Inventory & Margin

GMROI Calculator

GMROI (Gross Margin Return on Investment) tells you how many gross-margin dollars you earn for every dollar tied up in inventory. Above ~3.0 is healthy for most retail; below 1.0 means the inventory is losing money.

Your numbers

Annual revenue

Gross margin

Average inventory (at cost)

Result

1.67

GMROI

Marginal — room to improve

Gross profit$150,000

Average inventory (cost)$90,000

GMROI1.67 : 1

Gross margin $ per $1 of inventory$2

Formula: GMROI = Gross Profit $ ÷ Average Inventory Cost

What is a good GMROI?

There's no universal number — it varies by category and turn rate — but a rule of thumb for general retail is that a GMROI above 3.0 is strong, 2.0–3.0 is solid, and anything under 1.0 means that inventory is generating less gross margin than the cash it consumes. High-turn, low-margin categories (like grocery staples) and low-turn, high-margin categories (like specialty goods) can both hit healthy GMROI by different routes.

How to improve GMROI

•Raise margin — negotiate cost, fix underpriced items, trim discounting on hero products.
•Turn faster — cut weeks-of-supply on slow movers so less cash sits in stock.
•Rationalize the tail — delist dead SKUs that drag average inventory up without adding margin.

Stop calculating one item at a time

AssortIQ computes this for every product and store automatically — and tells you what to do about it. Free for 7 days.