Dissecting Margin: Strategies for Modern Merchandising

Here is where your business—or brand—lives or dies.

Making and selling great product is essential, yes. But sustaining performance and enabling future growth? That requires something more: a sharp, evolving margin strategy. Margin is what funds your ambition. And in today’s market, protecting it has never been more challenging.

Between rising raw material and transport costs, global supply pressures, and the ongoing impact of tariffs and geopolitical uncertainty—margin is under siege. So, let’s unpack how to defend and grow it in a way that’s smart, structured, and forward-thinking.

We’ve previously explored how to uphold your brand value during the season, how to protect your messaging, and why a differentiated assortment is your north star [Merchandising with a Mission].

Now it’s time to zoom in on the margin mechanics themselves.

Three Fundamentals of Margin Management

There are three levers every merchandiser and product team must learn to balance:

1. Optimise intake margin – without compromising on product quality or consumer trust.

2. Trade to maximise GMROII – gross margin return on inventory investment.

3. Prioritise absolute return where volume trumps % margin – and the scale justifies the stretch.

When these three work in sync, margin becomes less of a fight and more of a flow. It’s the closest this job comes to walking on water—calm above, deeply strategic below.

Margin Tension Framework

Start With Intake Margin

Intake margin is your foundation. It reflects how efficiently your buying, product development, and sourcing teams have come together to deliver a commercially viable product to your distribution network (or straight to store, if you’re a smaller setup).

Keeping your cost base top of mind is critical. Yes, small shifts in materials, process, or logistics can unlock improvements—but any cost-saving that erodes product quality, brand perception, or customer experience is a false economy. Know your baseline, then negotiate with care.

Mix, Price, and Sell-Through

Next, evaluate your product mix and pricing architecture. For each item, ask:

• What is its cost base?

• How much am I likely to sell at full price?

• What level of markdown or promotional pressure should I expect?

It’s here you may find that certain high-cost items still drive strong profit in absolute terms—even with a lower margin %. That’s not a weakness; it’s a different kind of win. One that supports brand elevation or volume-based growth.

Why GMROII Matters More Than Ever

GMROII—gross margin return on inventory investment—is your sharpest KPI for efficiency. It tells you, in plain numbers:

“For every euro (or pound, or dollar) I spent on inventory, what margin did I actually make?”

It’s a performance metric that rewards both sell-through and margin discipline. And it’s increasingly the way smart businesses manage risk—by focusing not just on revenue or margin %, but on the return they’re getting for their inventory capital.

Margin Is Strategy

Done right, margin isn’t an afterthought. It’s a reflection of your whole go-to-market system—your buy depth, your product positioning, your trading responsiveness, your markdown controls.

Keep it fluid. Revisit your approach often. And remember: it’s not about chasing the highest %—it’s about building a mix that delivers sustained, strategic return.