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GMROI – GMROF – GMROL : How To Make More With Less

Written by: Nilesh Shah

Article Overview: You don’t necessarily have to increase your sales to improve your profits. What matters is how much each inventory rupee produces.

GMROI – GMROF – GMROL : How To Make More With Less

As a retailer, your primary means for earning profits is your inventory investment. So it only makes sense to put your inventory rupee into merchandise that will give you the greatest return on your investment. But how do you know whether you should, for example, cut back on running shoes and build up your collection of cycling shoes?

GMROI – GMROF - GMROL can be a very useful tool in your analysis.

GMROI (also known as GMROII) stands for Gross Margin Return On Inventory Investment - a measure of inventory productivity that expresses the relationship between your total sales, the gross profit margin you earn on those sales, and the number of rupees you invest in inventory.

GMROI is expressed as a percentage or a rupee multiple, telling you how many times you’ve gotten your original inventory investment back during a specified period.

GMROF stands for Gross Margin Return On Footage - a measure of inventory productivity that expresses the relationship between your gross margin, and the area allotted to the inventory.

GMROF is expressed as a percentage or a rupees multiple, telling you how much returns you’ve gotten per area (selling feet) during a specified period.

GMROL stands for Gross Margin Return On Labor - a measure of inventory productivity that expresses the relationship between your gross margin, and the full time employee.

GMROF is expressed as a percentage or a rupees multiple, telling you how much returns you’ve gotten from each piece of full time employee during a specified period.

Related Articles
  Retail Matrix - Part II
  Understanding Retail Metrics

Article Tags: cycling shoes, full time, gmroi, gross margin return, gross margin return on inventory, gross margin return on inventory investment, gross profit margin, productivity, profits, relationship, running shoes, rupee, rupees, time employee



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