to make educated business decisions to improve your store’s inventory performance.

Make sure you’re evaluating these 3 important inventory performance metrics:

  1. Look at your Sell-Through – This is the percentage of sales to the inventory investment available for sale. The formula measures how much or what percentage of your total available inventory was sold during a given period. For instance, if you had two items for which you had received 10 pieces of both and had sold 6 pieces of both, the sell-through percent on both items would the same at 60%. But if one of these items had been in your store for 12 months and the other item in the store for 1 month, the second item is much more profitable for your business than the first, even though the sell-through is the same.
  2.  Evaluate the Return On Investment (ROI) of Your Inventory – For every dollar you invest in a product, how many are you getting in return. ROI analyzes inventory levels, sales, and profitability by comparing the investment in inventory required to generate those gross margin dollars. A high ROI indicates that you have the right amount of inventory, at the right time, for the right price. A low ROI may indicate that you are missing out on sales opportunities and leaving money on the table in the form of old inventory or excess markdowns.
  3. Understand the Gross Profit Margin (GP) of classes/SKUs/vendors – GP measures the percentage of your total sales dollars that are profit dollars. The GP percentage is relative to the cost of the item as well as the selling price. A higher GP percentage indicates that you are selling your product as close to the original retail price as possible. A lower GP percentage may indicate excessive markdowns for products driving down profitability.
Without the data, it is difficult to accurately know your success. The more insight you have, the better equipped you are to make informed decisions so that you can be a profitable retailer.   [vc_row][vc_column width=”1/1″][minti_testimonial author=”Joey Pointer” company=”CEO, Fleet Feet”]”We rolled out an ecommerce platform and we wouldn’t have been able to do it without RICS.”[/minti_testimonial][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]At RICS, we support retailers integrating with new solutions to help grow their business. We’ve integrated with trustworthy partners offering e-commerce solutions, payment gateways, gift and loyalty solutions, EDI, Open-to-Buy Consulting, and more.  These reliable and trustworthy partners connect to RICS so you can keep up with the trends of retail technology. Click here to see learn more about the current integrations with RICS software.

USING THE RICS API

We’re excited and ready to help you integrate with RICS to meet your technology needs. Due to our current development initiatives, we won’t do the custom programming of the integration. Using your development team or a partner, RICS’ API can be accessed to create custom integrations. Our services team will work with your developers throughout enablement.

WE WANT YOUR INTEGRATION SUGGESTIONS

RICS is already integrated with tools and services to help your business perform at its best. However, there are always opportunities for new integration ideas! We’re open to exploring integration suggestions with your help. Implementation often doesn’t require custom development, but it does require a validation process to ensure the 3rd party adds value and is feasible using the RICS API. Our integration enablement process follows four steps:
  1. Client suggests an integration
  2. RICS enabled API access if the integration is purposeful and feasible
  3. RICS provides acceptable API usage guidance to client and integrated third-party
  4. RICS monitors to ensure API guidelines are met
Don’t hesitate to reach out to an Account Manager at any time to discuss initiatives like these. You can contact us at accounts@ricssoftware.com to start the conversation. [/vc_column_text][/vc_column][/vc_row]

The retail landscape is changing – don’t get left behind.

To be a successful retailer, you must commit to understanding your inventory. According to RMSA’s Senior VP of Client Services, Paul Erickson, savvy retailers have “a thorough understanding of how to actively manage inventory”. So, How can you use data to better manage inventory and turn more profits? Reserve your seat for RICS & RMSA’s Webinar Series for Retailers focused on strategies you can use to manage your inventory and grow your business. “Retailers need to understand the strategies discussed in this webinar series because the very best independent retailers have an ongoing commitment to learning and growth. They recognize that there is always room for developing new skills and refining others.” – Paul Erickson, RMSA Senior VP of Client Services

What takeaways can you expect from this series?

– A Strategic Plan for your inventory investment to increase cash flow, profits and sales

– A breakdown of key metrics like inventory turnover, GMROI, Open-To-Buy planning

– Actionable steps to take these concepts from abstract to a working merchandising strategy

Webinar #1: Open-To-Buy: Where Better Inventory Management Begins

If you’re ineffectively managing inventory, you could see excess inventory which means decreased margins and potentially negative cash flow. Join Senior Vice President of Client Services at RMSA and retail expert, Paul Erickson, on July 25th at 2 pm EST for a discussion about open-to-buy, a financial strategy that helps retailers focus on accurate forecasting and selling strategies to help increase profits.

