If you’re new to retail, it can be hard to keep up with all the language used in the industry. Knowing the terms used in shops and online is key to advancing your business and having your operations run smoothly.
That’s why we put together our retail dictionary. This dictionary can help you navigate the jargon you frequently hear and keep you up to date with the latest trends in the world of retail.
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An anchor store is a big department store in a mall. Depending on the size of a shopping center, there can be more than one, generally at either end of the building. Their wide range of merchandise and massive advertising budgets help attract customers to the mall. Those shoppers often spend money at the anchor stores as well as at the surrounding smaller retailers. This role is usually filled by large, well-known chain retailers such as Macy’s.
Often shortened to AR, this principle is about supplementing the customer’s physical world with virtual things, so they appear to be in the same environment. In retail, AR can be used in shoppable catalogues, apps that let you see in-store deals by using your phone’s camera and virtual fitting rooms. While this is still relatively new technology, it is set to become more widespread in coming years.
ATS stands for average transaction size, which is the average amount spent on a single transaction or purchase. It’s calculated by dividing the value of sales during a given time by the number of transactions in that same period. This data is invaluable in measuring sales growth over time.
Big box store
A big box store is a store that provides a wide variety of products in a large physical space. These stores focus on large sales volumes, allowing a lower profit margin for items and competitive prices for customers. The stores are usually very minimalist in design. Walmart, Ikea and Home Depot are examples of big box stores.
For most retail businesses, profit margins are small and keeping a close eye on overhead and delivery costs is a vital part of maintaining profitability. Finding ways to attract new customers and build brand loyalty is a constant challenge. Big data can help a business to understand a customer’s desires. By collecting and combining data from sales, inventory, revenue and other sources, big data analysts can help a retailer hone their operations and reduce operating costs, boost customer satisfaction and increase the likelihood that they will return, and generate more profits.
Brick and click
A brick-and-click business is a retail store with a brick-and-mortar establishment, as well as an eCommerce website. In modern business, it’s widely accepted that to achieve the highest lead conversion rate for your business you should have a physical presence instead of being based solely online. A store that has a traditional outlet and the opportunity to shop online will enjoy more profit. The brick and click aspects of a business ensure that customers from all around the world have access to your product or service.
Bulk is buying goods in large quantities. A retailer buys wholesale products in bulk and marks them up to sell to customers.
Bundled pricing is the sale of goods and services at a lower price than they would be charged if they were all purchased separately. Popular examples of bundled pricing include option packages on new cars, meal deals at restaurants and cable TV channel plans. Implementing a bundled pricing strategy can allow you to increase your profit by giving customers a discount on items that aren’t selling well individually.
The cashwrap is the main checkout area of your retail store, where customers pay for their items. It’s also known as the point of sale or the point of purchase. A cashwrap is sometimes staffed by sales personnel trained to upsell customers, getting them to add anything from extended warranties, gift wrapping or participation in a store loyalty card program to their purchase. The approach to a cashwrap will frequently be flanked by shelves stocked with items picked and priced to entice customers into making an impulse buy on their way out.
A chargeback is a charge that’s returned to a payment card after a customer successfully disputes a purchase on their account. A chargeback can occur on bank accounts or credit cards. They are issued to the cardholder for a variety of reasons such as when a customer decides to return an item, if a merchant duplicates a charge in error, or if a technical issue occurs that causes a card to be charged incorrectly. A chargeback is a refund as it returns funds taken from an account to pay for a prior purchase.
Click and collect
Known by many other names like scheduled pickup, curbside pickup and product pickup, click and collect refers to the act of ordering something online and then collecting from the physical store. Customers are increasingly choosing this over delivery service because it offers the immediate gratification of receiving their item, while also saving money on delivery.
The COVID-19 pandemic made this feature absolutely essential, and normalized the experience for reluctant shoppers. Retailers can benefit from click and collect also, as it reduces the cost of operation and can influence customers into making impulse purchases when they visit your store. The in-store collection also offers an opportunity for retailers to connect with customers on a personal level, improving the overall customer experience.
