Each day this week I am sharing a newsagency management benchmark which I hope you find useful. The benchmarks are not rigid, use them as a guide to determine what is right for your business. I have developed these benchmarks over years of working with a variety of newsagencies in many different situations.
Management benchmark #4: stock turns
Stock turn is a measure of the numbers of times you turn the value of your average stock holding in a product category in a year. For example, if your average holding is $10,000 and your sales are $100,000 with the cost of those good being $50,000, the stock turn would be 5.
The formula is cost of goods sold for the category for the year divided by average stock holding value.
A common mistake is dividing retail sales value by average stock holding value. This would give you an inaccurate figure.
Here are benchmarks by key categories I suggest newsagents aspire to achieve:
- Stationery: 7.0.
- Cards: 3.5.
- Gifts: 7.0.
- Toys: 6.0.
- Plush 7.0.
In your newsagency software you ought to be able to report on stock turn for a set period or on a moving annual total basis. Seek this out and run the report to see your figure for yourselves.
If your turn is low you can correct this by increasing sales without increasing stock or reducing stock without reducing sales. either approach takes planning and commitment.
Key to achieving a healthy stock turn is for your to control your inventory investment.
The Queensland Government has an excellent page on stock turn. I encourage you to check it out.
I hope this series helps newsagents look at their businesses differently and to ask questions about their performance in the context of best practice in our channel. Newsagencies with the brightest future are those where data is respected and benchmarks are set to be achieved and passed.
What’s the benchmark for magazines?
Bill I left it off because it is a metric we have little control over. The overall average I see is a turn of 3.6 which is an appalling result for a low margin category. While the cards turn is low, the margin is, usually, excellent.
Mark, that’s why I asked the question, we can have control over mags because of early returns and that’s why we should be focused on controlling our level of debt as the #1 issue in this new mag trial.
3 years ago I made the decision to cut my stock cover to 8 weeks to achieve 6 stock turns. Anything over 8 weeks cover is a conscious decision on my part, ie AFL collector cards. I track my mags to ensure my monthly bill is equal to my cost of goods sold.
My magazine sales are the same size as yours and I have been achieving similar results as you by focusing on removing the dead wood that pushes up our stock levels and affects turns.
Stock-turns of 3.6 is equal to 14.4 weeks cover. At a margin of 25% that’s a return on inventory multiple of 1.2 times. Compare this to cards at 3.5 turns and they are giving 4 times the return.
I would encourage everyone to focus on how many weeks cover of magazines they have and reduce it where possible to improve the health of their business.