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What is the "return on investment" of a retailer's largest investment? The GMROI calculation is the tool for the job! GMROI – Gross Margin Return on Inventory Investment – indicates how much Gross Margin you get back for each dollar “invested” in inventory over a year. No other formula, no other calculation, simultaneously impacts both Gross Margin and Cash Flow. No wonder we consider GMROI as the #1 measure of inventory productivity. And since inventory represents between 65%-80% of a retailer's total assets, it deserves a lot of management attention. Let's start with a little "window shopping." Check below for the GMROI Benchmarks for just a few retail segments.
There are lots more charts where these came from. Go here to find the Benchmarks for your retail segment, plus to see all 40+ retail segments for which data is available.
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A few years ago, during a planning session in our office, we drew a quick diagram on a whiteboard. It showed three shapes.
Out of all of the potential things we could do, which ones truly warrant our time, energy, and resources?
That picture keeps coming to mind as the COVID-19 shutdown orders on retailers of "non-essential" goods are starting to be lifted.
That's a sign of the times, isn't it? While retailers are more accustomed than most folks to cope with change, 2020's unrelenting flexibility tests have been a challenge. Forget about five years. Retailers have to be ready for the next five months! It's back-to-school and then Holiday. The only certainty about the next five months is that they will probably feel like the past five months. Yet you still must run a retail business. And that means you still must buy and sell merchandise. The opportunities – and the pressures – are mounting.
This is welcome news for many retailers, as consumer confidence has been a key leading indicator of retail sales. However, a note of caution: retail sales are not the sole component of consumer spending.
As we look around, we see a popular cost-saving and productivity-boosting tactic being instituted by many national retailers, shopping malls, and restaurants. They are open fewer hours.
This offers an opportunity for you to revisit your store hours and employee scheduling practices. Maybe it's time to consider some changes, if you haven't already.
Your customers have voted with their feet. Your goal is to see what patterns there are in their shopping visits. (This could be a fine project for a summer employee home from college.)
Start small; focus on , say, the last four weeks of data collected by your POS system. But this time, produce reports by the day of the week. Yep, seven columns of data. Wait till you see what it can reveal!
Let's assume your stores have been closed for weeks now.
We recognize how conscientious you are. So, after paying what you can to your employees (and yourself), the next most-worrisome dilemma is your rent.
As you likely have discovered, a common choice for many landlords is to offer to defer your payments. But that means taking on more debt, as those payments are only being postponed to a later point in time. You need a better solution than that.
"Of course I want it today. If I wanted it tomorrow, I would have come in tomorrow." That's what we call "retail time." Retailers are comfortable with that pace; they enjoy the variety; they welcome the need to change and adjust. But, instead of just keeping life interesting, 2020 seems to have gone overboard in bringing changes and disruption to us all. The triple pandemic of the virus, the economy, and the civil unrest. And oh yes, it's also an election year. Enough already, right? We think the most challenging part of this is the effect on our sense of time.
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