Webinar #2: Making Your Inventory Work for You

As a business owner, you’re constantly checking your bottom line. On August 24th at 2 pm EST join Senior Vice President of Client Services at RMSA and retail expert, Paul Erickson, to learn the specific techniques recommended to control your inventory, increase your margins, improve your cash flow and increase your bottom line.

Webinar #3: Increase Cash Flow Now

To make agile, real-time business decisions making you more money, you must examine your data on a regular basis and adapt to what it’s telling you. On September 21st at 2 pm EST join Senior Vice President of Client Services at RMSA and retail expert, Paul Erickson, as he goes through the step by step to improve your cash flow and increase top line sales.   Want to learn more about the webinars or sign up for the series? Visit our website here.   DOWNLOAD OUR CASH FLOW E-BOOK      

Do you want to increase cash flow?

Your cash flow and profitability depend on inventory productivity (i.e., does it sell or not and how fast). If you can improve this value, you can improve the profitability of your store. So, what can you do to improve your inventory productivity?

Analyze product performance

As a general rule, you can improve your cash flow by 1% for every 1 week of improvement you achieve in inventory turns. Turns are the rate at which inventory is sold within a certain time frame. This is an important indicator of how efficiently a product is moving through a sales cycle. You can use turns to discover what products sell most quickly and make you the most money (note: products selling at a faster rate usually sell at full price and higher margins). On the flip side, slow inventory turnover is an indicator of lost opportunity.

Here’s how to improve your inventory turn rate:

  1. Analyze your turn data at the class, brand, and product levels to identify inventory performance
  2. Mark down stale products to sell them quickly and make room for better-performing products
  3. Invest your cash into high productivity classes, brands, and products
Making these decisions will improve your inventory productivity to increase cash flow. What would it look like if your business could increase overall inventory turn by shaving off just one week off inventory age? Find your potential cash flow increase:

Total number of sales X .01 (1% improvement from 1-week turn increase) = cash flow increase

 

That’s a powerful number! RICS system provides turns, return on investment, and gross margin rate of investment on our sales reports so you don’t have to mess with calculating it yourself.

No more guesswork, no more hunches.

Get control of your inventory to increase cash flow. Need more help? Click below to register for our upcoming webinar or check out our guide, Cash Flow: How To Use Inventory Management to Make More Now.
Register for our upcoming webinar It’s almost that time again… all the kids are heading back-to-school in August and you have an opportunity to end summer with a bang by hosting a back-to-school event! Now is the time to start planning. Not sure how to start? Here are 3 tips for hosting a profitable back-to-school event.

How to host a back to school event?

1. Promote with a purpose

Use your customer list to invite loyal customers to your back-to-school event. Make the coupon or invitation specific to your customer segments (2-4 customer groups). If you haven’t already, consider a Frequent Buyer program to maintain customer loyalty. Start promoting the event 2 weeks before to ensure you give your customers enough time to mark their calendars.  Connect with customers through their preferred communication channels (email, text, social, etc.). Examples include having an event hashtag on Twitter, creating a Facebook event to share on your page followers, and posting a photo to Instagram with the event details. Post about the event on social media during business hours for optimal visibility (consider Hootsuite to automate the posts).

2. Utilize data on inventory transactions

Analyze the previous performance of your products.  What products sold well last year? Which ones are stale on your shelves? Do some sell no matter what? Use this information to arrange your store. For example, move the stale product to a prominent display or out onto the sidewalk. Stock up on well-performing products or consider moving them to the back of the store. This means your customers will walk past other products to find what you already know they will purchase.

3. Consider an additional POS

Long lines are discouraging, so enable a temporary POS to get through a spring sale or just a couple of busy months to ring out customers quicker. This will reduce tension and frustration in the store, providing a more pleasant shopping experience. It will also allow you to sell more in less time.   Now you’re equipped to host a profitable back-to-school event. Want ideas for other events to bring in customers? Well, the good news is, we’ve put together a calendar of monthly occasions that you can add to your marketing plans to attract more customers. Without data, you don’t have the insight you need to know how your business is really doing. That’s why it’s important to keep track of these 3 retail productivity metrics. These three metrics work together and will help you make actionable decisions about your inventory using data.

