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      Gross Margin ROI

      Gross Margin ROI (Return on Investment) is a profitability ratio that measures the return a retailer gets on the money invested in inventory.

      Gross Margin ROI (Return on Investment) is a profitability ratio that measures the return a retailer gets on the money invested in inventory. It is an important metric because it helps retailers understand how effectively their investment in inventory is generating profits.
       
      To calculate Gross Margin ROI, you use the following formula:
      Gross Margin ROI = Gross Margin / Average Inventory Cost
       
      Where:
      • Gross Margin is the total sales revenue minus the cost of goods sold (COGS).
      • Average Inventory Cost is the average value of the inventory over a specific period.
       
      For retailers, Gross Margin ROI is crucial because it helps them evaluate the performance of their inventory investment. A higher Gross Margin ROI indicates that the retailer is making more profit per dollar of inventory investment, which is a sign of healthy inventory management and pricing strategy. Conversely, a lower Gross Margin ROI suggests that the retailer's inventory investment is not performing as well and may need to be reassessed in terms of pricing, purchasing, or inventory turnover strategies.