Gross Margin Return on Inventory Investment answers the question every retailer eventually asks: "Of every dollar I have on the shelf, how many dollars of gross profit does it return?" Many SKUs that look great by GMROI per item look terrible when you account for the slow-moving ones tying up cash.
GMROI = (Gross margin %) × (Sales / Average inventory cost). Or, equivalently, = Gross profit / Average inventory cost. The result is a multiplier: how many dollars of gross margin you earn per dollar of inventory.
The textbook rule: a GMROI above about $2.50 is "healthy" in retail; below $1.50 is "unhealthy". But "healthy" depends entirely on your business model. An ecommerce seller of high-velocity consumables might average $5; a luxury jeweler might be at $1.20 and still be doing great.
The reason this calculator is useful isn't the number itself — it's the mix view. When you compute GMROI per SKU, your catalog usually splits into three groups: high-margin-and-moving, low-margin-but-moving, and high-margin-but-sitting-still. Knowing which is which is where the action is.
| SKU | Sales ($) | COGS ($) | Avg inv cost ($) |
|---|---|---|---|
The mix-weighted GMROI is the average across your inputs, weighted by inventory investment. SKUs with more inventory cost contribute more to the average. This is the right way to think about overall business health.
But the per-SKU view is where the decisions live. Three patterns to look for: