GMROI calculator.
Gross margin ÷ average inventory cost. Tells you which products earn the most per euro you have tied up in stock. Better than turnover OR margin alone.
For the period
Use a year of data. Defaults assume an apparel SKU group.
GMROI
GMROI beats turnover and margin alone.
Turnover alone misses margin — fast-moving low-margin junk looks good. Margin alone misses turnover — high-margin slow-movers look good. GMROI combines them: how many euros of gross margin you earn for every euro of inventory you keep on the shelf.
The formula
GMROI = gross margin ÷ average inventory at cost
Where average inventory = (beginning inventory + ending inventory) ÷ 2, both at cost.
What's a good GMROI
Under 1.5: losing money once you account for holding costs (rent on backroom, insurance, financing, write-offs). 1.5-2.5: survival range. 2.5-4: healthy. Most well-run independent retailers live here. Over 4: exceptional. Common for boutiques with tight assortment and fast turnover.
How to use it for buying decisions
Calculate per category, per supplier, per SKU group. Rank them. Cut the bottom decile from your next order; double the top decile. Most retailers find 30-40% of their assortment delivers 70-80% of their GMROI — but they keep ordering the bottom because it "looks normal."
Two ways to improve it
Raise margin (better sourcing, smarter pricing, less discounting) — improves the numerator. Or reduce inventory (smaller orders, faster reorders, drop poor performers) — improves the denominator. The second usually moves the needle faster for small retailers.