HOT TOPICS
WHAT IS INVENTORY TURNOVER? INVENTORY TURNOVER IS A TOPIC THAT’S FREQUENTLY DISCUSSED but often poorly understood by pawnshops. The definition of Inventory Turn originates in a traditional retail store setting. It is a ratio that is calculated to show how many times a company has sold and replaced inventory during a given period. Properly calculating inventory turnover can help pawnbrokers make better decisions on pricing and marketing the items that they have for sale, as well as the amounts and mix of items that they will purchase or allow as collateral for a pawn loan.
Martin Strasser, owner of Premier Jewellery and Loan in Kelowna, British Columbia, Canada, explains that for pawnshops, correctly calculating inventory turn and managing the retail side of the business is a crucial component of pawn operations. “Not only can it be 16
ISSUE 2 PAWNLEADERS MAGAZINE
a moneymaker, but it’s also the primary method of recovering capital from defaulted pawns. Well run retail builds your ability to loan more aggressively,” he says. “To understand retail, it’s important to look at two things: sales margin and inventory turn. Margin is how much money a sale generates. Turn is how many times (on average) inventory sells. To retail effectively, you need to optimize both sides of the equation. High margin doesn’t work if people won’t buy because items are overpriced. Likewise, bargain pricing with high volume brings the risks of inventory depletion and ‘selling through’ your client pool.
Beth Annundi, who, alongside her husband Adam, owns Capital Pawn in Oregon, describes their approach to managing inventory. “Having just opened three additional stores within three months, we learned the fast way that you can never stop buying! Always buy as much as you are able and then
