the true measure of retail – g.m.r.o.i. – and what it ...the true measure of retail –...
TRANSCRIPT
![Page 1: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/1.jpg)
The True Measure of Retail –G.M.R.O.I. – And What It Takes To Grow It
Paul Erickson, RMSA
![Page 3: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/3.jpg)
![Page 4: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/4.jpg)
Metrics Matter
What gets If you don’tWhat getsWhat gets measured – gets
changed
If you don t measure it, you can’t change it,
What gets rewarded – gets
doneand if you don’t
reward change it will not happenpp
![Page 5: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/5.jpg)
Metrics Matter
What gets If you don’tWhat getsWhat gets measured – gets
changed
If you don t measure it, you can’t change it,
What gets rewarded – gets
doneand if you don’t
reward change it will not happenpp
![Page 6: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/6.jpg)
Metrics Matter
What gets If you don’tWhat getsWhat gets measured – gets
changed
If you don t measure it, you can’t change it,
What gets rewarded – gets
doneand if you don’t
reward change it will not happenpp
![Page 7: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/7.jpg)
GMROI
![Page 8: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/8.jpg)
Nature of Merchandise1 Frequency of purchase1. Frequency of purchase
2. High purchase frequency=lower replacement price
3. Low purchase frequency = higher replacement price
4. “Deliberation” merchandise
![Page 9: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/9.jpg)
Nature of Merchandise1 Frequency of purchase1. Frequency of purchase
2. High purchase frequency=lower replacement price
3. Low purchase frequency = higher replacement price
4. “Deliberation” merchandise
![Page 10: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/10.jpg)
Nature of Merchandise1 Frequency of purchase1. Frequency of purchase
2. High purchase frequency=lower replacement price
3. Low purchase frequency = higher replacement price
4. “Deliberation” merchandise
![Page 11: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/11.jpg)
Nature of Merchandise1 Frequency of purchase1. Frequency of purchase
2. High purchase frequency=lower replacement price
3. Low purchase frequency = higher replacement price
4. “Deliberation” merchandise
![Page 12: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/12.jpg)
DefinitionG M i R t I t tGross Margin Return on Investment –A measurement of the relationship between inventory turnover and gross margin dollarsinventory turnover and gross margin dollars. It simply says that for each dollar tied up in inventory at cost x number of dollars that yhave been earned in gross margin = Gross Margin Return on Investment
![Page 13: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/13.jpg)
Formula
Annualized Gross Margin A I t t C tGMROI = Average Inventory at Cost
![Page 14: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/14.jpg)
Earn ‘n Turn Calculation
Example #1$500GM = $2.00 GMROI$250 ACI
$2.00 GMROI
= $5.00 GMROIExample #2
$500GM $5.00 GMROI$100 ACI
![Page 15: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/15.jpg)
![Page 16: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/16.jpg)
Warren Buffet
![Page 17: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/17.jpg)
What is a Good GMROI?
![Page 18: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/18.jpg)
Fast Selling – Low Marging g
• Sell 156 units a yearSell 156 units a year• Cost is $5 – Retail is $7
K 6 h d t ll ti• Keep 6 on hand at all times• Investment cost is $30 ($5 x 6 units)• 156 unit sales at $2 GM = $312 GM• $312 / $30$ $• $10.40 GMROI
![Page 19: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/19.jpg)
Slow Selling – High Marging g g
• Sell 2 units a yearSell 2 units a year• Cost is $325 – Retail is $999
K 2 h d t ll ti• Keep 2 on hand at all times• Investment cost is $650 ($325 x 2 )• 2 unit sales with a GM of $674 = $1348• $1348 / $650 = $ $• $2.07 GMROI
![Page 20: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/20.jpg)
Item Comparison
Item AFast Selling – Low Margin
Item BSlow Selling – High Margin
• GMROI – 28.6% • GMROI – 67.5%• Not so profitable • Highly profitable
![Page 21: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/21.jpg)
GMROI & inventory turnover are the most importantare the most important measurements for vendor
f t t il!performance at retail!
![Page 22: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/22.jpg)
Vendor Comparison
Vendor A Vendor B
• Sales – $500k • Sales - $500k• Gross $ - $240 (48%) • Gross $ - $220 (44%)• Turns – 2 0 • Turns 4 0Turns 2.0 Turns 4.0
![Page 23: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/23.jpg)
Let’s Compare
GM$ AVG Cost $ ROIVendor A $240k $130k $1.84Vendor B $220k $57 5k $3 82Vendor B $220k $57.5k $3.82
![Page 24: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/24.jpg)
Three Keys to Retail Success
![Page 25: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/25.jpg)
Three Keys to Retail Successy
I t GRInventory Turn
Gross Margin
Revenue GrowthTurn MarginGrowth
![Page 26: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/26.jpg)
Three Keys to Retail Successy
I t GRInventory Turn
Gross Margin
Revenue GrowthTurn MarginGrowth
![Page 27: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/27.jpg)
Three Keys to Retail Successy
I t GRInventory Turn
Gross Margin
Revenue GrowthTurn MarginGrowth
![Page 28: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/28.jpg)
![Page 29: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/29.jpg)
outdoorindustry.org/OU
Recorded Sessions now available for on-demand viewing:
• Inventory Turnover – Three Steps to Purchasing Smarter, Turning More and Making More Money
• Shoulder Season Discounting Strategies The Eight Truths of• Shoulder-Season Discounting Strategies – The Eight Truths of Markdowns
• The Mysteries Behind Initial Mark-up – Pricing Strategies to Improve Your Bottom LineYour Bottom Line
• The True Measure of Retail – GMROI – and What it Takes to Grow It
![Page 30: The True Measure of Retail – G.M.R.O.I. – And What It ...The True Measure of Retail – G.M.R.O.I. – And What It Takes To Grow It Paul Erickson, RMSA](https://reader030.vdocuments.us/reader030/viewer/2022040521/5e7ae1525499e22c4725ff66/html5/thumbnails/30.jpg)
Thank You
outdoorindustry.org/OU
Thank You.
Paul EricksonRMSA Retail SolutionsRMSA Retail Solutionswww.rmsa.comperickson@rmsa [email protected]