High Margins slowed inventory turnover, tying up cash

Challenge

An independent retailer came to us with a cash flow problem. Rent was high relative to revenue, and the working theory was that volume was the issue.

We looked at margins first, expecting a leak. There wasn't one: margins on the top products were above industry standard. The cash was sitting on the shelves, in stock already paid for and not yet sold, while rent came due every month.

Approach

The cost history lived in two years of paper supplier invoices, so we digitized them into a usable record, and reconciled card processing fees from the POS exports against what actually reached the bank. Then we read margin against sell-through, as GMROI, rather than margin on its own.

Outcome

Margin wasn't the problem. Sell-through was, and the pricing was what held it back: a nearby competitor was cheaper, and the gap was costing traffic. We recommended closing part of that gap, adding more affordable products, and extending hours so the fixed rent bought more selling time.

The client chose not to act. Lowering prices when cash is already tight feels like walking toward the danger, even when the numbers say otherwise.

What we learned

A ratio doesn't pay rent. A smaller margin collected more often beats a larger one collected rarely, and the trade is far easier to make while there is still cash to absorb it.