When opening a dollar store there are many indicators of success. They range from bottom line profit to undesired employee turnover. However one of the most important is inventory turns.
What are inventory turns anyway? This is simply a measure of the number of times that the full cost of the store’s inventory is sold. It is measured on an annual basis.For example, if after opening a dollar store the inventory for your store is maintained at $1,000,000, and annual sales are $8,000,000, then there are eight inventory turns per year for that store ($8,000,000 sales divided by $1,000,000 store inventory.).
When opening a dollar store, the goal is to maximize the number of inventory turns per year. The more inventory turns, the harder the money that is invested in inventory is working for you. A reasonable goal for a family owned store is to achieve six-to-eight inventory turns per year.
There are two strategies that work well for increasing the inventory turns for those who are opening a dollar store. Both need to be considered when looking at ways of achieving desired inventory turns levels. The first is inventory reduction and the second is increasing sales.
Increase inventory turns by reducing the inventory that is being maintained in the store. By carefully eliminating or at least reducing the inventory of items that sell slowly, the inventory turns number will increase. Care needs to be taken that inventory reductions aren’t so great as to impact total sales however. When you are opening a dollar store the worst thing that could happen would be to sharply reduce inventory without fully understanding the impact to sales.
When opening a dollar store inventory turns can be increased by increasing total store sales. The higher the sales level while maintaining the same inventory levels, the higher the inventory turns for the store. Care must be taken to ensure that inventory levels of core products be maintained at appropriate levels. As sales go up, expect core products sales to go up as well. Without consistently maintaining core products such as household cleaners, paper good, and health and beauty items sales will drop.
