1. Gross Margin
The real profit of a product.
Formula
margin = (selling_price - cost) / selling_price
Example
cost = 6€
price = 10€
margin = 40%
Retailers care about this more than revenue.
2. Inventory Turnover
How fast inventory sells.
Formula
turnover = annual_sales / average_inventory
Example
sold 1000 units
average stock 200
turnover = 5
Meaning: stock rotates 5 times per year.
3. Sell-Through Rate
How much of received stock is sold.
Formula
sell_through = sold / received
Example
received 100
sold 70
sell-through = 70%
Retailers track this to measure product performance.
4. Reorder Point
When to buy more stock.
Formula
reorder_point = daily_sales × supplier_lead_time
Example
daily sales = 5
supplier delay = 10 days
reorder point = 50
If stock drops below 50 → reorder.
5. Dead Stock
Products that do not sell anymore.
Example rule:
no sale for 90 days
Dead stock = frozen cash.
Stores hate it.
6. Basket Size
Average items per purchase.
Formula
basket_size = items_sold / number_of_orders
Example
200 items sold
100 orders
basket size = 2
Retailers try to increase this.
7. Stockout
When a product becomes unavailable.
Stockouts cause:
- lost sales
- customer frustration
Good inventory systems try to predict and avoid this.
8. Category Performance
Retailers organize products into categories.
Example:
Dairy
Beverages
Snacks
Managers compare category performance.
9. Lead Time
How long suppliers take to deliver.
Example:
Order today
Delivery in 7 days
This affects inventory planning.
10. Markdown / Promotion
Retailers reduce price to sell slow products.
Example:
Original price: 10€
Promotion: 7€
This helps remove dead stock.