Retail terms are phrases used by members of the industry, such as business owners and product suppliers. There are several key retail terms that are important to know when running a retail business and many others that you will encounter throughout your time working in the retail industry.
1. Anchor Store
Anchor store, sometimes also referred to as an anchor tenant, is a store or service provider in a mall that draws in many people. It is also one of the largest stores in the shopping center and is typically a department store or chain store that caters to a wide audience.
2. Average Transaction Value
Average transaction value (ATV), also sometimes called average transaction size (ATS), is the typical amount spent by a customer in a single purchase or transaction. This is a retail metric that is calculated by dividing your total sales dollars by the number of transactions during that time period.
3. Bar Code
A bar code is a visual, machine-readable code that is typically found on product labels. Retailers use bar codes to identify products when ringing them up for sale or when taking inventory. Bar codes also typically have a numeric code underneath. Bar codes are either provided by product suppliers or created and printed by each retailer.
Retailers can create bar codes right within a point-of-sale (POS) system such as Vend. The POS system also has a mobile app so retailers can scan bar codes with their phones to do an inventory count or to add products and bar codes automatically.
Backorder is when a retail supplier or wholesaler is out of stock on a particular product and is unable to fulfill a retailer’s order for that product.
5. Big Data
Big data refers to extremely large sets of information that require a specific program or analyst to manage and interpret. Big data typically refers to larger pools of outside information, such as census data or social media posts, which is used to get a better understanding of customers. Whereas retail analytics typically looks at in-store metrics like foot traffic or conversions.
6. Big-box Store
A big-box store, or big-box retailer, is a physically large retail store―usually 50,000 square feet or more―that sells a wide assortment of goods. They are considered a “one-stop-shop.” Big-box stores are typically chains, store locations are often freestanding, and they are frequently found in suburban areas. Examples of big-box stores include Target and Walmart.
7. Brick and Click
Brick and click is a business model where retailers operate physical stores (the bricks) and online stores (the clicks). The retail terminology “brick and click” is also sometimes referred to as clicks and mortar.
8. Bundled Pricing
Bundled pricing is a promotional strategy where a retailer sells multiple items together for a single price. The items should cost less bundled together than they would if sold individually. Typically, a popular item is bundled with slower-moving products. Bundled pricing provides a good value for shoppers and helps retailers sell more merchandise.
A cashwrap, also known as cash wrap, checkout counter, or cash well, is the physical area where customers pay for the products they are buying. This area is important because, in addition to housing the cash register or POS system, it’s also used for promoting impulse sales.
A chargeback is a dispute management process that happens when a customer reports a bank or credit card charge as fraudulent to their bank. The bank then petitions the retailer to refund or reverse the charge that was reported as fraudulent.
In addition to communicating with customers, retailers need to work closely with their merchant account providers or payment processing providers to help prevent and resolve chargebacks. Having a merchant account provider that offers personalized customer service, such as Payment Depot, can help make navigating chargebacks easier.
11. Click and Collect
Click and collect is a product delivery method where a customer buys a product online and then picks it up in-store. There are several retail terminology phrases to describe the process of buy online, pickup in-store, including buy online, pickup in-store (BOPIS).
12. Cross Merchandising
Cross merchandising is the practice of displaying products from different categories or departments together to increase sales. These products are typically used together, such as batteries for electronics or graham crackers next to marshmallows.
13. Contactless Payments
Contactless payments are a secure payment method that uses radio frequency identification (RFID) or near-field communication (NRC) technology to transmit bank or credit card information. Examples of contactless payments include Apple Pay, Samsung Pay, and Google Pay.
14. Customer-facing Display
Customer-facing display (CFD) is a computer screen or monitor that displays information to customers while their sale or order is being processed. CFDs typically show product pricing and a running total of the products being purchased. CFDs can also be used to show loyalty program information, return policies, or to collect customer contact information.
15. Customer Relationship Management
Customer relationship management (CRM) is the process, system, or software that retailers use to organize customer data and communications. CRM in retail is typically managed through a POS system and can be used to improve customer loyalty, offer personalized product recommendations, and send targeted marketing messages.
16. Dead Stock
Dead stock is merchandise that is not selling. Dead stock is removed from the sales floor without ever being purchased by customers either because it is outdated or to make room for better-selling merchandise. Retailers deal with dead stock by discounting the product or liquidating it to another company.
