GMROI improves dramatically when your stock-on-hand is set to meet upcoming customer demand without purchasing overstock.
Paying more for a product won’t necessarily have a negative impact on GMROI.
A well-run store has an average GMROI of 365%. A typical store has about 150%.
Remember, not every item in your inventory will meet the 365% target. Some products will be lower, some will be higher.
What is GMROI?
When you purchase items for your inventory, think of it as a short-term investment.
Each time a product sells, those investment dollars are in motion and generating profits. As this cycle repeats itself, again and again, retailers earn the money needed to grow and expand their business. Investment dollars that sit on a shelf in the stockroom are not working, and could be losing value.
GMROI (gross margin return on investment) analyzes how efficiently a store can convert inventory into cash.
Want to learn more about GMROI?
Read our article “Using GMROI To Evaluate Your Inventory Investment” for a breakdown of what GMROI is, and how to use it.