Margin Tells You Half the Story

Vaping Products Duty (VPD) is live, and every duty-paid unit entering your stockroom now carries more cash than it did before. The question we hear most from retailers is a practical one: which lines should stay in the range, and which need a closer look?

Margin is the natural place to start. But margin only tells you what you make when a product sells. It says nothing about how often it sells, or how much money sits on the shelf waiting for that to happen. That is the gap GMROI fills.

GMROI Shows What Every Pound of Stock Earns Back

GMROI stands for Gross Margin Return on Inventory. It measures how much gross profit a product or category generates for every £1 invested in stock at cost. Retailers use it to compare how productively different lines turn inventory into profit.

The Calculation
Gross profit ÷ average inventory at cost = GMROI
If a category generates £2,000 in gross profit over a period while you hold an average of £1,000 of stock at cost, its GMROI is 2.0. Every £1 tied up in that stock returned £2 in gross profit.

Calculate It Consistently
Value stock at cost, not at retail price. Compare lines over the same period, ideally a full year, or annualise a shorter one. Average inventory can be estimated from your opening and closing stock values.

A Higher Margin Can Still Be the Weaker Investment

Consider two products. Product A earns £4 gross profit per unit and sells 5 units a week, generating £20. Product B earns £3 per unit and sells 20 units a week, generating £60.

Product A wins on margin per unit. But if both lines hold a similar value of stock, Product B returns three times the gross profit on the same cash. It turns stock back into money faster and more often.

Duty Raises the Value of Every Unit You Hold

From 1 October 2026, VPD is charged at a flat £2.20 per 10ml of vaping liquid, whether it contains nicotine or not. The duty is paid by manufacturers, importers and approved warehousekeepers, and is reflected in the cost of duty-paid products as they move through the supply chain.

Liquid Volume	Duty per Unit (excluding VAT, VAT applies on top)
2ml	£0.44
10ml	£2.20
50ml	£11.00
100ml	£22.00

As duty-paid stock replaces older stock, the cash value of the same shelf rises. Overstocking a slow line now ties up more money than it used to, which is why stock efficiency belongs alongside margin in every buying decision.

Protect, Reduce or Challenge: Three Decisions for Every Line

GMROI is most useful when it drives a decision. Read it alongside margin, rate of sale, stockholding, customer demand and the cash each line ties up.

1. Protect the lines doing the heavy lifting. Higher-GMROI products that sell consistently are making your stock investment work hardest. Keep them available, avoid unnecessary stock-outs and make sure replenishment keeps pace with demand.
2. Right-size the steady performers. Middle performers may still earn their place; the issue is often how much you hold. Carrying a smaller quantity rather than delisting keeps choice on the shelf while freeing up cash.
3. Question the lines holding cash longest. Slow-moving, lower-GMROI products need the closest review. Ask whether the line has loyal demand, completes an important part of the range or supports other sales. If not, that cash and space could work harder elsewhere.

Five Questions to Put to Your Range Before the Next Order

1. Which products sell consistently? These are your replenishment priorities.
2. Which products are tying up cash for too long? Look for lines where stock sits for weeks between sales.
3. Am I holding more than the rate of sale justifies? Compare stock on hand with what actually sells between deliveries.
4. Which slower lines still serve a clear purpose? Some lines complete the range or keep loyal customers coming back.
5. Where can I release cash without weakening the range? Reduce depth before you reduce choice.

The goal is better visibility, not fewer products

VPD has added cost to the category, but it also gives retailers a clear reason to look at how efficiently their stock is working. You do not necessarily need a smaller range. You need a clearer view of which products deserve your investment.

Before you commit more cash to stock, speak to your VB account manager. We can review your current range, stock position, slower-moving lines and expected demand ahead of your next duty-paid order, or email info@vb-distro.com.