3 Retail Performance Metrics:

  1. Return On Investment (ROI) – For every dollar you invest in a product, how many are you getting in return. ROI analyzes inventory levels, sales, and profitability by comparing the investment in inventory required to generate those gross margin dollars. A high ROI indicates that you have the right amount of inventory, at the right time, for the right price. A low ROI may indicate that you are missing out on sales opportunities and leaving money on the table in the form of old inventory or excess markdowns.
  2.  Turns – Turns measure how many times will you sell through your inventory in 1 year. This is an important indicator of how efficiently a product is moving through a sales cycle. You can use turns to find out which products sell most quickly and make you the most money (note: products selling at a faster rate usually sell at full price and higher margins). A low turn rate can indicate you may be overstocked in a product. This is based heavily on how you choose to manage your inventory.
  3. Gross Profit Margin (GP) – GP is the percentage of your overall sales dollars that were profit dollars. The GP% is relative to the cost of the item as well as the selling price. A higher GP% can indicate that you are selling your product as close to the original retail price as possible. A lower GP% may indicate excessive markdowns for products driving down profitability.
Without the data, it is difficult to accurately know your success. The more insight you have, the better equipped you are to make informed decisions so that you can be a profitable retailer.   Before beginning the creation process of open-to-buy, it is important to review your Key Performance Indicators and decide on which KPIs are most important to your business. Many retailers measure their product using Turns, ROI, Gross Profit %, Profit, Net Sales, and others. Once decided, RICS offers many different reports which can be used to review those KPIS and begin measuring the success of your business. To start, we need to set our frame of mind and understand that the overall reason to create an open-to-buy process is to help bring the right product, in the store, at the right time. That’s the overall all goal of having a business, right? If you have the right product, in the store, at the right time, you’ll have a product to sell for every customer that walks in your door. To get the right product, you’ll want to review your data you already have in RICS. It is important to understand how your product has performed historically (Sales Comparison Report), how it trends season to season (Sales By Month Report), understand what product you have at on-hand (Grid Analysis Report), as well as making sure you are selling at the right price point (Sales Analysis Price Point Summary). When running these reports, you’ll want to take a high-level approach and review which top performing classes and suppliers exists inside of your business. Once you’ve identified the top performing classes and suppliers, you’ll want to continue to drill down further into your hierarchy to understand at a SKU level and ultimately a size level which products are your best sellers. Drilling down into the product will help identify your core products in your organization which are the most important products to manage efficiently and effectively. Finally, once you’ve determined what are the core products that exist in your organization, RICS has the ability to help you automate the way you fill in orders by using product models and our Generate Automated Purchase Order Report. By filling in the product model information into RICS’ Generate Automatic Purchase Orders report, it will provide you a suggestion on which products to order based on on-hands and on order quantities. These efficiencies can help you drastically cut down on your ordering time by simply using RICS suggestions as a starting point and then managing the ordering process there after. When you’re managing more than one store, it can be difficult to stay on top of how your inventory is doing across locations. Optimizing your inventory for each store and for your business as a whole is an important part of creating a business model that makes you money. So when it comes to optimizing your inventory to get the most bang for your buck, where do you start? Check out these three tips for how you can better manage and optimize your inventory in your multi-store business. Analyze inventory performance monthly (at minimum)  Ideally, you want to be analyzing your inventory as often as possible. If you can’t get around to viewing performance daily (or even weekly), make sure you are at least setting some time every month to review your inventory performance. This will help you identify you best and worst sellers, along with which stores are selling what products. Map inventory sales Sometimes you might find that one piece isn’t selling well at one location but is flying off the shelves at another. That’s why it’s so important to map your sales to each of your locations. When you know inventory is performing better in one location, you can move some of your stock to that location rather than allow it to collect dust on your shelves. On top of that, you’ll avoid being overstocked due to ordering new products by borrowing inventory from other locations. Take advantage of transfers As mentioned above, optimizing your inventory can also mean borrowing inventory from other stores. The idea that you should ‘buy from yourself’ before placing a new order can be instrumental in avoiding excess inventory at the end of the year. Use store transfers to move inventory around to the location that you know will be able to sell it. For more tips on managing your multi-store business, download our free guide, Guide to Multi-Store Management.   [vc_row][vc_column width=”1/1″][vc_column_text]As a retailer, your technology is incredibly important to running a successful business. Whether you’re using customer data to deliver personalized messages to your shoppers, or looking up inventory for a customer on the sales floor, having a system that works for you is a crucial part of your business. When it comes to choosing a POS and inventory management system, you want to make sure you have a partner with all the functions you need. We know that finding that perfect partner can be a challenge, that’s why we want to help you identify the top questions that can help you identify if a POS provider is right for your business.