Direct-to-consumer (DTC or D2C) is a business model where a product manufacturer or creator sells directly to shoppers instead of selling products to retailers to sell to consumers. Examples of direct to consumer brands include Warby Parker, Dollar Shave Club, and Away. This business model is popular now that it is easier for new brands to gain customers through Instagram or other social media platforms.
Dropshipping is a type of customer order fulfillment typically used by online retailers. With dropshipping, orders are picked, packed, and shipped by the supplier directly to the customer who placed the order. The retailer never touches the products.
EMV stands for Europay, MasterCard, and Visa. It is the global security standard for chip credit and debit card payments. It also serves as the operational standard for card payments so that customers can use their MasterCard and Visa cards everywhere.
20. Endless Aisle
Endless aisle is the concept of retailers having more products available online than in-store. This includes products that are typically sold in-store but are currently out-of-stock and products that are only sold online. Customers can purchase these products online and have them shipped to their houses or store for pickup.
21. Flash Sales
A flash sale is a very limited time frame where retailers sell products at a deep discount. This promotional tool is used by retailers to encourage impulse buys and higher sales as customers won’t want to miss out on the great pricing.
22. Gross Margin
Gross margin is the difference between the price a retailer sells the product for and the wholesale price the retailer initially paid for the product. Gross margin can be calculated per product, department, or for the entire store.
23. Impulse Purchase
Impulse purchase, or impulse buy, is when a customer makes an unplanned decision to purchase a product. An impulse purchase typically happens when a customer is shopping for another product or when a shopper is about to pay for another product. Candy is placed at grocery store checkout aisles to encourage impulse purchases.
24. Inventory Management
Inventory management is a system or process used by retailers to ensure products are in the right place at the right time. Inventory management is typically done with a software or POS system, such as ShopKeep.
25. Inventory Turnover
Inventory turnover is the number of times a retailer’s products are sold during a specific time period. Inventory turnover can be used storewide or to measure specific products or departments.
26. Keystone Pricing
Keystone pricing is a standard retail pricing strategy where the retailer prices a product at an amount that is double the wholesale cost they paid.
27. Lead Time
Lead time is the amount of time it takes to process and prepare an order. Lead time is typically used when discussing how much time a supplier needs to fulfill a retailer’s product order. However, it can also be used to discuss how long a retailer needs to fulfill a customer’s order, especially if it is an online purchase or a custom product.
28. Loss Leader
A loss leader is a product that retailers sell at a loss to attract customers. Loss leaders are typically popular products or products that will encourage customers to make repeat purchases. For example, when ebooks were first taking off, Amazon sold Kindles at a loss.
29. Loss Prevention
Loss prevention is measurements businesses take to prevent theft and preserve profits. One example of loss prevention is installing a security system like Simplisafe, which offers 24/7 professional monitoring for small businesses.
30. Loyalty Program
Loyalty programs are structured marketing strategies that reward customers for repeat purchases, store visits, customer referrals. or social media promotions. Loyalty programs are designed to encourage customers to continue to shop at a particular store or business. Many POS systems, including Vend, have built-in loyalty programs so that retailers can track rewards with customer purchases automatically.
Markdown is the difference between an item’s initial retail price and the reduced sale price. It is used to illustrate a discount or sale. Markup is the difference between the wholesale price and the retail price of a product, similar to the profit margin.
Merchandising is the activity of presenting and promoting retail goods for sale. The term is most commonly used to discuss store displays, strategies for arranging products, and creating a store layout.
33. Minimum Advertised Price
Minimum advertised price (MAP) is the lowest price a retailer can sell a product for. MAP is set by the manufacturer of the product to prevent the product from being devalued and to protect retail margins.
34. Multichannel Retailing
Multichannel retailing is the act of selling products through more than one sales channel, such as brick-and-mortar stores, a retail website, online marketplaces like Amazon and Etsy, social media platforms like Instagram, or temporary events like pop-up markets. In multichannel retailing, the sales channels are more or less independent of each other.
35. Net Profit & Net Profit Margin
Net profit is the actual revenue after accounting for expenses. Net profit is calculated by subtracting retail operating expenses from gross profit. Net profit margin is the percentage of revenue left after subtracting expenses. It’s calculated by dividing net profit by net sales.