Clienteling is the set of processes that retailers can utilize to increase customer value by delivering them a personalized, more intimate shopping experience. The sophisticated technology and software necessary for accurate clienteling is gradually becoming more affordable, making the practice more widespread. Modern clienteling solutions can deliver in-depth data to a business, allowing them to provide a personalized experience to each customer and generate a rapid return on their investment in technology and training.
When retailers display unrelated products from different categories together, this is known as cross merchandising. Products are grouped in imaginative ways, often connected by a common theme or event, to encourage customers to see a relationship between them and purchase all of them.
Examples of cross merchandising can be as simple as selling batteries next to electronic goods or light bulbs next to lamps. They can also be more elaborate, like selling grills together with all the food, utensils and dishes needed for grilled cheese sandwiches.
This is merchandise that isn’t owned or paid for by the retailer until it’s sold. Consignment is a business deal whereby the retailer agrees to pay a seller for goods after they have sold. Businesses that operate on consignment are usually retail stores that specialize in a specific type of consumer product. The business takes items from the seller and agrees to pay a percentage of the funds generated if the goods are sold.
Consumer packaged goods
Consumer packaged goods, often abbreviated to CPG, are items that are used daily by the average consumer. Goods in this category are ones that don’t have a long shelf life and need to be replaced frequently, compared to goods that are usable for prolonged periods of time.
The CPG market will always have consumers, but it’s competitive due to high market saturation and extremely low consumer switching costs. The most obvious examples of a CPG are consumables such as food, beverages, tobacco, clothing and household products.
Retail conversion rates measure the percentage of visitors that make a purchase. For example, if 100 shoppers visit a store but only 20 make a purchase, the conversion rate is 20 percent. To accurately measure retail conversion, you must count the people who enter a store but also take into consideration partners, children, and visitors, such as sales representatives or maintenance staff, who do not represent potential shoppers.
A cooperative is a business that’s owned by a community of members rather than by investors or corporate shareholders. They range from huge, multibillion businesses to tiny community enterprises. Cooperatives are present in many industries across the country, from housing to health care, and retail to social care.
Depth of assortment
This is the amount of each item or different styles of a product that a retailer stocks. For example, a store may want to keep inventory costs down and as such have a shallow product depth, meaning that they may only have 3-5 different types of each product in stock.
Dropshipping is a business model that allows a company to operate in a very simplistic manner. This kind of business doesn’t need to maintain inventory on-hand, own a warehouse to store products, or worry about shipping them to customers directly. A retailer partners with a dropship supplier who takes care of virtually the entire process for them. Once the product is ordered, the dropship supplier will ship them directly to the retailer’s customer.
Short for electronic retailing and usually referred to by its more common name, eCommerce, e-tailing refers to the sale of goods and services through the internet. It can include business-to-business sales of products and services as well as business-to-customer. This is achieved through advertising and subscriptions to website content. This method of sales requires detailed product and service displays and descriptions to give shoppers an accurate idea of the look and quality of the products without them needing to be in a physical store.
Electronic article surveillance
Electronic article surveillance, often abbreviated to EAS, is a technological method for preventing shoplifting. Tags and labels are affixed to high-value or frequently stolen goods and then are removed or deactivated by staff after being purchased so that they don’t set off the alarm system. At the exits of the store, a detection system sounds an alarm to alert the staff when it senses active tags are passing through.
Europay, Mastercard, Visa
Almost always shortened to EMV, this technology is the global standard for credit cards that utilize computer chips to secure and authenticate transactions. This technology encrypts information from the banks and is much more secure than older magstripe cards. EMV reduces the chance of card information being cloned and used in fraudulent transactions.
An endless aisle refers to a brick-and-mortar store that allows customers to peruse the entire catalog with minimal effort. Instead of stocking up on every item and expecting the client to spend their precious time browsing endless shelves, the retailer provides the entire catalogue to browse on a touchscreen or a tablet.
A flash sale is a promotion or discount offered by a store, either ecommerce or brick-and-mortar, for a brief period. Because the quantity of the goods is limited, higher discounts are offered in comparison to frequent promotions. This encourages impulse buying as the time limit and limited availability entices customers to make a purchase through fear of missing out on a bargain.
Footfall is the measurement of the number of people entering your business premises. By counting how many people enter your retail space, other important key metrics can be calculated, such as conversion rates and your average transaction value (ATV).
