Explain why gross margin is an inadequate tool for decision-making in retail organizations like Needs Retail Limited.

Gross margin is calculated as the difference between the selling price and the bought-in (purchase) cost of goods. While this provides a basic profitability measure, it is inadequate for decision-making in modern retail due to the following reasons: Ignores Indirect Costs: It excludes overheads, storage, transport, labour for shelf stocking, and inventory financing, which are substantial in a retail setup. Distorts Product Profitability: Products with high gross margins may still be unprofitable after considering indirect costs like space consumption or handling time. Misguides Strategic Decisions: Using gross margin as the sole metric may lead to poor product mix choices, under-pricing, or failure to identify cost-draining SKUs.