💰 GMROI Calculator — Gross Margin Return on Investment
Calculate gross margin return on inventory investment
Total gross profit from sales
Average inventory investment
How to Use This Calculator
Enter Gross Margin
Input the total gross profit (revenue minus cost of goods sold) for the period you're analyzing.
Enter Average Inventory
Input the average inventory value for the same period. Calculate as (Beginning Inventory + Ending Inventory) / 2, or use average inventory from your records.
Calculate
Click calculate to see your GMROI percentage, which shows how much gross profit you generate per dollar invested in inventory.
Review Results
Use GMROI to evaluate inventory profitability, compare products, optimize stock levels, and make inventory investment decisions.
Formula
Gross Margin Return on Investment (GMROI):
GMROI = (Gross Margin / Average Inventory) × 100%
Average Inventory:
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Gross Margin:
Gross Margin = Revenue - Cost of Goods Sold (COGS)
Example 1: Retail Store
Gross Margin: $50,000, Average Inventory: $25,000
GMROI: ($50,000 / $25,000) × 100% = 200%
✅ Excellent - earning $2 for every $1 invested in inventory
Example 2: Lower Performance
Gross Margin: $30,000, Average Inventory: $40,000
GMROI: ($30,000 / $40,000) × 100% = 75%
⚠️ Needs improvement - earning less than $1 per $1 invested
About GMROI Calculator — Gross Margin Return on Investment
The GMROI (Gross Margin Return on Investment) Calculator helps retailers and inventory managers measure how efficiently inventory investment generates gross profit. This critical retail metric shows the return on every dollar invested in inventory, helping you identify profitable products, optimize stock levels, and make better inventory investment decisions.
When to Use This Calculator
- Product Performance: Evaluate which products provide the best return on inventory investment
- Inventory Optimization: Identify products with low GMROI that may need re-evaluation
- Buying Decisions: Make informed purchasing decisions based on expected GMROI
- Category Analysis: Compare GMROI across different product categories
- Inventory Planning: Plan inventory levels to maximize GMROI
- Performance Benchmarking: Compare your GMROI to industry benchmarks
Why Use Our Calculator?
- ✅ Quick Calculation: Instantly calculate GMROI from your gross margin and inventory data
- ✅ Clear Results: Easy-to-understand percentage display with performance indicators
- ✅ Investment Insight: Shows return per dollar invested in inventory
- ✅ Performance Indicators: Color-coded results indicate performance level
- ✅ Free Tool: No cost for essential inventory analytics
Common Applications
- Retail Stores: Evaluate inventory profitability for retail operations
- E-Commerce: Analyze online inventory performance
- Wholesale: Measure inventory return for wholesale businesses
- Product Management: Compare product profitability and make assortment decisions
Tips for Best Results
- Accurate Inventory: Use average inventory value for the period, not just ending inventory
- Time Period Consistency: Ensure gross margin and inventory are from the same period
- Compare Products: Calculate GMROI for individual products to identify winners
- Regular Monitoring: Track GMROI over time to identify trends
- Industry Benchmarks: Compare your GMROI to industry standards (typically 100-200% is good)
Frequently Asked Questions
What's a good GMROI?
A good GMROI varies by industry, but generally 100-200% is considered good, with 200%+ being excellent. This means you're earning $1-2+ in gross margin for every $1 invested in inventory. Lower GMROI may indicate overstocking or low-margin products.
How is GMROI different from ROI?
GMROI focuses specifically on inventory investment and gross margin, while ROI typically includes all costs and net profit. GMROI is a retail-specific metric that helps evaluate inventory profitability before considering operating expenses.
Should I calculate GMROI by product or overall?
Both! Calculate overall GMROI for your business, but also calculate it by product, category, or vendor. This helps identify which products provide the best return and which may need re-evaluation or discontinuation.
How do I improve my GMROI?
Improve GMROI by: increasing gross margins (better pricing), reducing inventory levels (faster turnover), focusing on high-margin products, improving inventory turnover, reducing markdowns, and optimizing product mix. Consider discontinuing low GMROI products.
What if my GMROI is below 100%?
GMROI below 100% means you're earning less than $1 per $1 invested in inventory. This indicates poor inventory performance. Consider: reducing inventory levels, improving margins, focusing on faster-moving products, or discontinuing low-performing items.
How often should I calculate GMROI?
Calculate GMROI regularly - monthly or quarterly. Track trends over time to identify improvements or declines. Also calculate it before making major buying decisions to evaluate expected return on new inventory investments.