An estimate of the future demand for goods or services. Demand in the past is used to calculate future demand, with adjustments for trends and seasonal trends.
Some businesses expand by distributing their products via a licensing relationship. A franchisor issues a license to the franchisee to operate under the business’ name. In most circumstances, the franchisor will specify the products and services to be provided to customers by the franchisee, provide an operating system and operational support. Subway and McDonald’s are some of the most popular businesses that operate through franchising systems.
Green retailing is an increasingly popular approach towards managing a retail business by implementing environmentally friendly and sustainable practices and processes. By implementing such processes, retail businesses can become more efficient and save money in the process.
A business’ gross margin is its total sales revenue minus the cost of goods sold, divided by its total sales revenue and then expressed as a percentage. The percent of total sales revenue that the company keeps after dealing with the direct costs of producing and selling the products that it sells is the gross margin. The higher the percentage, the more that the company makes from each sale.
Hardlines and softlines
Also known as hard goods and soft goods, hardlines and softlines are two major kinds of retail inventory. Soft goods are items that are literally soft, such as clothing. Hard goods are non-personal items such as electronics, appliances and sporting equipment.
High speed retail
In this fast-paced world, customers demand faster service and shorter waiting times. High speed retail is all about optimizing the customer’s shopping experience and ensuring that it goes as quickly and smoothly as possible. Popular examples of high speed retail are drive-through grocery stores, mobile businesses such as food trucks or any business that utilizes an urgent promotion or limited-time sales.
An impulse purchase is a thing that a customer purchases with no prior plan, often because of a sudden whim or impulse. A customer who makes this kind of purchase is considered an impulse purchaser or buyer.
Integrated supply chain
Integrated supply chain management refers to a specific resource planning approach to traditional supply chain management. Rather than having multiple systems within the organization, a business manages and facilitates relationships with all of its suppliers and distributors through a centralized system.
Inventory management is important for businesses of any size. It is crucial for knowing when to restock items, what amounts to purchase or produce, and what price to pay to suppliers. Small businesses can automate day-to-day stock management by adopting POS technology and basic inventory management techniques.
The average amount of times that inventory that is in stock is sold or used during a given period is known as inventory turnover. In most circumstances, high stock turnover is good, as it’s a sign that you’re selling a lot without overstocking. If a business wishes to calculate it, the cost of goods sold must be divided by the average price in inventory.
Layaway, also known as lay-by, works differently than shopping with traditional means like credit cards or installment billing plans. When on a layaway plan you make the payments over a prearranged period, but unlike when you pay by credit card, your goods will stay in the store until you’ve finished paying for them in full.
A leveraged buyout (LBO) is a transaction whereby a company is bought with a combination of equity and debt. The company’s cash flow is the collateral used to secure and repay any money borrowed. Leveraged buyouts generally occur because the return that will be generated on the acquisition will be considerably more than the interest that’s paid on the debt. As such, it can be a very good way to benefit from high returns while only risking a little capital.
Loss leaders are goods or services that are offered at significantly discounted rates, sometimes even below cost, to attract customers into a store and to promote sales. It is a tried and trusted method of enticing customers into stores and has been met with much success, especially by larger discount retailers. The idea behind this pricing strategy is that the customer will buy the loss leader item and other products from within the store that are not discounted.
Markdown and markup
Markdowns are the discounts that retailers make on merchandise from the original marked price. Unlike sales or promotional events, a markdown is when the list price is changed to a lower price permanently. Goods that aren’t selling very well are usually marked down. Markup is the amount by which the cost of a product is increased to derive the selling price.
Merchandising is any practice that helps to facilitate the sale of goods to a customer. This term refers to a range of marketing strategies where retailers present goods and services to potential customers in the most appealing and convincing way possible, to entice them to part with their hard-earned money. How products are merchandised determines how likely a retailer can sell them. By following best practices, it’s more likely that customers will want to spend money.
Minimum advertised price
This is a supplier’s pricing policy that doesn’t permit retailers to advertise prices below a specific amount. While legally a retailer can’t advertise for less than this price, they can, in fact, sell items in their store for less than this price.
