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Frame turnover rate
Trying to get a grip on how to think about inventory, thought I would ask the brain trust here to see how you all look at it.
Right now we have an allotment for each frame brand, example Tom Ford ophthalmic 28 frames on our board. We have data on how many frames of each brand we sold last year, so lets say we sold 70 Tom Ford ophthalmic Frames. We take 70 sales divided by 28 allotment and get 250% turn rate.
Obviously 250% turn rate doesn't mean much on its own, it means more when compared to how other frame brands are sold in the store. So I looked at average turn rate for all of our brands and now I am considering should we drop brands that are under the average to try and find something that would sell better?
1) Do you use turn rate when trying to decide if you should drop a brand or is it done more by feel?
2) Should I be looking at inventory differently? I was considering looking at total frame space and looking at markup and cost of the frames to see which frames are the most valuable to sell. Then look at that in conjunction with frame turnover to see how valuable that turnover actually is.
Am I completely overthinking this?
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Couple of my thoughts:
1. Frame turnover rate is percentage of collection that turns per unit time: 25% quarterly, 100% annually, etc. I've heard that the entire collection should turn quarterly, but dang if that's not too rich for my blood. I'd be happy if the entire collection turned twice a year, so that's my standard.
In other words, an average frame should sell twice a year, OR IT'S FOR ME TO POOP ON.
https://www.youtube.com/watch?v=r5g_gs6nnyo
Now, some frames in a collection will turn a lot. Others not so much.
So, say you have a 24-frame collection. You'd better sell 48 frames per year. That's 1 from that collection every week. Sounds daunting.
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Extrapolating this to your WHOLE FRAME COLLECTION, if you have, say, 600 frames but do only 600 jobs/year (that's 2-3 jobs/day) then you have a "lazy inventory". Better to pare it down a little, unless you cut into the bone of what you need to carry for your clientele.
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Other thoughts: R...O...I.
Say you invest $100 in a frame, and you sell it for $150 in six months. You made a gross profit of $50! You are rich. Your return on investment is 50%/6 mo or 100% annualized!
But now you have to figure "opportunity cost". YOU COULD HAVE INVESTED that $100 in Space X https://www.yahoo.com/video/buy-spac...163005202.html. If you would have invested that hundo in SpaceX, held it for a year, and sold it at six times the cost, then your ROI would be 600%. You had officially been a stupid investor, buying that frame.
Having said that, in the optical world, investing in frames is the bread-and-butter of ROI, when it comes to materials, except for semi-finished lenses, perhaps (I don't know that stuff).
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If you jettison frame lines that are below average, you are mathematically jettisoning half of your frames. Maybe the worst selling frame line should be jettisoned, annually or bi-annually, if it's an outlier.
I prefer, however, to not do it based on turn, but ROI. Maybe you only sell ONE Cartier Platinum with Sapphire Encrustations per year, but you invested $1000 and sold it for $3000! But the turn rate is abysmal. That skews your data.
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Our overall frame turn rate seems pretty good, around 2.5, so doesn't seem like lazy inventory. I think we may be carrying too many higher end sunglasses. Very cool looking but they don't sell anywhere near as well as the traditional sun brands do from the evil empire.
I am just trying to provide some sort of objective measure to look at inventory instead of, "I feel that sells well" or "I feel that we should get rid of that because it doesn't sell well".
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The 80/20 rule says that 80% of your sales will be from 20% of your frames, over and over again. So 20% of your inventory is important, the other 80% is filler, IMHO.
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I just wish I knew what 20% to buy and put on the boards. HAHAHA!
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Or, if that 80/20 holds true, I should buy only five frames and I'll sell the hell out of the one! Keeps inventory costs down, right?
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Nothing personal NAICITPO, but Mark Wright is garbage.
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I know nothing about him, just something that I came across that related to this topic.
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Frankly when buying frames I find that most people will buy one frame at a time just because it looks pretty or that they think they could sell that ONE frame. That not my way of doing it.
I buy a STYLE of a frames in sizes and colors that I feel will work for the office. I call it a kit of frames. If it turns out to be a good kit I will sell through them quickly and a light will come on and say get more of those in here they are good movers. If I have just one of that style and it sells I will never know if it was a HOT item because I do not have any more to sell. And likewise if it is a poor mover and none of them sell I know to call the rep and get those exchanged for something else.
And also that way I am not spending to much time with a sales rep. If I buy in kits then it will not take me long to meet my maximum in frame purchases.
