Growing a Store: second location, promos and systems

01

Let your numbers choose the stock

In simple words

Think of a school bag again. In 2.20.2 you learned which books to carry first. Now you ask a bigger question: which whole shelf of books deserves the most space in the bag? You look at each category, not only each item, and you give space to the ones that pay you back fastest.

Before this course: Neighbourhood Store Business (course 2.20) and Store Operations: stock, credit and margins (course 2.20.2). You should already know gross profit, margin versus markup, ABC grouping, reorder points, true cost per piece, an aging list for credit, daily cash counts and a monthly profit and loss. Here we do not repeat those lessons. We use them to grow.

Key facts

Category review: group your items into categories (drinks, staples, snacks, household, and so on). For each category, find its sales, cost of goods sold (COGS), gross profit and average stock at cost.
Gross profit return on stock = monthly gross profit of a category ÷ average stock at cost. It tells you how hard each unit of money on the shelf is working. (Retailers call a yearly version of this GMROI. Here we use the monthly number.)
Space and cash: a category that holds a lot of your stock money but brings little gross profit is a candidate to shrink. A category with a high return and frequent stock-outs is a candidate to grow.
Dead stock: an item with no sale for a period you choose (many owners pick 60 days, which is a rule of thumb, not a law) is dead stock. Make a plan: discount it, bundle it, return it to the supplier if allowed, or stop reordering.
Trial rule for new items: put a new item on the shelf for four weeks, write the target (for example, 20 pieces and a gross profit of at least your category average), and decide with the numbers, not with feelings.
Sales by day and hour: a simple tally in a notebook (morning, afternoon, evening) shows when your customers come. Use it for stock, promos and staff.

Example (practice numbers)

Category	Sales	COGS	Gross profit	Average stock at cost	Return on stock per month
Drinks	30,000	24,000	6,000	4,000	1.50
Staples	50,000	44,000	6,000	10,000	0.60
Snacks	20,000	16,000	4,000	8,000	0.50
Household	10,000	8,000	2,000	8,000	0.25
Total	110,000	92,000	18,000	30,000	0.60

Household uses 27% of the stock money (8,000 of 30,000) but brings only 11% of the gross profit (2,000 of 18,000). Drinks use 13% of the stock money and bring 33% of the gross profit. A good move: cut household to the 10 best sellers, free up cash, and give drinks a second cooler shelf.

Step by step

Make a list of your categories (4 to 8 is enough).
From your sales notes and purchase invoices of last month, write each category's sales and COGS.
Subtract to get gross profit for each category.
Estimate average stock at cost for each category (stock at the start of the month plus stock at the end, divided by two).
Divide gross profit by average stock to get the return on stock.
Sort from highest to lowest. Mark the top one to grow and the bottom one to shrink.
List items with no sale in 60 days and write one action for each (discount, bundle, return, stop ordering).
Choose one new item to trial for four weeks, with a written target.
Check: you can say in one sentence which category gets more space next month and why.

Watch on YouTube

Markup vs margin, explained simply (a quick refresher)Xero Accounting Software · YouTube · youtube.com

Videos by other creators on YouTube, for reference. They are not made by or affiliated with The Future Market.

LESSON 01Let your numbers choose the stock

LESSON 01 / ANIMATED LESSON / AI VOICE00:00 / 01:00

Voice

Read the video script

[Host in front of two shelves, one packed, one thin] "Which shelf deserves more space?"
[Text on screen: Return on stock = gross profit ÷ average stock] "Divide a category's gross profit by the stock money it holds."
[Text on screen: Drinks 1.50 / Household 0.25] "Drinks work six times harder per peso on the shelf than household goods."
[Text on screen: No sale in 60 days = dead stock] "Items that do not sell for a long time are dead stock. Give each one a plan."
[Host] "Let the numbers pick the shelf space. Test new items for four weeks."

Try it now

Build the category table for your store (or for the practice store). Find the return on stock for each category. Name one category to grow, one to shrink, and three items of dead stock with an action for each.

ClaudeStuck? Copy a ready-made prompt for Claude

Copy this, open Claude, paste it, and Claude will walk you through the lesson step by step.

For a grown-up: Claude is for adults (18+). Copy this, paste it into Claude, and use the answer to explain the lesson to your child.

I'm learning "Growing a Store: second location, promos and systems" on The Future Market. Lesson 1: "Let your numbers choose the stock".

What the lesson teaches:
- Category review: group your items into categories (drinks, staples, snacks, household, and so on). For each category, find its sales, cost of goods sold (COGS), gross profit and average stock at cost.
- Gross profit return on stock = monthly gross profit of a category ÷ average stock at cost. It tells you how hard each unit of money on the shelf is working. (Retailers call a yearly version of this GMROI. Here we use the monthly number.)
- Space and cash: a category that holds a lot of your stock money but brings little gross profit is a candidate to shrink. A category with a high return and frequent stock-outs is a candidate to grow.
- Dead stock: an item with no sale for a period you choose (many owners pick 60 days, which is a rule of thumb, not a law) is dead stock. Make a plan: discount it, bundle it, return it to the supplier if allowed, or stop reordering.
- Trial rule for new items: put a new item on the shelf for four weeks, write the target (for example, 20 pieces and a gross profit of at least your category average), and decide with the numbers, not with feelings.
- Sales by day and hour: a simple tally in a notebook (morning, afternoon, evening) shows when your customers come. Use it for stock, promos and staff.

The exercise I'm working on:
Build the category table for your store (or for the practice store). Find the return on stock for each category. Name one category to grow, one to shrink, and three items of dead stock with an action for each.

I'm stuck. Please:
1. Explain the main idea in plain, simple words with one everyday example.
2. Walk me through the exercise one small step at a time. Ask me what I've done so far before giving the next step.
3. Don't just give me the final answer. Help me do it myself, and check my work when I share it.

I'm a parent helping my child (about 8 years old) with a lesson called "Let your numbers choose the stock" from the course "Growing a Store: second location, promos and systems".

Here's what the lesson says:
Think of a school bag again. In 2.20.2 you learned which books to carry first. Now you ask a bigger question: which whole shelf of books deserves the most space in the bag? You look at each category, not only each item, and you give space to the ones that pay you back fastest.

The activity:
Build the category table for your store (or for the practice store). Find the return on stock for each category. Name one category to grow, one to shrink, and three items of dead stock with an action for each.

Please explain this so an 8-year-old understands: short sentences, a fun everyday example, and no hard words.
Then give me 3 simple questions I can ask my child to check they understood, and a way to do the activity together, one tiny step at a time.

Open Claude

Sources

Formulas in this lesson are standard retail maths; the numbers are practice numbers. The 60-day rule and four-week trial are rules of thumb you adjust to your own store.

My notes

I learned this

02