GMROI: What is it and how to calculate it

Tips and tricks
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GMROI (Gross Margin Return on Inventory Investment)
indicates how much gross margin you get back for each dollar “invested” in inventory. Through careful analysis, you can see which lines, departments or categories are the most rewarding for your inventory investment. And which are least productive!

Calculating GMROI
GMROI% = Annual Sales divided by Average Inventory at Cost times Gross Margin %

For example, consider this merchandise category:

Annual Sales: $130,000. Average Inventory at Cost: $40,625. Gross Margin: 49%
GMROI % = $130,000 / $40,625 X 49%
GMROI% = 157%

The inventory investment in this example category is generating a 157% return in gross margin. Or, stated another way, for the year this retailer is getting $1.57 in gross margin back for every $1.00 invested in inventory in this category.

Want to know more?
Would you like to see GMROI measures in your Phocas database?

9 Likes
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Great feedback. I like the simplicity of this…

1 Like
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Yes I would like to see GMORI available in my Phocas database.

5

This is excellent information. I have recently been asked to calculate GMROI and display it in a dashboard. I would like to know more and how can I get GMROI measures in my database?

Thanks,
Justin

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@will.ferguson, is this something you added or are adding?

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We’ve used this for years (though not for Phocas) and call it the Co-Efficient.