Many people who are entering the retail industry – either as a store manager, owner, or vendor – need help learning retail terminology. With that in mind we have compiled this list of key retail terms. If you want to learn more about these and other concepts that can help you to build a top-notch retail operation, contact us for a free one-hour consultation!
Action Alley – The sales area of a store located immediately after entering.
Ad-to-Sales Percentage – The amount of advertising dollars that you spend expressed as a percentage of your sales.
Advance Shipping Notice (ASN) – The ASN is a file that contains all of the SKU information of the shipment, as well as the shipping container serial number. The SKU is the smallest divisible unit for keeping track of inventory. For example, in a shoe store the SKU might be defined by manufacturer, style, color and size. For this reason it is important for retailers to have the ASN so that they do not have to count or receive every piece of inventory individually.
Art – Also called artwork. The illustration for print ads. Could be photography if the store uses photos. Smaller stores use manufacturer’s mats or photos or artwork. Larger stores create their own art.
Average Inventory Cost – Average inventory cost is found by adding the beginning cost of inventory for each month plus the ending cost inventory of the last month in the period. If calculating for a season, divide by seven. If calculating for a year, divide by thirteen.
Audit -The formal process of examining how your store performed in relation to plan. All too often, management completes programs but does not review how things went and where improvements can be made for the future.
Bar Code – The bar code is a machine readable code made up of alternating dark and light bars. The spacing between these bars signals the reader what the numerical code is. Bar codes can be Universal Product Code – UPC or any number of other formats and almost limitless in length. (The longest currently is 128)
Benefit(s) – The basic customer benefit is ‘what is in it for the consumer’ – does your store deliver saving, service or convenience.
Breadth of Assortments – The range or number of different items offered for sale – i.e. wide = many different items, narrow = a limited range of items for sale.
Budget – Detailed outline of a store’s plan of spending for merchandise, operation, expenses, and sales promotion.
Campaign – Planned advertising schedule of specific length – usually up to 13 weeks in length.
Card File – Usually refers to a list of store customers arranged in a card index file.
Card Reader – A magnetic code reading device that is usually built into a register keyboard. When a credit card is passed/swiped through the wedge, the data is read into the machine.
Classification (Sub Classification) / Category (Sub Category) – further breakdown of a classification into a more specific group of items, e.g., men’s short sleeve dress shirts is a sub classification of the main classification of men’s dress shirts.
Circular Classification – Special printed advertising supplement inserted and delivered with the newspaper or mailed directly to the consumer. Can be printed in tabloid or full newspaper size as desired, using color and paper better than regular newsprint to call attention to a special event or store wide sale. Occupant or resident mailing lists can be purchased for distribution of circulars.
Classification / Category – A group of merchandise items that are non-substitutable with another group of items, e.g. tennis racquets would not be substitutable with badminton racquets.
Classification or Category Dominance – The situation where a retailer offers a range of merchandise (brands, models, SKUs) that is superior/ greater/broader than competitors. The result is that shoppers will have this store in a top-of-mind position and travel further to shop there first.
Comp Sales – Comparable-store sales are a measurement of productivity in revenue used to compare sales of retail stores that have been open for a year or more. Historical sales data allows retailers to compare this year's sales in their store to the same period last year.
Computer-based training – The delivery of retail training programs to store, field, and operations personnel via the Internet or corporate Intranet.
Contribution Margin – Contribution margin is the difference between total sales revenue and total variable costs. The term is applied to a product line and is generally expressed as a percentage.
Conversion Rate – The number of people who enter a store divided into the number who made a purchase. Measures the “close” rate that a store achieves on specific foot traffic into the store.
CO-OP: An advertising allowance offered by a vendor, payable upon proof of an ad having been run.
Cost of Goods Sold: The price paid for the product, plus any additional costs necessary to get the merchandise into inventory and ready for sale, including shipping and handling.
Core – The base component of a particular aspect of your business, e.g., ‘core customers’ are the 20% who shop regularly and account for 80% of sales. Can also define merchandise that is central to a retailers success, core is product that is never out of stock.
CRM – Customer Relationship Management: Customer relationship management (CRM) is a business strategy designed to reduce costs and increase profitability by strengthening customer loyalty.
EAN – The European Article Number which is replacing the North American UPC code. The EAN has thirteen numbers, with one being placed the leading left outside the bar code. The next six numbers are assigned to the manufacturer and the remaining six are for product identification.
Elearning – A method of delivering retail training to store and field personnel. Effective for delivering sales training, product training, and operations/systems training.
Electronic Data Interchange (EDI) – The transfer of data between two companies in a format that can be read and understood by both parties. EDI today uses common language/protocols so that messages, purchase orders, invoices, advanced shipping notices and other business data can be send and received by any company no matter what computer they are using. EDI messages are sent through a Value Added Network (VAN) which is a third party mailbox that both vendors and retailers use to store the messages in transit. EDI is roughly 100 times faster than fax to send data and maintains an audit trail.
Environment/Décor – The surrounding objects and space with which a shopper comes in contact. It involves all the senses of sight, hearing, touch, smell and taste.
