Retail & E-Commerce health calculator

Retail looks healthy when the register is noisy. The quieter questions are margin after discounts, how fast inventory turns, and how much cash is trapped in things that will only sell at 40% off. This calculator is for owners who can read a POS export and a year-end inventory number, not for people still choosing a niche.

Who this is for

Brick-and-mortar, Shopify-style e-commerce, or a mix of both. If you are pure wholesale to a handful of accounts, still use it — just treat “foot traffic” as optional.

What to enter first

Revenue, cost of what you sold, and operating expenses unlock gross and net margin. Average inventory (even a rough count × cost) unlocks turnover. Return value and clearance units show leakage that a top-line sales graph will hide.

Worked example: 1,400 sq ft apparel shop plus website

Original Business metrics example. Twelve-month figures.

  • Revenue: $386,000 (in-store and online combined)
  • COGS:
  • Operating expenses:
  • Net: $44,000
  • Average inventory at cost: $72,000
  • Returns processed:
  • Square footage selling floor: 1,400
  1. Gross margin = (386,000 − 178,000) ÷ 386,000 = 53.9%. Soft apparel often lives in the mid-50s before theft, returns, and promotions chew it.
  2. Net margin = 44,000 ÷ 386,000 = 11.4%. That looks fine until you notice inventory.
  3. Inventory turnover ≈ 178,000 ÷ 72,000 = 2.47 turns. A common independent-retail conversation is closer to 4–6 turns. This shop is sitting on too much season.
  4. Return leakage = 19,300 ÷ 386,000 = 5.0%. Not catastrophic, but online sizes probably drive it.
  5. Sales per square foot = 386,000 ÷ 1,400 = $276 per year. That is a density number for the lease conversation, not a vanity metric.

The owner who only watches sales will order more of what “sold.” The owner who watches turns will stop reordering the slow size run. This calculator is built to make the second conversation unavoidable.

How to read the results

Gross margin is pricing and mix. Net margin is rent, payroll, and ads. Turns tell you whether your cash is in the bank or on a hanger. Returns and dead stock explain a profitable year that still needed a credit line in March.

Mistakes that make the math useless

  • Using retail (ticket) value as inventory instead of cost. Turns will look miraculously fast.
  • Combining gift-card liability with sales. You have not earned that cash yet.
  • Ignoring marketplace fees in COGS or opex consistently — pick one place and stay there so the trend is real.

When to re-run the check

After a promotion calendar, a tariff or freight spike, or the week you write off a season. Seasonal shops should run the calculator at the start and end of peak, not only at tax time.

I sell on Amazon and in a store. One run or two?

One run is fine if you want a whole-business picture. Run a second pass with only Amazon figures if you need to decide whether that channel is worth the fees.