The Retail Owners Institute is a handy Web site for retailers to bookmark on their computer and check often. One sample offering from the ROI, as the organization is known, is a Web page all about Turnover Rate.
Survival of your store, say the experts at ROI, depends on a proper turnover rate. "The pros know," they say, "that no other responsibility should have a higher priority for top management."
You can take a look, on this Web site, at industry benchmarks for the typical inventory turnover rate for your retail segment, then compare your store´s performance. If your "turns" are below the industry average — which probably means you have excess inventory– then you are operating inside what the ROI professionals call the "The Diamond of Doom."
To illustrate the idea, they´ve drawn a diamond shape onto the Web page. At the top point of the diamond is the term, "Excess Inventory." At the bottom point of the diamond is the term "Lower Operating Profits." You can see how excess inventory leads to lower operating profits by moving your eyes down the right and left sides of the diamond.
As you move down the left side of the diamond, you see that excess inventory leads first to poor cash flow, then to excessive debt, followed by higher interest expense and finally to lower operating profits. The road to certain doom.
The right side, shows that excess inventory leads to first to excessive obsolescence, then to lower gross margins, next to high advertising and selling expenses and, finally, again, to lower operating profits.
Elsewhere on the site, there are pages about Balance Sheets and Income Statements, Bookkeeping and Cash Flow, to name just three. Unless you know everything there is to know about retailing, this Web site probably is worth your time.