What industries do you service?

You’re not a cupcake shop, so why would you use a POS system that was built for one? As a footwear or apparel retailer, it’s incredibly important to find a system that can support the way you do business. A system that boasts a one-size-fits-all model doesn’t give you the functionality you need to run your business. Finding a solution built for your industry means you’ll have all the functionality you need to run your store and is a proven solution for other retailers like you.

Are you cloud-based?

When it comes to how your POS system is hosted, it’s important to ask if a provider is an installed solution or is cloud-based. Installed solutions may seem like a one-time expense, but the reality is they can cost a lot more over the course of time. Installed solutions require servers that need to be maintained and lack ongoing support and software updates. With a cloud-hosted solution, you eliminate costly servers and ongoing maintenance, and move to a solution that is constantly being updated and supported. Additionally, cloud-hosting gives you the ability to access your data from anywhere so you’re not longer chained to your store when making business decisions.

What is your support model?

As you’re evaluating systems, it’s necessary to ask about your access to support. Is ongoing support an added cost or is it included with your basic contract? You want to go with a provider who not only gives you access to unlimited support, but also includes education as part of their support model. Whether education comes in the form of webinars or training guides, it’s nice to know you’ll be able to continue education and training on your own time. Thinking about switching your POS? Download our free guide to learn more about choosing the right POS for your business.[/vc_column_text][/vc_column][/vc_row] Increased profitability in retail can come from many different places. Better inventory management, smarter buying and markdowns decisions, and keeping down expenses are all places from which retailers can pull bigger profits. So, what’s the one common theme in improving performance in each of these business areas? The key piece to the puzzle? Efficiency. It sounds simple enough. We all know we want to be more efficient. We all want to maximize our work hours and be more effective at running our business. The question is how do we improve that efficiency? And the answer has never really changed. We get better tools.

Retail Efficiency

Running a retail business without the right technology for automating buying and markdown decisions, or getting access to key performance indicators on merchandise and employees, is tantamount to waiving the white flag in this increasingly competitive environment. We must stay dynamic and always be looking for ways to improve our processes. The importation of data into our POS and inventory management system is another one of these key efficiencies that will add more time back to your day, which equals making more money in your business. It will add to the efficiency of entering purchase orders, processing special orders, and insuring data consistency across all your stores. If your POS system doesn’t allow for the importation of things like products Customers, (SKUs), prices, Vendors, and UPCs, then my guess is that you are spending a lot of time entering them manually. Think about being able to request a product file from your vendor, copy and paste it into a template, and drop that file into your POS system! Import those UPCs for all the products in your system off an Excel sheet instead of scanning each item individually. Use the tools available to make running your business easier and more profitable. If you don’t have the ability to do this with your current POS and inventory management system, then maybe it’s time to look for a new one.

You’re not a cupcake shop, so why use a POS system built for one?

In retail, it’s important to for your technology to serve your business goals. There are so many options for your inventory management needs making it hard to find a perfect fit for you. Many inventory management and POS providers boast a ‘one-size-fits-all’ solution that works for any business. In reality, no two businesses or industries are the same. So why would you use technology that was built to for all retailers? Here are 3 reasons your cover-all solution isn’t fit for your business:

The Wrong Functionality

One-size-fits-all solutions limit you to high-level, generalized functions. As a store needing a grid system, you won’t have all the options you need for inventory management.

