by James Hallman.

…let's talk about bananas.  Bananas are an interesting fruit- they come in their own zip-lock covers, and they are good for you. I personally love to eat bananas. So do a lot of other people.  So, to better understand what inventory turn means, and also to help answer the question of "How do you do it?" let's go into the banana business together... 
 
Let's say we own a little fruit stand, and from this fruit stand we sell bananas. We buy our banana stock from a local wholesale market. We pay 50 cents for each banana, and we sell it to our customers for $1.00.  We sell, on average, 100 bananas per week (remember, it's a small fruit stand).  So, bright and early, each Monday morning, before our stand opens, we go to the wholesale market, show our ID cards to prove we are real-life retailers and have a right to buy at this wholesale market, and we buy our 100 bananas. 
 
We pay $50 for these 100 bananas. Our inventory investment in these 100 bananas is $50.  We work hard for six days, and by Saturday night, we have sold all of our bananas. We made a $50 profit on our $50 investment.  We turned (bought and sold) our inventory of bananas one time that week. We take Sunday off- we deserve the rest! 
 
Now, we begin to exchange notes about our business - how can we do more business? "Well," you say, "almost every customer who comes by the stand to buy bananas asks me if we carry apples. I think we could sell some apples, if we had them."  I agree, since many of my customers also asked about apples. 
 
We decide to do some high-tech market research.  All the following week, whenever anyone asked us about apples, we put a hash mark on a sheet of paper. By doing this, we determined we could sell at least 50 apples per week. We can get the apples for 50 cents each, and sell them for $1.00, just like the bananas. 
 
We only have one problem. We don't have an extra $25 to buy the 50 apples!  We only have $50, and we need that $50 to pay for our 100 bananas. All the meager profit we make each week goes to pay the rent on the fruit stand, and for us to live on.  We think about borrowing the extra $25 from your Mom, but you don't want to ask her - and she doesn't like me at all!  Oh, what can we do? 
 
"Eureka!", you exclaim. "I know what we can do! This Monday morning, we'll go to the market as usual, but instead of buying 100 bananas, we'll only buy 50 bananas. With the $25 we save, we'll buy our week's supply of apples!" 
 
"But if we only buy 50 bananas, we'll run out of bananas", I note.  "Not really", you say, "because we'll make an extra trip to the market Thursday morning, and with the money we made from selling all 50 bananas and half the apples the first half of the week, we'll buy the other 50 bananas we'll need for the second half of the week".  So, that's what we do, and of course, here is what happened: 
 
Rather than investing $50 once per week to sell the 100 bananas which brings us a $50 profit, we invest only $25 to buy 50 bananas, we sell those for a $25 profit, get our original $25 back, and then re-invest it in another 50 bananas which we sell the other half of the week. 
 
Now, we are making the same $50 banana profit on a $25 investment because we buy 1/2 the bananas twice as often during the week.
 
With the other $25, we buy our week's supply of apples. By selling the apples, we make another $25 profit. 
 
So now, our same $50 invested in fruit is returning us a profit each week of $75, rather than $50. 
 
That is what inventory turn is all about: buying, selling, and rebuying the inventory more often during the same time frame. 
 
And, it won't take us long to realize that we don't really need to buy our entire week's supply of apples all at one time, either. 
 
After all, some customers have been asking about oranges... 
 
Note: To improve your fruit stand's inventory turn, it is vital, even critical, that you know how many bananas you can sell per week.  And apples, and maybe even oranges. That is where sales forecasting and inventory planning comes in...
 

3 Proven Ways to increase Sales Without Going Broke

Even if we continue to see modest gains in retail sales, many businesses are still struggling to grow sales with limited, or even nonexistent budgets. If you are looking for ways to increase sales without spending much, try these ideas:

Maximize upsell opportunities
Upselling is a highly profitable tactic for increasing sales and profitability per customer. It involves inducing a customer to purchase additional or more expensive products and services than they had originally intended. The incremental cost of achieving the additional sales is negligible. The customer was already intent on making a purchase.

As consumers we are continually exposed to upselling. When you order a hamburger and are asked if you want the “meal deal” – which adds french fries and a soft drink – that is an upsell. Being asked to upgrade to run flat tires when you purchase a sports car is also an upsell.



Upselling can be applied to virtually any type of customer and industry. It can also be used effectively across multiple sales channels: your website, call center, retail space and more.

Execution is important. Using deception or acting desperately are poor ways to conduct upselling. It’s critical to ensure that your employees understand this and that your incentive scheme does not inadvertently promote bad behavior. Adding a quick survey at the end of a customer’s buying process to assess how the sales person treated them may counteract the desire to upsell too aggressively.

Facilitate impulse purchases
An impulse purchase is an unplanned decision to buy a product or service which is usually made right before a planned purchase is consummated. These are emotional, not rational, purchases. Recent studies estimate that about 20 percent of purchases are unplanned. A recent study by Miller Zell, a leading retail strategist, indicates that 51 percent of buyers make unplanned or impulse purchase decisions.

Some proven tactics for increasing impulse purchases include:

•Using in-store signage that attracts attention and is positioned at or close to the point of sale
•Making the process as simple as possible, ensuring that the buyer won’t be delayed by making the impulse purchase
•For online and call center sales channels, including impulse purchases as part of the standard check-out order flow and script.
To determine the success of your impulse purchase campaign, establish benchmarks for sales based on recent performance by category, location, channel and employee. Consider implementing a management dashboard to assist with the process.

Optimize your selling environment
Paco Underhill, president of Envirosell, a behavioral research and consultancy firm focused on commercial environments, is also the author of “Why We Buy: The Science of Shopping” which discusses his research and methods for enhancing retail sales. One area covered in the book is organization of inventory. There are many tactics that can be used to make it easier for your customers to access higher-priced and higher-margin products. Steps like placing preferred items on shelves at eye-level, adjusting lighting and optimizing the floor plan can generate material increases in the sale of high-margin products.

Will all of these tactics work as planned? No. Nothing ever does! But it is definitely worth trying them out.

Mike Periu is the founder of EcoFin Media, LLC an independent producer of financial, economic and entrepreneurial content for television, radio, print and the Internet. Over the past ten years he has started three companies and advised over 50 companies on financial strategies including fundraising. Mike also hosts regular small business webinars on a range of topics relevant to business owners.