Saying Goodbye to GMROI

In short, there is a much larger profit impact from increasing gross margin than
there is from reducing the level of inventory. The two profit levers in the GMROI
model are not even close to equal.
From a GMROI perspective, though, reducing inventory is actually better than
increasing the gross margin percentage. The GMROI after the inventory
reduction is 222.2%, while the GMROI from increasing margin is only 220.0%. In
both cases GMROI went up, but the weaker of the two levers gets credit for
better performance. Turn and Earn shows the same set of results, albeit with
slightly different numbers.
GMROI will always make low gross margin items look better than they are and
make high gross margin items look worse than they are. It will also almost always
make actions that produce small profit improvements look good and actions that
make large profit improvements look bad. It is a serious limitation that impact
inventory investment decisions daily.

10 strategies to maximize store prductivity with real-time video intelligence

Video intelligence also provides valuable information on customers’ movement throughout  the store – including where they stop for a significant amount of time. Called dwell analysis, this lets retailers know which aisles and products are attracting consumers.

.. In store video intelligence is a competitive differentiator because it enables a much deeper understanding of how consumers repond to products, product placement, packaging and promotions,” add Leslie Hand, research director, Global Retail Insights. “For example, intelligence regarding a product promotion that seemed successful on the surface may reveal that 50 percent of customers that stopped to look at the promotion compared it to something else, or simply changed their minds after reading the ingredients.”

 

The single greatest miss in retail store metrics: Footfalls

Beyond the basic financial metrics of volume, revenue and margin, most retail chains are measuring assortment and inventory performance through metrics like Inventory Turns, Stock to Sales Ratios, and many are moving toward GMROII – Gross Margin Return on Inventory Investment. Even the smallest retail chains are measuring some form of “Market Basket”, at least in terms of ratios of profitable accessories attached to a core item like a PC or Tablet.

.. The critical question: If there are no increases in sales or profits, was the fail due to lack of conversion based on better a consumer experience, or simply a lack of consumer traffic? Or conversely, if retail financial performance improves, how much of the gain is due to better footfalls of the right consumers, and how much is due to store execution?