What discounts, turn goals and receipts do to your margin.
Five numbers in, four scenarios out. Change anything and watch gross margin, inventory and weeks of supply move — the same quick open-to-buy model I use to show merchants why these three levers can't be pulled independently.
Your numbers
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| Baseline | 1. Discount up, hold revenue |
2. Discount up, hold revenue & turn |
3. Hit a turn goal, receipts fixed |
4. Max revenue from your inventory |
|
|---|---|---|---|---|---|
| Revenue & margin | |||||
| Revenue after discounts | |||||
| Revenue at full retail value | |||||
| Discount rate | |||||
| Sales at landed cost | |||||
| Product gross margin $ | |||||
| Gross margin % after discounts | |||||
| Dilution $ from your IMU | |||||
| Dilution of IMU to GM% (bps) | |||||
| Receipts | |||||
| Receipts at landed cost | |||||
| Receipts at full retail price | |||||
| Inventory | |||||
| Average inventory at cost | |||||
| Average inventory at full retail | |||||
| Average weeks of supply | |||||
| Annual cost turn | |||||
| What it means | |||||
| Where you are today, on the numbers above. | Holding revenue at a higher discount means selling more units at a lower price. Turn rises, margin rate falls. | Turn is protected too, so receipts have to grow to fund the extra units. | The discount has to do the work. Needs a month-by-month roll — an annual average can't get you there. | Leaving two weeks of supply at year end, the most you can sell on these receipts. | |
Three levers, one outcome.
Discount rate, turn goal and receipts get argued about in separate meetings, by different people, as though they were independent. They aren't. Move any one of them and the other two have to absorb it somewhere — usually in gross margin, and usually without anyone deciding to.
Push the discount rate up while holding revenue and margin falls while turn rises, because you're moving more units at a lower price. Protect the turn as well and the receipts have to grow to fund it. Fix the receipts instead and the discount has to do the work. There is no version where all three move independently.
This is deliberately a quick model — annual, one category, no seasonality beyond the monthly roll in scenario 3. A real open-to-buy plan works by month and by category, and that's what the open-to-buy engagement builds. But the relationships here are the same ones, and they're the ones most often missed.
Want this on your real numbers?
That’s the initial assessment: this same model, run on your main categories with your actual figures, and a walk-through of what they mean and where to focus first.