GMROI
Gross Margin Return on Inventory Investment measures how much gross profit a retailer earns for every dollar invested in inventory, calculated as gross margin ÷ average inventory cost. A GMROI above 1.0 means inventory is profitable; most retailers target 2.0–3.0, meaning each dollar of stock returns two to three dollars of gross margin.
How it's calculated
Divide the gross profit you earned by the average cost of the inventory you held to earn it:
GMROI = gross margin ÷ average inventory cost
Gross margin is revenue minus COGS; average inventory cost is your stock valued at what you paid. A GMROI of 2.5 means every $1 invested in inventory returns $2.50 of gross margin.
Why it matters
GMROI fuses margin and turnover into a single profitability-of-inventory number, so you can compare a high-margin slow seller against a low-margin fast mover on equal footing. Above 1.0 is profitable; most retailers aim for 2.0–3.0. Shopify merchants use GMROI to decide which products deserve more inventory dollars and which to cut.
Track this automatically
Logistified calculates and monitors metrics like this across your whole Shopify catalog and turns them into reorder alerts and purchase orders.