Event – A happening. A special promotion, off-price sale, fashion show, store wide sale or merchandise import fair.
Facing – The number of identical products (or same SKU) facing out toward the customer. Facings are used in plan-o-grams and when zoning a retail store.
Fixed Position – A guaranteed specific time slot or place for a commercial announcement.
Flighting – Scheduling a heavy advertising schedule for a period of time, then stopping advertising altogether only to come back later with another heavy schedule. Used to build strong impact to support sales goals, seasonal selling, new product introduction.
Frequency – Average number of times an individual is exposed to a given advertiser’s message over aspecified length of time.
FSA(Forward Sortation Area) – The first three digits of a postal code in Canada, FSAs have specific boundaries and can be used as a location system for customer analysis and direct mail. The similar area in the US is called ZIP + 4 which can more accurately locate boundaries within a ZIP code area.
Gift with Purchase – A promotional technique that includes giving a gift with the purchase of a specific item. Used extensively in the cosmetics area.
Gondola – Primary merchandising fixture consisting of a base, free-standing vertical wall, and a number of four of sections of shelving.
Gross Margin – Gross margin is the difference between what an item costs and what it sells for.
Gross Margin Percent – The Gross Margin Percent is calculated as follows: Sales – Cost / Sales = Gross Margin Percent.
Gross Margin Return on Investment (GMROII) – Gross Margin Return On Inventory Investment measures the impact of both stock turnover and gross profit. Often calculated to compare vendors or categories of merchandise. The formula is gross profit dollars for the year divided by average inventory at cost. The result is always expressed as a dollar, it answers the question “For every dollar invested in inventory, how many dollars were returned?”
GRP or Gross Rating Points – The sum of all average quarter-hour ratings in a schedule; also the total reach multiplied by frequency. Represents the total audience reached, including duplications. A rating point is a number based on the audience compared to all the potential listeners in that demographic region.
Items Per Transaction – Often referred to as “lines per ticket.” A measure of how many items are contained in the average transaction with each customer. The formula is total items sold for the day, week or month, divided by the number of transactions in the day, week or month.
Inventory – Inventory is the merchandise a retail store has on hand. The term also refers to the act of counting, itemizing and recording in-stock merchandise or supplies.
Inventory Turnover – The number of times during a given period that the average inventory on hand is sold and replaced.
Keystone – Keystone pricing is a method of marking merchandise for resale to a price that is double the wholesale price.Layout – The design or plan of a print ad, done in pencil, ink or by computer print-out. The layout indicates the position and sizes of the various elements of the ad – the headline, art, copy, signature, and floor line. Layouts are distributed to copywriters, artist typesetters, buyers and merchandise managers.
Loss Leader – Merchandise sold below cost by a retailer in an effort to attract new customers or stimulate other profitable sales.
Loss Prevention – Loss prevention is the act of reducing the amount of theft and shrinkage within a business.
Margin: The amount of gross profit t made when an item is sold.
Markup: A percentage added to the cost to get the retail selling price.
Markdown: A planned reduction in the selling price of an item, usually to take effect either within a certain number of days after seasonal merchandise is received or on a specific date.
Marketing Calendar: A marketing calendar is a tool used by retailers to show where and when marketing events, media campaigns and merchandising efforts are happening, as well as the results.Marketing – The art and science of gathering facts on consumers; determining which of their needs and wants offer you opportunity; deciding which segment can be best served within the scope of your resources; and then formulating a strategy to capture profitably a reasonable share of market through highly focused merchandising, ser Merchandise Mix: A merchandise mix is the breadth and depth of the products carried by retailers. Also known as product.
Merchandise Presentation – The methods and techniques involved in fixturing, stocking, displaying, signing, ticketing products so that sales are increased.
Merchandising – The embellishments which a retailer adds to a basic product, such as price, packaging, special offers, ticketing/labeling, couponing, product-with-purchase, etc.
Merchandise Mix – A merchandise mix is the breadth and depth of the products carried by retailers. Also known as product.
Minimum Advertised Price – A vendor's pricing policy that does not permit its resellers to advertise prices below some specified amount. It can include the resellers' retail price as well.Minute – 60-second commercial; 140-160 word script.
Net/Gross Advertising – Gross advertising includes your co-op dollars. Net is your own dollars only.
Objective – The end goal that you want to achieve, usually expressed in a measurable number. In advertising, the effect you want advertising to have on the consumer.
Off Price Advertising – Advertising whose basic appeal is outstanding savings.
Open-to-buy – Merchandise budgeted for purchase during a certain time period that has not yet been ordered.
Operating Expenses – The sum of all expenses associated with the normal course of running a business.Outpost Display – A secondary display – placed outside the department. e.g., at doorways or high traffic areas.
Planning – The processes of choosing a course or direction after reviewing alternatives.
Plan-O-Gram – A detailed plan of floor, wall and fixture layout. It requires a mapping of what items go where for each square foot or product frontage of shelf pace, wall, or hanging rack. Particular emphasis is put on placing the most profitable products in an advantageous purchasing position.
