Small time retailers and traders work at overall margins between 5-25% on various goods. Is that number a good indicator of business health? Online ones these days flaunt turnover, or in the case of marketplaces, GMV. Is that any good at all?
Well, finally what any business cares, or should care, about is profitability. But that’s an “eventual” goal and as we’ve heard often, even Amazon keeps pushing out that “for later”. So what should you track as a retailer or a trader? The answer might just be something that traditional ones have known and worshipped for years!
Or, how many times do you sell or “turn around” your entire stock (and of course, the cash you invested into it) in a month? It’s what matters to traders and retailers.
This one metric encapsulates many other things that you might need to track – inventory or “holding” costs, the ability to find enough market quickly, whether or not a price point and level of margin works in the market, and even the efficacy of marketing efforts. It also brings focus on moving fast – and on the costs associated with each cycle. It’s not surprising that for many a retailer or trader, this is the metric to track for a sense of how the business is doing.
Capital then invested in such a business is then just a variable that helps grow business – if the turnover’s good and the margins sustainable, it’ll grow.
If you sell, keep an eye on this number. If you’re a marketplace, help track and grow this for your vendors. It’s the core of their business model, and that, hopefully, is aligned to yours!