Question 1

What is a good inventory turnover ratio?

Accepted Answer

General retail runs 4 to 6 turns a year, fast-moving categories like grocery 8 to 12, and slow considered purchases like furniture or jewelry 2 to 3. Below your category norm, cash is sleeping on shelves; far above it, you are probably losing sales to stockouts.

Question 2

What is GMROI and what should it be?

Accepted Answer

GMROI is annual gross margin dollars divided by average inventory at cost: how many margin dollars each inventory dollar produces per year. Above $2.50 is healthy for most retail; below $2.00 the inventory is not earning its keep and assortment or pricing needs work.

Question 3

How does open-to-buy work?

Accepted Answer

Each month: planned end-of-month inventory plus that month's cost of sales, minus what you start with and what is already on order. The result is your buying budget. It forces purchases to follow the sales plan instead of supplier minimums and enthusiasm.

Inventory Turns & Open-to-Buy Planner

Your Numbers Today

Plan Settings

How Hard Is Your Inventory Working?

Full Buying Plan Pro

Inventory eating your cash?