How can you evaluate merchandise performance in retail operations?

2 Sell-through rate

Sell-through rate is the percentage of units sold out of the units available for sale in a given period of time. It shows how quickly your merchandise is moving and how well it matches your customers' preferences. You can calculate your sell-through rate by dividing your sales volume by your inventory at the beginning of the period, and multiplying by 100. A high sell-through rate means that your merchandise is selling fast and that you are minimizing inventory costs and risks. However, sell-through rate alone does not tell you the profitability or quality of your merchandise.

3 Gross margin

Gross margin is the difference between your sales revenue and your cost of goods sold, expressed as a percentage of your sales revenue. It measures the profitability of your merchandise, as it shows how much you earn from each unit sold. You can calculate your gross margin by subtracting your cost of goods sold from your sales revenue, and dividing by your sales revenue, and multiplying by 100. A high gross margin means that your merchandise is priced well and that you are controlling your costs. However, gross margin alone does not tell you the demand or efficiency of your merchandise.

4 Stock turnover

Stock turnover is the number of times that you sell and replace your inventory in a given period of time. It indicates the efficiency of your merchandise, as it shows how well you manage your inventory levels and cash flow. You can calculate your stock turnover by dividing your cost of goods sold by your average inventory in the period. A high stock turnover means that your merchandise is not sitting idle and that you are maximizing your inventory investment. However, stock turnover alone does not tell you the popularity or quality of your merchandise.

By using these indicators, you can evaluate the performance of your merchandise in retail operations and identify the strengths and weaknesses of your merchandise mix. You can also use them to set benchmarks, goals, and action plans to improve your merchandise performance and achieve your retail objectives.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?