Limited Reporting Options

Many solutions come with certain reports that you have to fit into your business process. But what if you need to slice your data a different way to get the information you need? You should have options for analyzing your data the way you want, not the way a technology vendor wants you to.

Inadequate Customer Capabilities

Just like limited reporting capabilities, lacking the right tools and information to reach your customers can be detrimental to customer loyalty and sales. The way an apparel shop reviews customer data and markets to them is not the same way a cupcake shop does. Make sure your tools analyze the right customer data so you can turn it into insights for customer retention and marketing.
  Contact us to get more information on why RICS is the perfect fit for your business.   As a retailer, you’re always looking at the bottom line of your business and how to improve it. One of the problems many retailers are facing is the lack of increasing cash flow. Cash flow allows you to ensure you can continue running your business at full steam. So how can you make sure you’re giving your business the best chance for improving cash flow? Check out our three tips that can help!

Practice Heat-Mapping

Heat-mapping is the practice of identifying your best-selling locations in your store. Once you identify what spots historically sell the best, you can start moving inventory around to see if new placement helps low performers sell better. Sometimes, it’s a great way to move merchandise that you were thinking about marking down and sending to the clearance section.

Plan an effective markdown strategy

Contrary to popular belief, marking down inventory can actually have a positive effect on your cash flow. Your inventory only has a 60-90 day shelf life before it loses its steam with customers. Make sure that you identify the shelf life of your products and are marketing down appropriately. Even though you’re not making the full monetary amount you hoped for, you’re still able to make money and room for newer inventory that will sell at full price.

