Why GMROI matters
Margin and turnover argue when judged alone: the rich-margin slow mover versus the thin-margin fast mover both claim to be working. GMROI is the referee, combining how much each sale earns with how often the inventory earns it, so buying decisions compare products by return on the capital they tie up.
Using GMROI
- Rank categories and products by itThe buying budget’s honest league table
- Diagnose low scoresA margin problem, a turnover problem, or both
- Steer the mixReorder depth and space toward the earners
- Watch it through promotionsDiscounts that lift turnover can still sink GMROI
Questions
What’s a good GMROI?
Above one is table stakes, each inventory dollar returning more than itself in margin, and the working target varies by category economics. As with turnover, the useful comparison is your products against each other and your own trend, not a borrowed benchmark.
GMROI or inventory turnover: which to steer by?
Turnover measures speed; GMROI measures pay: a product can turn fast while earning little. Buyers use turnover for stock health and GMROI for allocation, where the next buying dollar earns most.