Worked scenario
Volume in one shelf, margin in another
Where margin varies widely across a range, buying on movement alone concentrates capital in the least profitable stock.
3 min read
Movement is easy to see and margin is not, so buying follows movement. In a category where margin varies by band, that is a systematic bias.
Two kinds of slow
A slow line with a strong margin may be worth carrying for the customers it brings. A slow line with a thin margin is simply capital on a shelf. Treated identically, the wrong one gets cleared.
Capital by band
Knowing how much cash sits in each price band frequently surprises owners, and it is the number that governs whether a range can be widened at all.
What changes
- Margin recorded per line alongside movement
- Capital tied up per band visible
- Range decisions informed by contribution
- Slow high-margin lines distinguished from slow low-margin ones
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