Of course, since I am not myself a chandler or retailer, you may feel this is unsullied by any practicality: but we do get involved in systems to manage some 300 retailers round the country, so we hear a lot of wishes and modern systems now permit more efficient stock investment.

Let's challenge assumptions.

Stock is an asset?

Technically, yes. But you have to insure it, store it, probably borrow to pay for it - or at least not benefit from credit interest - and if you ever sold the business you'd get less for it than you paid for it, should we see it as a liability?

So let's think of it as full of potential. Like an adolescent child - tough to put up with, under your feet and tolerable only for what it may bring in the future.

Margin is king?

Tesco makes a moderate living on about 2%, so it's not the whole story. And yes I do know that a chandlery isn't a supermarket. I discovered that when I asked the check out lady for a discount.

Gross margin counts for more - the cash you actually make - and stock turn is what generates that.

I hear a lot about margin reporting from our marine trade customers: not so much about stock turn. Profit comes from both.

Chandlery is different?

It's certainly a tough environment. Loads of stock lines, lots of suppliers, no central buying groups, technical elements.

But it's not so different that you can afford to ignore retailing fundamentals and not to learn from others.

At the heart of all retailing is getting the right goods on the right shelf at the right price.

To quote a master retailer:

"Assortment is vitally important. Strive never to let a customer come into your shop to buy something that ought to be there and is not. Ceaseless diligence in contriving to have actually in stock what in theory you are stocking on that particular day is crucially important to a solid trade." That was John Spedan Lewis, in a memo to the MD of Peter Jones.

Herein lies the basic tension:

assortment verses availability - range of stock vs depth of stock. How do we juggle this, and do we buy for margin or stock turn?

We set up a modelling tool to look at one issue: buying to improve margin. We'll use it to look at two cases: buying regular, steady moving stock and buying high value, fast moving stock such as antifouling.

First, some definitions I'm using: Average Quantity on hand - this is the average quantity of each stock line taken through the year.

Capital Employed - the cost of your stock Stock Turn - the number of times you've sold your stock:

period sales/ average qty on hand. Improve it by more sales and less stock holding Return on Capital Investment - the amount of profit you've made on your average stock investment over the period. Thus the same sales but with less stock held will increase ROCI Gross Margin Achieved - the actual amount of money you have made in the period: sales less cost of sales in money.

In both cases, we'll take a 12 week period. The same things work over 12 months or even 12 days. The point is that we are looking at buying in one go, or anything up to 12 goes.

We assume that if we buy in one go, we can get a better price: anything over one go, we pay standard cost price.

For each case, we take three options:

1) Multiple buys, standard cost, standard price, standard sales 2) Single large buy, reduced cost, reduced price, enhanced sales 3) Multiple buys, standard cost, reduced price, enhanced sales Case 1 - steady sellers Cost of placing order - 5.00.

Opening stock level - 5.

Standard nett retail price - 10.00. Offer retail price - 9.00.

Standard nett trade price - 7.00. Deal nett trade price - 6.00. Number sold in period - 10. Number sold at promo price -15.

The cost of placing the order includes carriage and admin costs: we've set it high to load against restocking, not buying up front.

Here are the results: Table 1 shows results for regular stock sales. The first line is multiple orders at standard prices, the second line a bulk purchase deal of the whole stock for the 12 weeks with a discounted buying price and selling price, the third multiple orders at standard cost but reduced selling price leading to faster sales We make most reward (gross margin) by buying on an upfront deal with a reduced cost price as a result - but the ROCI is much the same.

If we buy 12 times we have £100 tied up, if once £130.

Could we have made more of the £30 difference than £15?

So buying quantity may not be such a bad idea - ensuring we don't run out on a lowish stock turn item.

Figure 1. You get most return from 4 buys with no selling offer price. Buying in 4 lots also reduces your investment dramatically, feeding the higher return. Of course you must also use the money you have saved Figure 2. Slight reduction in risk or return from buying when needed Case 2 - fast movers It's obvious isn't it? We know we're going to sell a lot of antifouling in the spring, so let's buy it at a good price, pile it high and sell it at a deal.

Do the numbers, and it looks a bit different. Applying the same rules: Cost of placing order - 20.00. Opening stock level - 15. Standard nett retail price - 50.00. Offer retail price - 40.00. Standard nett trade price - 37.50. Deal nett trade price - 30.00. Number sold in period - 200. Number sold at promo price - 300.

Table 2. Results for high value fast movers such as antifouling. Buying pattern scenarios as for Table 1 Here we see a different picture, and it is the opposite of what you may expect. There is a dramatic increase in ROCI if you buy little and often - and charge full price.

Buy up front and you risk a lot of cash with only an extra £500 of reward.

The key question: could you earn more with the extra £8000-odd invested in a better assortment? Well, £500 is a 6% margin, so you'd hope so.

Let's look at the trends with increased numbers of orders:

Figure 3. Steady climb in ROCI as you buy more often, with reduced exposure.

Figure 4. Dramatic reduction in risk by regular buying, along with minimal reduction in total return - of course this assumes that you shift 200 units at standard price when all about you are discounting!

Improving stock turn Improving stock turn will pay dividends across the stock range, but mostly so on the faster moving items. If you chase overall stock turn, but do it one item at a time: start with the fast moving items.

How do we do it?

Buy better. Automatic buying proposals based on seasonal trends let you run a flatter stock profile, having fewer of each line but more lines.

Identify and dump excess. A wide stock, especially of odd bits, is a real magnet. But you don't want too many bits of obscure stock (a nice term for old junk). A good system should identify overstock that you can turn over with promotions, such as buy one thing get another etc.

You must monitor the effectiveness of these promotions. With hard information you'll get very good at matching the promotion to the item. Convenience stores use them all the time - and they work. And of course, there's always e-Bay?.

Sell More. Classically the way to do stock turn. Do your staff suggest related product sales, is your store layout refreshed often enough, is it bright and attractive? In fact, are you the best merchandiser you can be?

Going forward And now you have focussed the fast movers to cut your investment, have you used the spare cash to broaden your assortment?

When you aren't a web trader, are you really offering the things the web traders can't. Touch and feel, personal contact, simple returns, advice, attention. A smile.

At least in our climate you have one thing going for you.

Studies indicate that in UK waters on 99.437% of days most of us sailors would rather spend leisure time buying waterproofs than go out and get cold and wet wearing them.