Are you hiding from the numbers in your business or not sure how you should manage your stocks and the numbers that really matter in your business?

Running a successful retail business requires paying close attention to the numbers. Tracking key metrics can help you optimize sales, manage inventory efficiently, and maximize profits.

Sarah Johnson is the founder of Flourish Retail, a merchandising expert who has over 20 years experience working for retailers like ASOS, River Island and Debenhams. Sarah joined me on podcast episode 57 to share some of the most important numbers small business owners should be looking at and help you understand them. 

Track Sales and Returns

One of the first numbers to pay attention to is sales. This includes total sales as well as net sales, which accounts for returns. Tracking returns is crucial – a high return rate for a particular product could indicate fit or quality issues. According to Johnson, an average return rate of around 20% is common for clothing ecommerce businesses. This will vary by product type – jewelry tends to have lower returns since items like earrings are often non-returnable.

Analyze Profits

Don’t just look at total sales – dive into profit margins. As Johnson says, “Sales is vanity, profit is sanity.” A product with high sales but low margins won’t help your bottom line. Aim to maximize profit per unit sold across your inventory.

Manage Inventory

Understanding the numbers in your retail business

Keep tabs on how much cash flow is tied up in inventory. Look at stock levels compared to sales – if 10% of your stock is in dresses but dresses make up 30% of sales, you likely need more dress inventory. Use “cover” calculations – the number of weeks your current stock will last based on sales – to inform reorders and avoid stockouts.

Plan by Looking Back

When planning seasons ahead, look to sales history to guide purchasing. See what sold well (and may need more stock) and what required heavy discounts (and probably doesn’t need replenishing). Add context too – don’t just repeat buys on last season’s hot item if that trend has passed. Build a balanced inventory with core products as the “foundation” and new trend-driven or higher priced items as the “doors and windows.”

Rightsize Markdowns

Discount struggling products strategically, starting a few months into the season. Across the board discounts usually just increase sales of already popular products. Target markdowns on slower items. Sarah Johnson notes discount percentages under 10% rarely motive customers – aim for 20%+ to effectively clear stock.

Think Beyond Black Friday

Avoid getting trapped in the race for bigger and better Black Friday promos each year. Consider opting out completely or have targeted flash deals on slow items. Focus on profit over sales numbers. Get creative with bundle offers, gifts with purchase or giveaways to loyal email subscribers.

Understanding the numbers in your retail business in vital. Carefully tracking and analyzing your sales, inventory, profits and more provides invaluable insight into what’s working – and what’s not – in your business. With the right numbers, you can make smart purchasing and promotion decisions to improve your bottom line.

For more in depth information listen to the full podcast episode here.

I hope that this post helps you to continue on your journey to success and if you need any extra support then check out my free resources on my website, follow me on Instagram, subscribe to my monthly newsletter or get in touch at Book a free discovery call to see how we can work together and how I can help you with your business or idea Book a power hour with and get the clarity of what your next steps need to be and your questions answered.

The Buyer and Retail Coach is a global retail expert with over 18 years experience working in the industry as a buyer and head of buying for companies such as Primark, M&S, and George at Asda, developing and sourcing a broad range of products from Lingerie to Health & Beauty and driving strategies and innovation. 

Having worked for the big blue chips, Nicole Higgins now brings that expertise and experience to entrepreneurs and SME’s to help you make your product ideas a reality, scale your business, and increase your bottom line and profits. 

This blog is sponsored by Neon Digital Clicks 

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