Inventory Turn: A Key Metric for Shoe Retail Success

By Alan Miklofsky, 10/13/24

In the competitive world of shoe retail, understanding and managing inventory turn is crucial for maintaining profitability and optimizing cash flow. Inventory turn, often referred to as inventory turnover, is a metric that measures how quickly a retailer sells through its inventory over a specific period. For shoe stores, where trends change rapidly and customer preferences evolve, effective inventory management can be the difference between thriving and merely surviving.

What is Inventory Turn?

Inventory turn is calculated using the formula: COGS divided by Average Inventory.

Where:

• Cost of Goods Sold (COGS) represents the direct costs attributable to the production of the goods sold during a given period, which in a shoe store is your landed cost for inventory (including freight).

• Average Inventory is typically calculated by taking the ending inventory for a period. Open to buy programs often calculate the average ending inventory for each month in the last 12 or 13 months.

For shoe retailers, a high inventory turn indicates that products are selling well, reducing holding costs and minimizing the risk of obsolescence. Conversely, a low inventory turn can signify overstocking or poor sales, leading to cash flow issues.

Why is Inventory Turn Important for Shoe Stores?

1. Cash Flow Management: Shoes can have significant carrying costs, including storage and insurance. By maintaining a healthy inventory turn, retailers can free up cash that can be reinvested in the business.

2. Trend Responsiveness: The shoe industry is influenced by seasonality and trends. A higher inventory turnover allows retailers to respond quickly to changing consumer preferences, ensuring that they are stocked with in-demand products rather than outdated styles.

3. Reducing Discounting: Slow-moving inventory often requires markdowns to sell. High turnover minimizes the need for discounts, allowing retailers to maintain healthier profit margins.

4. Enhanced Customer Satisfaction: A well-managed inventory ensures that customers find what they want when they visit the store or shop online. This leads to improved customer loyalty and repeat business.

How to Improve Inventory Turn in a Shoe Store

1. Analyze Sales Data: Regularly review sales reports to identify best-selling items and those that are underperforming. This data-driven approach helps optimize inventory levels and make informed purchasing decisions.

2. Implement Just-In-Time (JIT) Inventory: Adopting a JIT strategy can help shoe retailers reduce excess inventory. By ordering stock based on demand forecasts and current sales trends, retailers can minimize carrying costs and reduce the risk of overstocking.

3. Diversify Product Offerings: Offering a diverse range of shoe styles, sizes, and brands can cater to a broader customer base. This not only helps in attracting more customers but also in achieving faster inventory turnover.

4. Utilize Technology: Inventory management software can provide real-time data on stock levels, sales trends, and customer preferences. This technology allows retailers to make quicker, data-driven decisions about reordering and markdowns.

5. Monitor Supplier Performance: Building strong relationships with suppliers and understanding their lead times can help retailers ensure that they have the right products available at the right time.

Conclusion

For shoe retailers, mastering inventory turn is essential for driving sales and maintaining a healthy cash flow. By leveraging data analytics, embracing technological solutions, and staying attuned to customer preferences, retailers can enhance their inventory management practices. Ultimately, a focus on improving inventory turn not only boosts profitability but also elevates the overall customer experience. As the shoe business continues to evolve, those retailers who prioritize effective inventory management will be well-positioned to succeed.