PLU – Price Look Up. A system with the PLU feature will display the description and price of an item when the item number is entered or scanned at point of sale. It is also printed on the customer’s receipt and this is helpful for the customer to remember what he/she bought. It is also a good deterrent to price ticket switching in some cases.
Point-of-purchase Display – Point-of-purchase displays, or POP displays, are marketing materials or advertising placed next to the merchandise it is promoting. These items are generally located at the checkout area or other location where the purchase decision is made. For example, the checkout counters of many convenience stores are cluttered with cigarette and candy POP displays.POS – Point Of Sale, used in reference to POS visual merchandising. Also used to refer to a cash register that has capability of price look ups (PLU’s) and storing customer data.
Quick Response – Quick response is the name given to the system that immediately replenishes goods based on consumer demand. It is also sometimes referred to as JIT II (Just in Time level two) or in retailing as ECR (Efficient Consumer Response). The use of current technology links the manufacturer, supplier, retailer and retail outlet together to speed up communications, reduce paperwork, reduce inventory carrying costs, and have what the customer wants when they want it. Primarily involves Electronic Data Interchange – EDI and Universal Product Code – UPC.
Radio Frequency Identification (RFID) – Method for embedded tag to communicate SKU and other information from a product to a receiver. Currently being used at the pallet level for receiving, slow adoption at the Point of Sale due to both cost and some technical issues.
Receipt Printer – A specially built narrow carriage printer that used to print customer receipts.
Segment (Consumer or Market) – A single part of the market, separable from the rest of the market. It can be clearly identified as being different by a set of distinct and common characteristics such as demographics, lifestyle, geographic location, or buying habits.
Services – Extras offered by stores to make shopping more pleasant. Includes free parking credit, snack and restaurant facilities, gift wrap, post office, night openings, delivery, and other ‘fringe’ benefits that discount retailers do not always offer.
Shrinkage – (inventor Shrink) Retail shrinkage is a reduction or loss in inventory due to shoplifting, employee theft, paperwork errors and supplier fraud.
SKU – Stock-keeping unit. The finest identification of a specific item either by itself or in a range.i.e., one basic shoe style requires approximately 30 different SKUs which are the combination of the range of sizes multiplied by the range of widths stocked. This is increased by 100% each time a color is added in the full size and width range.
Spot – Commercial on radio or television. Spot announcements are anywhere from 10 to 60 seconds long and highlight a single item, or at most two items. Spot illustration in a print ad is a detailed sketch showing a special feature not obvious in the main illustration
Store Positioning – The position a store takes in respect to price, fashionability, service, assortments vs. competition.
Strategy – Your basic ‘idea’ – the essential thrust of your business concept. An aggressive plan of action, usually with a singular focus, that is formulated to out-maneuver competitors by serving target market customers to their highest expectations.
Suggestive Selling – Suggesting the purchase of related items in addition to the original purchases, like a tie with a shirt, blouse with skirt, hats with jackets and so on.
Target Market – The group of consumers to whom you are directing your business concept.
Tearsheet – An ad torn from the publication in which it ran. This is considered proof that the ad ran on the day it was supposed to and represents proof of performance for collecting co-op money.
Tie-In – An ad sponsored by more than one advertiser; e.g., a magazine ad in which a store, an airline, and a luggage manufacturer participate, with costs shared. A tie-in might feature an airline in a store’s advertising in exchange for the airline offering a free trip in a draw held for store customers.
Top of Mind – Refers to the store, brand or product that first comes into a consumer’s mind when he/she thinks of a category of merchandise.
Trading Area – The area from which your store draws the majority of its customers.
Trading Up – In a “good, better, best” offering of merchandise or services the action of selling the customer the better or best solution for their needs. Leads to better solutions as the customer gets more utility and benefits from the better or best item or service.
Universal Product Code (UPC) – The Universal Product Code is a twelve digit code that is made up of a single leading number, five numbers uniquely assigned to a manufacturer or seller, five more numbers assigned by the manufacturer or seller to a specific product and the last number which is assigned as a check digit. It is being replaced with the EAN which is defined above.
USP – Unique Selling Proposition – What is special about your store and how your store stands out from your competition.
Value Offer – A strategic option or alternative to emphasize value (value = price x quality x shopping environment or service, rather than just ‘price’ or ‘discount price’).
Visual Merchandising: Visual merchandising is the art of implementing effective design ideas to increase in-store traffic and sales volume.
Volume – The gross amount of business a store does in a period of time. The difference between volume and the cost of doing business is profit.
Wholesale: Wholesale is the sale of goods, generally in large quantity, to a retailer for resale purposes.
If you want to learn more about these and other concepts that can help you to build a top-notch retail operation, contact us for a free one-hour consultation!
- David Goodwin is the Principal of the Retail Advocacy Group. As a 30 year veteran of the retail industry he has hired, trained, and performance managed thousands of retail sales representatives and retail managers. You can learn more about instructor-led, e-learning, and other training solutions for retailers at www.retailertrainingservices.com.