Strategic Staffing

As a business owner, you know that there are overhead costs that can drive down your bottom line. Employees are one part of your business that can help you make more money or cost you money. One way to ensure employees aren’t hurting your business is to practice strategic staffing. This involves staffing more (and your best) employees at peak sales time, while scheduling fewer employees at hours in the day when you don’t see a lot of foot traffic. Strategic staffing enables you to cut back on salary costs when they aren’t needed and ensure you have enough people on the floor to help customers during busy times. Putting more cash back in your pocket gives you the power to confidently stock the right inventory at the right time for your customers. These tips are just a few ways you can start to improve your overall cash flow. For more tips, check out our Cash Flow: How to Make More Now ebook! As a software engineer, I often find myself thinking about the world around us, and, of course, the technology that has gone into making our world what it is. You see, being a software engineer doesn’t just mean that I write software, it means that I engineer software and solutions for our customers. So, naturally, my thoughts gravitate toward not only technology, but engineering in general. For example, I’m sitting here enjoying a bowl of granola (it’s a breakfast meeting), and a cup of coffee. I look at the granola and think, “Somewhere, some nutritionist, chef, and probably someone with a title like ‘food engineer’ designed and tested the granola recipe. They decided the ratio of oats to almonds, what flavoring to add, etc. And someone designed that plastic spoon I’m using to eat the granola. Someone decided that it should have those little ridges on the bottom edge of the handle, probably to provide some structural strength so it doesn’t break easily…” If you’ve read this far, you’re probably wondering “What in the world does this have to do with RICS, and retail POS software?” In short – everything. My background is as a software developer, not in retail operations. I’ve certainly bought shoes before, many times, from all sorts of retailers – from big box stores, to shoe chains, to specialty stores. But I never really thought about how all of that process works – until I came to RICS. Since starting at RICS approximately 6 months ago, though, I’ve come to learn about a whole new world “under the covers” that I never had any exposure to – payment processing, inventory management, product cataloguing, retail financial reconciliation… Throughout my career, I’ve had many such experiences learning about the “iceberg” that’s under the water, on so many things we take for granted and simply don’t think about – everything from used car dealer inventory financing, to custom manufacturing, to university and municipal parking management, to insurance annuities. Software developers call all that information “business requirements” – the “what should it do?” of the systems we create. A lot of software developers view those as just the least interesting part of the job – a necessity, to be sure, but really just an excuse to create cool technology. At RICS, though, we’ve been very fortunate to build a team that, like I do, shares an interest and curiosity in learning about the business, and retail operations, so that we aren’t just creating cool technology, but useful technology for you, the customer. In other words, here at RICS, we don’t want to just know “what it needs to do” – we want to know the why and the how – so that we can make the technology to do “it” even better. And we’ll continue to do so. Does your POS and inventory management system control your credit card processing too? Are your processing rates too high because of it? Some “more affordable” systems require a certain credit card processor where they sky rocket the rates to offset the cheaper POS pricing and get a kick back from the processor. Your POS/inventory management system shouldn’t make the decision on who processes your credit cards. Flexibility, freedom, and the right to have a choice should always be an option with any technology provider. With RICS, you get just that. You get more than a POS and inventory management system, you get a partner that truly cares about helping you run the best business you can. Not only can we help with the most important part of your business with managing your inventory, but RICS works with most processors. We have the flexibility to allow you to process your credit cards as an integrated or non-integrated solution. Both options will also allow you to choose who you work with when it comes to credit card processing.  If you decided to go with an integrated solution, RICS works with 3 different gateways to handle the communication from the POS to the processor. Two of the gateways, Shift4 and SlimCD can work with most processors out there. The third gateway, OpenEdge, is actually a combination of a gateway and processor combined. Don’t let your credit card processor manage your inventory. Choose RICS and let the processor do what it’s supposed to do. Check out our other technology partners and integrations here. The theme of connectivity is not a new one. And the snowball development of technology means that we are all more connected than ever. But what does that mean for you and your business? Has your customer base now expanded past your neighborhood and into the farthest reaches of the globe? Is connectivity all about connecting to more and more customers? Well, that’s one way to look at it. With the advent of the internet we can now connect to customers around the globe. But is that practical from a profitability standpoint? Am I really going to tap into the Ukrainian Sperry Top-Sider market from my family footwear store in Indiana? Perhaps. But probably not. Connectivity for the independent brick and mortar retailer is more about connecting all of your efforts to harness technology together. This means more than simply connecting your in-store inventory to your website. It means connecting your customer database to your marketing efforts. It means allowing all your store data to flow between the applications you choose to help advance your business efforts. While there are a multitude of programs and technology companies that provide services to help you become a more successful retailer, there is one thing they all have in common. They all rely on connecting to your business data (inventory, sales, and customer) to help you leverage the power of their technology. Your POS and inventory system is the central nervous system of your business. So deciding how you will connect to current and future unknown technology partners is critical when choosing a POS and inventory management system for your store. Some companies will offer an all-encompassing system. POS, accounting, and ecommerce, all in one independent, eco-sphere of data. But what happens when you want to connect that data to a new service or application outside of that sphere? What happens when the newest channel of retailing shows up and you determine you can’t compete any more without being connected to it? The key is deciding that your business data will reside in a system that can serve as a hub to any program or application that you want to connect to. The ability to connect your POS and inventory management system through an open API is the way independent retailers will successfully compete now and in the future. Sell on Amazon, text your customers, fully automate your Accounts Payable functionality, or share a gift-card program with other business. And remember, we don’t even know what the next big new thing will be!  But we do know we’ll need a way to connect. Interested in learning how RICS can help you become a more connected retailer? Schedule a demo with us here! Technology has become a driving force in many different industries, and retail is no exception. The introduction of technology into the retail space has changed the way business owners track their inventory, report on their business, interact with their customers, and how customers can interact with them. Taking advantage of the tools that are available is no longer a choice, but has become a necessity in order to keep pace with the changing and competitive market. With greater accuracy in inventory tracking, retailers are able to ensure that they have the right amount of every product they carry in the store. Having a more robust way of reporting inside of your business gives greater insight into what is happening in your market. It will allow you to ensure that you are carrying the right products to fit the needs of your customers. Customer engagement has also become extremely important and a major influence for a successful retailer. Customers use technology every day to help make their lives easier. Finding an effective way to communicate with your customers can help drive business to your store and using technology to make their buying experience as simple as possible will keep them coming back. In the age where everything is just one click away, it is important to adapt to improved ways of doing business, and to keep pace with the rapidly changing customer expectations. To learn more about adopting technology in your retail store, download our How to Grow Your Business with Technology guide. As a business owner, key performance indicators (KPIs) are incredibly important in tracking the success of your retail business. Identifying and using those KPIs can help you understand how your buying, inventory, and selling strategies are affecting your business. If you’re using an advanced POS and inventory management system, you have access to all the data you need to review to determine how your business is performing. Turnover is a great metric that can help you understand how your inventory is performing in your store. Let’s take a closer look at how using Turnover as a KPI in your business can help you make better decisions about your business.

