Gross Margin Return on Investment, (GMROI)

Gross Margin Return on Investment, (GMROI) is the most important KPI in retail. What it measures is for every dollar invested, how many dollars did you get back?

An example say you purchased $160 of stock and sold it all in the same year for $260, your profit would be $100. Your GMOI would be profit/cost. For this example, the GMOI would be $100/$160 x 100%= 62.5%.

Now it can be quickly showed that GMROI depends very much on stock turns.

Say we make two turns so you buy for $100 a stock line, then sell if for $260, you buy another $100 and sell it at $260. So for this example, $100 has resulted in two lots of $260 sales, so the profit is 2 x $260 - $100 = $420, so the GMOI is now $420/$100 x 100%= 420%

If your Turns go up, your average stock holding is lower and your return is greater.

To get the GMOI

Go to reports and select "Sales by Return On Investment (GMROI) see the red arrow.

Now put in the required options, here I picked stationery department. I do suggest that you do this by department.

When my report comes up here, I further suggest that you export it to excel. If you do not have excel, use openoffice which is free which our software can integrate into too.

Then I got this.

As a general rule in retail increasing your GMOI is your goal.