A shop turning over $800,000 a year should typically hold between $65,000 and $160,000 of stock at cost. Where you land inside that range depends on what you sell and how fast it moves. Anything much above it and your cash is sitting on shelves instead of in the bank.
That’s the short answer. The longer answer is more useful, because most retailers I talk to have never worked the number out properly. They hold what they have always held, or what the shop looks like it needs, or what suppliers talked them into last season.
The current numbers suggest a lot of shops are carrying too much. In the June quarter of 2026, retail trade inventories in Australia rose 1.0% while sales of goods and services rose only 0.4%, and company gross operating profits in the sector fell 5.2% (ABS Business Indicators). Stock growing faster than sales while profit goes backwards. I don’t think that’s a coincidence.
Forget the percentage-of-turnover rule
The advice you hear most often is to hold stock worth some percentage of your turnover. It’s the wrong way around. Stock is bought at cost and sold at retail, so a turnover-based rule quietly ignores your margin. Two shops with identical sales and very different margins need very different stock.
The number you need comes from two things.
Your cost of goods sold. What your stock actually costs you across a year.
Your stock turn. How many times you sell and replace your average stock holding in that year.
Then:
Stock at cost = annual cost of goods sold ÷ stock turn
Nothing else. If your cost of goods is $400,000 and you turn stock four times, you should be holding around $100,000 at cost. If you’re holding $180,000, you’re turning it 2.2 times, and roughly $80,000 of your money is doing nothing.
What your category should look like
You don’t have to guess your cost of goods. The ATO publishes small business benchmarks drawn from actual tax returns across 100 industries, covering more than two million small businesses (ATO small business benchmarks). The cost of sales figures are the ones that matter here.
The table below applies those figures to a shop on $800,000 annual turnover, then works out what it should be holding at three, four and six stock turns. Stock figures are at cost, not retail.
| Category | Financial year | Avg cost of sales | Implied gross margin | Cost of goods on $800k | Stock at 3 turns | At 4 turns | At 6 turns |
|---|---|---|---|---|---|---|---|
| Gift stores | 2023–24 | 52% | 48% | $416k | $139k | $104k | $69k |
| Newsagents | 2023–24 | 55% | 45% | $440k | $147k | $110k | $73k |
| Homewares retailing | 2022–23 | 52% | 48% | $416k | $139k | $104k | $69k |
| Clothing retailing | 2023–24 | 53% | 47% | $424k | $141k | $106k | $71k |
| Florists | 2023–24 | 49% | 51% | $392k | $131k | $98k | $65k |
| Garden supplies retailing | 2023–24 | 51% | 49% | $408k | $136k | $102k | $68k |
| Book retailing | 2022–23 | 54% | 46% | $432k | $144k | $108k | $72k |
| Toy and game retailing | 2022–23 | 60% | 40% | $480k | $160k | $120k | $80k |
Cost of sales percentages are the ATO average for the turnover band containing $800,000 in each industry: gift stores, newsagents, homewares retailing, clothing retailing, florists, garden supplies retailing, book retailing and toy and game retailing.
Scaling is simple. On $400,000 turnover, halve the stock figures. On $1.6 million, double them.
What stock turn should you aim for?
Four is a fair target for most independent shops selling giftware, homewares, stationery and similar. Six is very good. Below three, you have a problem you can measure in dollars.
For context, across more than 2,400 small and mid-sized businesses using its platform, Netstock found average stock turns of 5.3 and a median of 3.9 in 2025 (Netstock Supply Chain Planning Benchmark Report). That’s global and it covers wholesalers and manufacturers as well as retailers, so treat it as a sanity check rather than a target. The gap between the average and the median is the interesting part. A small group of good operators pull the average up while most sit lower.
Stock turn also translates into something more intuitive. Weeks of cover is 52 divided by your stock turn.
| Stock turn | Weeks of cover |
|---|---|
| 2 turns | 26 weeks |
| 3 turns | 17 weeks |
| 4 turns | 13 weeks |
| 6 turns | 9 weeks |
Thirteen weeks of cover is a quarter’s worth of stock on the floor. Twenty-six weeks is half a year. Say it that way and most owners immediately know which end they’re at.
Where the whole-of-shop number misleads you
The average across a shop hides everything worth knowing. I’ve seen plenty of shops with a respectable overall turn where one department is doing all the work and another hasn’t moved in eighteen months.
Look at it by department, and expect wide variation. Fast-moving consumables and impulse lines should turn many times a year. Greeting cards turn slowly by nature and that’s not a fault, because the range needs depth to work at all. Considered purchases and collectables turn slowly too. Jewellery is the extreme case. Store-based jewellery chains run some of the slowest turnover in retail. Signet Jewelers reported around 2.1 times in the financial year ended January 2026 (AisleStock analysis of Signet’s 10-K).
Three other things distort the number.
Seasonality. Measure stock as an average across the year, not on one day. A gift shop counted in mid-November looks disastrous, and counted in late January looks brilliant. Neither is true.
Sale or return, and consignment. If you don’t own it, it shouldn’t be in the calculation.
Dead stock. Stock that hasn’t sold in a year isn’t really stock. It’s a loss you haven’t booked yet. Strip it out and recalculate, and the honest number is usually worse than the reported one.
What to do about it
Work out your real figure first. Cost of goods sold for the last twelve months, divided by the average of your opening and closing stock at cost. One number, ten minutes, and it tells you more about the health of your business than your sales graph does.
If you’re holding more than you should, resist the urge to fix it with a big sale. Discounting recovers cash but destroys margin, and it does nothing about the buying habits that got you there. The durable fix is on the buying side. Cut order quantities on slow lines, stop reordering anything that hasn’t sold in six months, and hold the money back for the categories that are actually turning.
Then check it every quarter. Stock creep is gradual and almost nobody notices it happening.
Common questions
Is stock counted at cost or at retail? At cost, for this calculation. Mixing cost and retail values is the most common error I see, and it makes the result meaningless. If your point of sale system reports stock at retail, convert it using your average margin.
What if I’m a new shop? Expect a low turn in year one. You bought a full range before you had sales history to guide you. Judge yourself on the trend across the first eighteen months rather than the number itself.
Does high stock turn always mean I’m doing well? No. Turn too fast and you’re running out of things and losing sales you never see. Empty pegs and gaps in a range cost more than they look like they do. Turn is a balance, not a race.
Should I aim for the same turn in every department? No. Set a target per department based on what the category is. One shop-wide target will push you to over-buy slow categories and under-buy fast ones.
How does this relate to GMROI? GMROI is gross margin divided by average stock at cost, and it combines margin and turn into one figure. It’s the better metric once you’re comfortable with stock turn. Above 2.0 is generally healthy for most retail segments (RetailDogma).
Tomorrow morning
Pull your cost of goods sold for the last twelve months. Divide it by your average stock at cost. Write the answer on a sticky note and put it where you do your ordering.
If it starts with a two, your next order should be smaller than your last one.
…
Tower Systems offers software to local indie small business retailers to help with this.
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