Thank you for your support. This is Orcel Saito.
Today I'd like to talk about inventory turnover, a topic that isn't often discussed in the e-commerce world.
Inventory turnover is the number of times inventory is replaced in a year.
In other words, it is an indicator of how short the period from purchase to sale is.
It's not something that's talked about much in the e-commerce world, but I think it's very important.
Some people say, "It's okay because we'll be able to sell what we purchase someday."
Unless the goods have an expiration date, it may seem like a good idea to be able to sell the items you purchase at some point, but in the meantime, your funds will be sitting idle.
Furthermore, during this period of no sales, fixed costs such as labor and rent will be incurred, and you will lose the opportunity to make a profit by purchasing more goods.
Such thinking can lead to a disruption in cash flow and financial difficulties.
After all, inventory turnover needs to be closely monitored, just like sales and profit margins.
Just like with pachinko, it's better to put in money and have it increase and get it back in a short period of time.
However, there are currently problems with exchange rates, and it seems that there are some industries where companies that purchased goods when the yen was high and have a lot of inventory from that time are selling products cheaper than others and are winning out.
However, in principle, you need to keep track of the numbers for each product and category to increase your inventory turnover.
You should also pay attention to the relationship between profit margins and inventory turnover.
For example, let's say there is a shop that says they won't do it unless they can make a 30% profit.
However, for example, if a profit margin of 30% means you can only sell once every three months, but a profit margin of 20% means you can sell three times every three months, then even though your profit margin is lower, your profit will double.
You also need to consider price elasticity, the balance between price and demand.
Rather than making judgments based solely on numbers such as "profit margin" or "sales," numbers must be viewed from multiple angles.
When it comes to inventory turnover, there are two industries that I always think are good businesses.
One is a second-hand brand-name goods store.
Since second-hand brand items are one-of-a-kind, inventory turnover tends to be low.
Three months or six months is normal, and many are over a year.
Moreover, the cost of purchasing is very high, so it is a business that requires a huge initial investment.
It requires a good eye for quality, so I think it's quite a high hurdle for the average person.
But there are some very good things about this business.
It can be sold at auctions for dealers.
You can sell it for roughly the same price as you bought it, or with a profit.
Of course, other industries may be able to handle this by holding super-cheap sales, but in the case of second-hand brand businesses, this can be done without burdening the store, and you can almost certainly recover your investment in a relatively short period of time.
Another good option is industries where you can sell without holding inventory through drop shipping, such as furniture and car accessories.
In reality, it seems that the winners are the stores that have stock and can ship quickly.
In any case, it might be a good idea to think about your inventory turnover rate.
By the way, nowadays, if you have data, AI can analyze it for you.
Inventory turnover
