GMROI
GMROI is the acronym for Gross Margin Return on Investment.
Gross Margin Return on Investment
A retail-specific metric that measures the amount of gross profit earned for each dollar of inventory investment. This KPI helps retailers evaluate the profitability and efficiency of their inventory management.
GMROI Formula
Loading formula...Where:
- Loading formula...$\text{Gross Profit} = \text{Total Sales Revenue} – \text{Cost of Goods Sold (COGS)}&s=2$
- Loading formula...$\text{Average Inventory Cost} = \frac{\text{Beginning Inventory Cost} + \text{Ending Inventory Cost}}{2}&s=2$
A higher GMROI indicates that a retailer effectively manages its inventory and generates a good return on investment. It can be improved by:
- Increasing gross profit through higher sales or better pricing strategies
- Reducing inventory costs through better purchasing, negotiation, or inventory management
- Optimizing product mix to focus on high-margin, fast-moving items
Retailers can use GMROI to compare the performance of different product categories, stores, or periods and make data-driven decisions to improve overall profitability.
- Abbreviation: GMROI