Basics of Benchmarking
The average gross profit rose to 34 percent from the 31.8 percent reported in the previous survey compiled in 2005. Although retailers who primarily sold consumer electronics began with a 14 percent higher gross margin than appliance dealers, their operating profit margins were close at 2.2 percent for appliance dealers and 3 percent for those who primarily sell electronics. Consumer electronics retailers had higher expenses—paying more in total wages, employer taxes, employer benefits and rent/lease—as a percentage of total revenue when compared with appliance dealers.
This year’s report shows that dealers have done a much better job managing inventory than in previous years. Reporting dealers showed an average of 6.41 inventory turns per year, which is up significantly from the 4.42 turns per year in the 2005 report.
The combination of increased gross margin and improved inventory turns netted a big improvement in gross margin return on investment or GMROI. In the 2007, dealers saw a return of $3.45 for every dollar invested in products. Previously, the GMROI was only about half as good at $1.71.