Learn more about IMUs and how they work.
What Is IMU?
The IMU formula is used to determine the sales price retailers put on an item in a store. For example, if a retailer buys a hammer wholesale for $5, then the IMU is the measurement of how much they mark up that hammer when they sell it to customers. If the retailer set the sales price at $10, then you have a 100% IMU.
How Do You Calculate IMU?
To calculate IMU, subtract the unit cost from the sales price, then divide the result by the unit cost. Multiply the result by 100 to find the percentage.
How IMU Works
IMU works by ensuring that retail sales are profitable. One of the biggest mistakes retailers make is not paying more attention to IMU in their business. Retailers often have their own formulas, such as simply using the pricing from the vendor sheet or catalog. If the vendor says the cost is $50 and the retail price is $100, that’s what the retailer uses. But one retail store may have a completely different cost structure than other stores and should adjust its IMU accordingly. Some retailers use the “double plus” system, which involves using a keystone (a set formula to determine IMU), such as doubling the cost plus an extra dollar amount like $5. This method isn’t always the best, though, as the math can obliterate the profit margins when the cost of a product goes up, as you can see here: If you’re struggling with setting your IMUs, one of the best places to look is retail associations. These organizations collect data from their members and help you to see what margins, IMU, and turns you should be getting from your inventory. For example, a shoe retailer should be a member of the National Shoe Retailers Association, which puts out a business performance report of the stores in the association every two years. These are excellent tools for any company looking to improve their business. There are many ways to tweak your IMUs until you get them right, but here are three tips that could help:
