Ask a retailer why they bought a particular range and the answer too often is instinct. It looked good. The rep was persuasive. It sold last year.
While instinct has its place, it’s a poor substitute for a number.
Start with a simple question: what is the stock buy actually for? Stock turn? Overall profitability? Hitting a budget figure? Each purpose leads to a different decision, and confusing them fills a shop with the wrong goods.
The arithmetic works backwards from cost. After cost of goods, the two largest expenses in most retail businesses are labour and the retail space itself, whether that is rent or a mortgage. Both are broadly fixed, and neither shrinks because trade was quiet.
From those fixed costs, a required revenue figure can be derived. From the revenue figure comes the annual stock spend. Apply the stock turn the business achieves, or needs to achieve, and an inventory value emerges. A shop turning stock five times a year needs far less capital tied up than one turning it twice.
Every retail channel has its own numbers, so the calculation is not universal. The discipline is.
A shop carrying roughly $30,000 of stock needed to turn over at least a million dollars a year to work. It was horribly understocked and the owner had not seen it, having entered the business on something close to a whim, without appreciating that stock does not sell evenly through the year.
Knowing what the inventory value needs to be, week in and week out, changes buying, cash flow planning and supplier conversations. A gut feel becomes a target.
Our Tower Systems POS software carries the inventory reporting these decisions rely on: stock turn by department and supplier, dead stock identification, performance by category, and replenishment orders generated from what customers actually buy rather than what a rep suggests. Fast sellers get reordered before they run out, and market price checks flag supplier rises before they eat a margin.
AI Insights adds a layer on top, reading the numbers and reporting in plain English which lines deserve more investment and which are consuming cash without earning it.
None of this means buying less. It means knowing, before the order goes in, what the order is meant to achieve.
Tower Systems builds POS software for specialty retailers across Australia and New Zealand. Locally made. Locally supported.
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