What it means

Turnover is a ratio showing how many times a company’s inventory is sold and replaced during a given period. The ratio is annualized for consistency. How to find it Turns = Cost of Goods Sold (COGS) during Sales Period/Inventory Cost over Sales Period * 365

How it’s used

Turns are used to measure how quickly your inventory is sold.

Things to consider

This ratio only measures how quickly your inventory is being sold, but does not take into consideration how much profit was generated when the sale was made. To learn more about using KPIs and your data to improve your business, download our Increasing Profits Now guide. As a retailer, you know how important your key performance indicators (KPIs) can be in helping you determine if your business is having a successful and profitable year. If you’re using an advanced POS and inventory management system, you have access to a lot of data that can help you determine just how well your business is doing. Return On Investment (ROI) is arguably the most revealing indicators of how your entire operation is performing. Let’s look at how understanding ROI can help you make better decisions for your business. What it means ROI is the measure of how many dollars of gross profit or margin you are getting back for each dollar you have invested in inventory (based on your present rate of sales and average inventory for the period). This ratio can be shown as a percentage (175%) or as a dollar amount ($1.75). How to find it ROI = Profit during Sales Period/Inventory Cost over Sales Period * 365 Why it’s important ROI is an important tool that analyzes inventory levels, sales, and profitability by comparing the investment in inventory required in order to generate those gross margin dollars. A high ROI indicates that you have the right amount of inventory, at the right time, for the right price. A low ROI may indicate that you are missing out on sales opportunities and leaving money on the table in the form of old inventory. Things to consider ROI is an annualized number. The formula shown above indicates an ROI calculation for one day, which is why you multiply by 365. If you were calculating your ROI based off of 1 month of data, you would multiply by 12. RICS Software considers this ratio to be the most important and best overall indicator of performance in your store. It takes into consideration how quickly your inventory was sold, how much inventory you carried to generate those sales, and how profitable the sales were when they occurred. This is an excellent comparative tool because it may show that SKUs, classes, suppliers, etc. with the highest sales, or the highest GP%, or the highest turnover rates, are not necessarily your best performers. To learn more about using your KPIs to improve your business, download our 5 Data Points You Need to Know guide. Why do we consider changing anything? Typically, there are three reasons we consider change: 1. Things don’t work like they used to. 2. There must be a better way to do what I’m doing. 3. I want to do something different. What does this mean for my business? Specifically, what does this mean for my business regarding my POS system? Considering the first point, it’s pretty easy to understand how this could relate to your POS. If it has stopped working, if it has gone unsupported, if it has slowed down to the point where it has become burdensome and ineffective, then it’s pretty easy to understand that it doesn’t work like it used to. This means it’s time to consider a change. Now, when you are considering a change, you are most likely going to take the second point into consideration as well. Is there a better way to do what I have been doing? Even if your current POS system hasn’t slowed down and stopped working, shouldn’t you consider trying to improve? Couldn’t there be a more profitable way to leverage technology inside your business? Technology changes all the time. Using the best tools for understanding inventory performance and making data-driven decisions will lead to better buying, fewer markdowns, and more profit. In addition, if you don’t have the ability to use your current system to segment your customer base, you’re probably throwing away marketing dollars. Making sure your marketing is super relevant to the specific audience that will see it improves your ROI (Return On Investment). Finally, what kinds of things might you be able to do, that you can’t with your current POS system? Do you have a website? Are you participating in ecommerce? Are you pursuing third-party fulfillment? Making sure you have the ability to leverage additional sales channels means more customers and sales. However, there’s more to being effective online beyond just having an ecommerce website. You want to reflect your brick and mortar store inventory in real time. It’s all about integration. So make a change for the better. Update your POS system with one that will help you be more efficient, reach more customers and be more profitable. Click here to read the ultimate guide to switching to a POS that will make you a data-driven retailer.