GATE KEEPER MARGIN

Gate Keeper Margin is a retail term used to set a Fixed Margin level below which the margin should not drop i.e. the minimum expected 'net profit after tax' a retailer expects to make from the sale of goods or service.
This can be defined at SKU location level or at department location level and used as a alert mechanism or a hard stop mechanism.

We can use GKM to arrive upon our suggested selling Retail for every SKU listed in the merchandising system as calculated below :


Suggested Retail = [Unit cost x (1+{Vat rate/100})]/[1-(GKM/100)]
                            = [1800 x(1+{14/100})]/[1-(25/100)]
                            = [1800x1.14]/[0.75]
                            = 2025/0.75
                            = 2700 Rs.

So the retailer should sell the product at a minimum of 2700 Rs. To ensure the GKM is maintained at 25% Retailers can use this to put control on the Purchasing Cost based on the recommended retail price and GKM agreed

The below formula can be used to arrive at the GKM or Fixed Margin obtained from unit retail and unit cost of a product

GKM = [Unit Retail - (Unit cost x (1+Vat rate/100))]/Unit Retail