How much stock should I carry?" is probably the most common question new clothing retailers ask, and the usual answer ("it depends") isn't much help.
It does depend, but on things you can actually measure. Once you know your expected sales, your margin and how quickly you want stock to turn over, the right level of stock is a calculation, not a guess.
Why the number matters so much
Too little stock and your shop looks empty, your website looks thin and customers don't come back. Too much and your cash is locked up in clothes, you can't afford to reorder what's selling, and you end up discounting to get out of trouble.
For most independent retailers, overstocking is the bigger danger. Running low for a week is annoying. Carrying twice the stock you need for a whole season can sink a small business.
Step 1: Forecast your sales
Everything starts with how much you expect to sell. Work it out by month, in net sales (excluding VAT).
If you're already trading, use last year's figures for the same months and adjust for how the business is growing. If you're new, build it up from the bottom:
• expected transactions per week (footfall x conversion, or website visitors x conversion)
• average spend per transaction
• multiplied up to a monthly figure
Be honest here. An optimistic forecast is the most common reason retailers overbuy.
Step 2: Convert sales into stock cost
Your stock is bought at cost, so convert your sales forecast into what that stock will cost you. If you price at 2.5x wholesale (net of VAT), your cost of goods is 40% of your net sales.
Example: you forecast £10,000 of net sales in October. At 2.5x, the stock you'll sell that month cost you £4,000.
Step 3: Decide how many weeks of stock to hold
This is where stock turn comes in. Stock turn is how many times a year you sell through your average inventory.
• Stock turn = annual cost of goods sold / average stock held at cost
For an independent womenswear store, a stock turn of 4 to 6 a year is healthy. That means holding roughly 8 to 13 weeks of stock at any time. Online sellers buying from quick-delivery UK wholesalers can often run faster, with 6 to 8 weeks of cover.
|
Stock turn per year |
Weeks of stock held |
Typical for |
|
3 |
about 17 |
Slower, high-value or heavily seasonal stores |
|
4 |
13 |
Most bricks-and-mortar boutiques |
|
6 |
about 9 |
Well-run boutiques buying little and often |
|
8+ |
6 or fewer |
Online stores with fast restocks |
Using our example: £4,000 of cost of goods a month is about £920 a week. Holding 10 weeks of cover means an average stock of about £9,200 at cost.
Step 4: Plan purchases with open-to-buy
Open-to-buy (OTB) is the budget you have left to spend on stock for a period. It stops you buying on excitement and keeps your stock level where you planned it.
• OTB = planned sales at cost + planned closing stock + planned markdowns at cost - opening stock - stock already on order
Example for October, all at cost:
|
|
£ |
|
Planned sales at cost |
4,000 |
|
Planned closing stock at end of October |
9,500 |
|
Planned markdowns |
300 |
|
Minus opening stock on 1 October |
-8,800 |
|
Minus stock already on order |
-1,500 |
|
Open-to-buy for October |
3,500 |
That £3,500 is your spending limit for October. If a great deal comes along, something else has to wait.
How many items should a new clothing store stock?
For a physical shop, your space sets a practical limit. A standard 1.2 metre rail comfortably holds around 40 to 50 garments without looking cramped. A small boutique with 10 rails plus some shelving and tables typically needs 500 to 700 pieces to look full but not overcrowded.
Online, there's no rail limit, but there is a visual one. A new site with fewer than 50 to 60 live styles tends to look sparse. More styles with fewer units of each is usually better than a handful of styles in depth.
How much should a boutique spend on initial stock?
Work it backwards from your weeks-of-cover target. If your first three months are forecast at £24,000 of net sales and you price at 2.5x, that's £9,600 of stock at cost over the quarter. You don't need all of it on day one.
A sensible approach:
• spend 50% to 60% of the quarter's stock budget on your opening order
• keep 20% to 30% for reorders of whatever sells fastest in the first four to six weeks
• keep the rest for new styles to keep the shop fresh
This protects your cash while you learn what your customers actually buy.
How often should you reorder?
Little and often beats big and occasional for almost every independent retailer. Buying weekly or fortnightly from a UK wholesaler with fast delivery means:
• less stock sitting idle
• more new styles for customers to discover
• quicker reaction to what's selling
• less money lost to markdowns
Set a regular buying day, check your sales report first, and reorder against your open-to-buy.
Your stock level isn't a number you set once. It's something you manage every week, using sales, not instinct, as your guide.
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