Mobile payments are sent or received from a mobile device. Mobile payments are an alternative to paying with cash, credit cards, or check. Some merchants prefer to enable mobile payments in their business since it simplifies the payment process for customers, making the checkout process a more seamless experience.
This is the act of shopping on a mobile device, like a smartphone or tablet. This has become increasingly popular in recent years due to many websites being optimized for display on mobile devices and tablets. It’s virtually the same as shopping on a desktop PC or a laptop, only with a smaller screen.
Monthly sales index
This is a measure of seasonal sales that can be calculated by dividing each month’s sales by the average monthly sales and then multiplying that number by 100. Any result higher than 100 means that there has been growth. If it’s less than 100, then that month there has been a loss.
Mystery shopping is a research method that’s used to gather feedback. While the most common means of conducting this research is in person, it can also be conducted over the phone or by making online inquiries, depending on the kind of feedback required. Though mystery shopping is commonly used for market research, it’s also used to gather data about other factors that would impact a customer’s experience. For example, friendliness of staff or quality of food in a restaurant.
A niche retailer only sells a single type of product within a specific category. While niche retailers generally don’t appeal to large groups of consumers, they can meet the specific needs of the small groups that they target. Niche retail trends don’t correlate with trends in large, general retailers that sell a variety of goods and as such try to reach as many customers as possible.
Off-price retailers are retailers who provide high-quality items at extremely cheap prices. They usually sell second-hand goods or items that are out of season. These retailers offer brand name soft goods at low prices. They can afford to do this by purchasing irregular pieces straight from the manufacturer, canceled orders, goods purchased by other retailers and end-of-season clearance items.
Omnichannel retailing, also known as omnichannel commerce, is an approach to sales that aims to give customers a fluid shopping experience whatever the means they are using to shop. Whether they’re buying from an ecommerce store, over the phone or in a traditional brick-and-mortar store. This approach utilizes multiple means of promoting and distributing goods. For example, websites and apps, phone calls, emails and social media.
Order lead time
The order lead time is the period between when the retailer places an order with a supplier and when the product is delivered to their store.
The set of guidelines known as the Payment Card Industry Data Security Standard (PCI DSS) applies to companies that accept payments by credit card, regardless of the size of the business. Any company that accepts card payments and stores, processes and transmits cardholder data, must host that data securely with a hosting provider that is PCI compliant.
A planogram is a diagram that demonstrates how and where products should be displayed in a retail store to increase the number of purchases that a customer makes. Planograms are a vital part of merchandising and retail space planning. Planograms are sometimes used by manufacturers to suggest the most effective displays for their merchandise at stores.
Price look up
Known as a PLU, price look up codes are 4 or 5-digit numbers which have been used by supermarkets since 1990 to make checkout and inventory control easier, more efficient and more accurate. It’s an effective system that displays the description and price of an item when the item number is entered or scanned at the point of sale. They ensure that the correct price is paid by consumers by removing the need for cashiers to attempt to identify the product.
A marketing strategy where prices are set higher than usual because lower prices would hurt the brand identity instead of helping with sales. For example, with high-end perfume and clothing. There are a certain set of consumers who believe that if the price is set high then it denotes the quality and prestige of said item. Luxury products meet the expectations of this niche group of customers who seek to satisfy their desire for a higher social status by owning the product.
Product life cycle
This describes the stages that a product goes through from when it was simply an idea until it’s removed from the market. Not all products reach the final stage, some will continue to grow from strength to strength while others rise and fall. Businesses try to extend the life cycle of their products by launching advertising campaigns or reducing the price.
Point of sale (POS) system
In its simplest form, a point of sale system is a cash register that allows retailers to ring up sales and keep track of their transactions. More modern setups feature a computer and monitor, a cash drawer, a receipt printer, customer display and a barcode scanner. Most POS systems also feature a credit and debit card reader.
A product is considered part of a private label when it is manufactured by a third party but sold under the brand name of the retailer. A benefit to this is that the retailer gets to specify everything about the product from the ingredients and packaging to the label. This contrasts with buying products manufactured by other companies that come adorned with their brand names.
Quantity on hand or on order
If merchandise is on hand, it means that the retailer has it in their possession. If something is on order, this is stock that retailers have on open purchase orders or manufacturing orders.
