Posts Tagged 'GMROII'

How to Control Your Retail Business More Effectively-Part 1

One of the ways you can simplify controlling your retail business is through Gross Margin Return on Inventory Investment (GMROII) – commonly called JimRoy. It is, arguably, one of the most important Retail Key Performance Indicators (KPI).

Why is GMROII so important? Because it takes into account 3 very important operational activity areas in retail:

1. Sales performance

2. Desirability (demand) of the product (or buying effectiveness)

3. Profitability

Here is the formula for GMROII:

GMROII = GM% x (Sales / Avg. Inventory)

As a numerical example, if we assume Gross Margin of 33.33% and the store net sales of 24M over 12 months with 12 month average inventory of 4M, then:

GMROII % = 33.33 x (24 / 4) = 199.98% (some people use margin as a fraction, in which case this result becomes 1.9998)

Which means that for every $100 investment you make on your inventory, you get $199.98 back! Pretty good deal!

This metric is also a great tool for benchmarking similar stores, districts and regions as well as companies within the same retail vertical. It is also used to evaluate suppliers / vendors. You can apply GMROI to department, category, brand and SKU as well. A very versatile KPI indeed.

Keep a close eye on your GMROII, since through reporting of one number, you can reduce the amount of reports you have to look at or, at least, you will be consuming less time figuring out what’s going on.

Next week, we are going to dig even deeper into how you can manage your whole business through just one number

All the Success!

DMSRetail

PS. Retail Math-Made Simple, 3rd Edition has a lot of information on KPI’s and their calculations. Choose from an electronic download, printed version, DVD presentation or any combination. Learn how your retail business operates by the numbers.

You can check it all out here.

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Holiday Tip #5 and Your Retail Management Training Library

 

Lots of retail people know all about GMROII, but not so many know about GMROF. That’s Gross Margin Return on Footage.

During busy times (like now, for instance) it’s super important that we display our merchandise in the best possible way to take advantage of all that extra traffic and encourage better sell thru, right?

Well, you can go a step further than making your merchandise look great…you can put it in the best place.

So, Holiday Tip #5 is…Use GMROF to find out which of your fixtures or walls, or wall sections is returning a better profit to you. That’s right! GMROF is not just used to find out Gross Margin Return on Floor Space…you can use it to find out the Gross Margin Return on any merchandised space.

Here’s the calculation:

GMROF = GM% x (Sales* / Sq.Ft.)
*Sales for corresponding area & time frame

Here’s an example:

Which fixture is more profitable?

Fixture 1: Oval shape with merchandised area of 7.65 square feet. Sales generated from this fixture in one month are $3,465 and Gross Margin on those sales is 43.5%.

Fixture 2: Rectangular shape with merchandised area of 7.20 square feet. Sales generated from this fixture in one month are $2,987 and Gross Margin on those sales is 45.6%.

Answer: Fixture 1 is more profitable. (GMROF for fixture 1 is 197; GMROF for fixture 2 is 189)

Most of you know that we include Retail Math in all of our workshops and YourTime Study Courses. And the reason is very simple – retail math knowledge is something no retail manager or business owner can do without. It’s a basic…a ‘must have’.

Fail to understand retail math, fail to understand your business.

This year, because so many of you asked us to, we put our workshop material, including lots of retail math, metrics and kpi information, into home study courses so that people who can’t afford the investment, or the block of time, to attend our workshops can still get all of the information they need to run successful retail businesses.

Last week, we decided to package all of them together into the most comprehensive retail management training library available and offer it to you for a fraction of the regular price. We also offered to give each customer full credit for any part they already own.

We considered it our holiday gift to our loyal customers and subscribers, and without much fanfare, we made that retail management training library available at that incredible price, minus what they had already paid, for one week.

But all good things must come to an end and that week ends tomorrow – December 7th. If you want to check it out you can still go here: http://www.dmsretail.com/ultimatebundle.htm

If you decide to buy one, we’ll refund your previous purchase of a Super Retail Success Bundle and/or any YourTime Study Courses you’ve purchased to date. It’s only fair!

All the Success!
DMSRetail Inc.

PS: The 3rd Edition of Retail Math – Made Simple was released yesterday. We’ve added Vendor Scorecards, a fully explained Profit & Loss Statement and a Retail Math Quiz! Customers who already own Retail Math – Made Simple, get a free upgrade just by sending an email to training@dmsretail.com , and many, many of you already have! (Your upgrades have been sent.) The price, for the new 3rd Edition, will remain the same for now: http://www.dmsretail.com/retailmathbook.htm


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