Sales revenue
We use net sales throughout: gross sales after returns, refunds and customer discounts, and excluding sales tax / VAT. Mixing tax-inclusive sales with tax-exclusive costs is one of the most common sources of distorted retail KPIs.
Cost of Goods Sold (COGS)
COGS is the landed cost of the products actually sold during the period: supplier invoice plus inbound freight and duties. Store labour, rent, marketing and utilities are treated as operating expenses, not COGS. Shrink and waste are recognised when counted or written off.
Gross profit and margin
Gross profit equals net sales minus COGS. Gross margin is gross profit divided by net sales and expressed as a percentage. We never quote gross margin against gross sales because the tax inflation produces misleading numbers.
Markup vs margin
Markup is the dollar amount added to cost, expressed as a percentage of cost. A $4 cost sold at $10 is a $6 / $4 = 150% markup but a $6 / $10 = 60% margin. Our Retail Margin Calculator publishes both numbers side by side.
Waste and shrink
Waste is the cost of stock written off as expired, damaged or unsellable. Shrink is the unexplained inventory gap detected at stock count. Both are expressed as a percentage of net sales. Together they are total loss.
Labour KPIs
Sales per labour hour (SPLH) divides net sales by total worked labour hours, including absence cover but excluding paid time off. Labour cost percentage uses fully-loaded wage cost (base + on-costs + benefits) over net sales.
Inventory and GMROI
Inventory turn uses average inventory at cost, calculated from monthly snapshots where available, or opening + closing divided by two as a fallback. GMROI is gross margin dollars divided by average inventory at cost.
Benchmarks
Industry benchmarks displayed on calculator pages are ranges, not single points. They are compiled from regulatory filings, retail trade associations and the editorial team's operational experience across grocery, convenience, foodservice and specialty retail. Use them as a starting point for context — your own store's history is usually the most relevant benchmark of all.
See also our editorial policy and retail glossary.