This is an incentive that’s offered to the buyer whereby purchasing an item in bulk will result in a reduced price per unit. Sometimes it’s only a minuscule difference, but a difference nonetheless. Seeking out quantity discounts can make a world of difference to small and up-and-coming businesses.
When a business seeks to establish and maintain long-term bonds with customers, rather than treat each sales transaction as a completely new encounter with them, this is known as relationship retailing. This often manifests itself in the form of loyalty programs and fantastic customer service.
Usually shortened to RFID, radio-frequency identification is the use of radio waves to read and capture information stored on a tag. A tag can be read from several feet away and doesn’t need to be directly in front of the reader to be tracked. Retailers can use RFID tags to help record information, including stock quantity and precise locations of items.
Showrooming is when a customer will visit a store to see a product in the flesh but then goes on to purchase it from an online retailer. This happens because many people prefer seeing first-hand what they are going to buy, but things are often available cheaper from online vendors. Because of this, their local retailer essentially becomes a showroom for them.
Shrinkage is the loss of goods that can be chalked up to reasons such as theft by employees, shoplifting, admin errors, vendor fraud, damage in store or in transit and cashier errors. Inventory shrinkage is the difference between recorded inventory and actual inventory. The resulting loss of money is a huge problem for retailers.
Social commerce is defined as the ability to make a purchase from a third-party company within the social media experience. An example of this would be browsing and comparing products on a business’ Facebook page and then making the purchase directly through Facebook, as opposed to being redirected to the company’s website to complete the transaction. Similarly, a potential customer may see a Tweet about a product and then be able to purchase it directly via Twitter instead of being redirected to the retailer’s own website.
Stock keeping unit
A stock-keeping unit (SKU) is an identification code that’s often displayed as a machine-readable barcode that allows retailers to keep track of items in their inventory. An SKU doesn’t need to be assigned to physical products that are in the retailer’s inventory and can be assigned to intangible products such as repairs or warranties.
When a customer likes and trusts a store, and continually makes purchases there without being swayed by advertising or special offers, this is known as store loyalty. Retailers can encourage this by offering rewards programs or special discounts for regular customers. A good example of this would be the Starbucks loyalty card, where customers are offered free drinks.
Supply chain management
Supply chain management is the range of activities necessary to plan, control, and deliver a product. It encompasses the acquisition of raw materials and producing the item to the distribution of the goods to the final customer. All this must be done in the most efficient way possible.
Triple net lease
When a property owner leases a building to a retailer with a triple net lease, the renter is responsible for paying all the associated property taxes, building insurance and the cost of any repairs that the building needs during the entire term of the lease. Properties under a triple net lease generally have lower rent due to the other charges.
Units per transaction
Shortened to UPT, units per transaction is the metric that measures how many items a customer purchases in any given transaction. It can be calculated daily or over a longer period. This is an important metric that helps measure the growth of a business, as well as employee effectiveness in certain retail environments.
Visual merchandising is the act of creating appealing displays that will cause the customer to purchase goods. This is proven to be an effective means of driving foot traffic and sales. Effective visual merchandising will bring customers into the store and encourage them to make purchases. Visual merchandising begins on the outside of the store, often with attractive window displays, to entice the customer to come inside.
Warehouse management system
A warehouse management system (WMS) refers to software and general processes that let organizations manage and administer warehouse operations from the time goods or materials enter a warehouse until they move out.
The opposite of showrooming, webrooming refers to the act of looking at a product online before venturing out to a physical store and purchasing it from there. Customers sometimes choose to do this as it allows them to see goods in the flesh before deciding to make the purchase.
Selling wholesale means that you generally sell your product in bulk quantities to a “middleman” who then goes on to sell it to the consumer or in some instances other retailers. Due to high-volume purchase orders, wholesalers are typically able to buy products from manufacturers at a lower price and add their margins.
Your retail dictionary is always changing
Because the retail sector as a whole is changing so rapidly, it’s important to keep up with the industry. Find trade publications that are most relevant to your industry and sign up for their emails. Create a google alert for your industry so you stay in the know. Plus, make sure that technology is working for you, not against you.
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