ROI vs. Margin: Why You Need Both
ROI (return on investment) measures profit against the cash you tied up to get it — the number that decides how fast your money compounds as you reinvest in inventory.
If a unit costs you $8.00 all-in and nets $6.00 profit, your ROI is 75%. Margin would describe that same sale relative to revenue; ROI describes it relative to your cash outlay. For sourcing decisions, ROI usually wins — it tells you how hard each dollar of inventory is working.
ROI Targets and Inventory Turnover
A 30–50% ROI is a common minimum; 100%+ is considered a strong find. But ROI without turnover is misleading. A product with 50% ROI that sells out monthly can outperform a 100% ROI product that takes a year to clear, because you recycle the same capital far more often.
Annualized return ≈ ROI per cycle × number of inventory cycles per year. Always read ROI alongside how quickly the product actually sells.