GMROI (Gross Margin Return on Inventory)
Quick answer
The metric showing how many euros of gross margin you generate for each euro invested in inventory.
Key takeaways
- Comparing real profitability between SKUs/categories
- Listing/delisting decisions
- Allocating working capital to stock that performs
What GMROI is
GMROI (Gross Margin Return on Inventory Investment) = gross margin / average inventory cost. A GMROI of 3 means €3 of margin for every €1 held in stock. It combines profitability with capital efficiency.
Why it matters to the board
GMROI links margin with inventory turnover - two things managers often view separately. A high-margin but slow-turning product can have worse GMROI than a low-margin but fast one.
How it is used
- Comparing real profitability between SKUs/categories
- Listing/delisting decisions
- Allocating working capital to stock that performs
How CRMconnect helps
CRMconnect combines margin data with real inventory turnover to highlight low-GMROI SKUs (candidates for markdown/delisting) and top performers, optimising locked capital.
Real-world example
A retailer kept a high-margin but very slow-turning product. GMROI analysis in CRMconnect showed it locked more capital than it generated; replacing it raised inventory return.
Last updated:
Frequently asked
Why isn't margin alone enough?+
High margin with slow turnover can lock capital without return. GMROI corrects this, measuring margin per euro of stock, not just per sale.
What GMROI is good?+
Above 1 means stock generates more than it's worth; targets vary by industry. What matters is SKU comparison and the trend.
Where CRMconnect fits
Related terms
Gross Margin
The difference between revenue and cost of goods sold, usually expressed as a percentage of revenue.
LogisticsInventory turnover
How many times stock is fully sold and replenished in a period - a measure of capital efficiency.
FinanceWorking capital
The difference between current assets and current liabilities - the cash a company has to fund daily operations. A key financial-health indicator.
LogisticsDead stock
Goods unsold for a long period that lock capital and space, with little prospect of selling at normal price.