Off-price is purchasing or selling goods―often name-brand―below regular retail prices. Off-price retailers purchase overstock, end-of-season, second-hand, or slightly damaged products from other retailers or directly from suppliers at a steep discount. Off-price retailers then sell these items to customers at a price that is below typical retail pricing. Examples of off-price retailers include TJ Maxx and Homegoods.
Omnichannel retailing is when a business sells products across multiple channels in a way that provides a seamless experience for the customer. Omnichannel retailing is a step above multichannel retailing. For example, if a customer makes an in-store purchase, they can log into their account online and see purchase details.
Retailers selling through multiple sales channels typically choose a software solution that offers both a POS system and an ecommerce platform. Shopify is an ecommerce platform that comes with a free POS app. Shopify also lets businesses sell on Amazon and social media. All sales, customer, and inventory data are synced between all sales channels.
A planogram is a model or diagram that details the specific placement of retail products on a display to maximize sales. Planograms are typically used by large or chain retailers to ensure consistency across different locations.
39. Pop-up Shop
Pop-up shops or stores are temporary retail markets. Pop-up shops typically bring several businesses together to sell products in a temporary space. For both online and brick-and-mortar retailers, pop-up shops are a popular marketing and sales strategy to build brand awareness.
40. Product Lifecycle
Product lifecycle describes the stages that each product goes through when it hits the market. These stages include introduction, growth in sales revenue, maturity, and decline. By paying attention to when each product changes stages, retailers can forecast product demand and use that information to improve product offerings.
41. POS System
A POS system consists of the hardware and software that retailers use to process customer transactions in-store. However, modern POS systems do much more than process sales. They serve as the central hub for retail businesses, handling inventory and customer data, marketing tools, and providing reports and performance metrics.
ShopKeep is a popular small business POS system that works great for retail stores, specialty shops, boutiques, and cafes. It has built-in payment processing, inventory management, reporting, and more.
42. Private Label
Private label products are goods manufactured by another company but sold under the retailer’s brand name. Examples of private label products include Target’s Archer Farms and Up&Up lines.
43. Purchase Order
A purchase order is a document retailers send to suppliers detailing the products they need, quantities, and agreed pricing. Buyers send suppliers purchase orders when they need more supplies.
44. Quantity on Hand
Quantity on hand refers to the actual number of a certain product that a retailer has in their store or warehouse at a particular time.
Retargeting is a type of advertising that retailers direct at consumers based on their previous interactions with the brand. For example, if a shopper loads items into an ecommerce shopping cart, but then leaves the site without purchasing, retailers typically send a retargeting email to that customer reminding them about the products they left behind.
In retail, shrink or shrinkage refers to a reduction in inventory due to shoplifting, employee theft, human error, damaged products, or any other loss that is not attributed to customer sales. Retail inventory shrinkage is the difference between a product’s recorded stock count and the amount physically on-hand.
47. Stock-keeping Unit
Stock-keeping units (SKUs) are alphanumeric codes that retailers use to identify and track products. Many products come with bar codes created by the manufacturer, but retailers can also create their own SKUs with their POS system to organize the labels in a way that makes sense for their retail store.
48. Social Commerce
Social commerce is retailing that takes place over social media platforms like Instagram or Facebook. Social commerce typically refers to the direct sales of products over social media platforms but also includes customer reviews, discussions, and the general promotion of products on social media.
Showrooming is when customers visit a retail store to see a product in person before buying it online, typically for a lower price. Customers participate in showrooming partly because they are nervous about a product’s quality or size and want to test it in person. Customers also use showrooming to make sure they are getting the best possible price.
50. Supply Chain
The supply chain is the sequence of processes and businesses involved in the making and distribution of retail goods. For example, the manufacturer, importer or distribution company, fulfillment company, and the actual retailer are all part of the supply chain.
51. Units Per Transaction
Units per transaction (UPT) is a retail metric used to measure the average number of products each customer purchases at a time. Higher UPTs mean that customers are purchasing more products during each visit, which typically also means increased overall sales.
52. Visual Merchandising
Visual merchandising is the practice of developing and executing retail displays and store layouts. The purpose of visual merchandising is to attract and engage shoppers, ultimately motivating them to make a purchase.
Webrooming is when a shopper browses products online before visiting a store to make the purchase. Webrooming is the opposite of showrooming. Customers browse online and then buy in-store to test a product physically before purchasing. Customers also webroom to determine which store has the best pricing, and so that they don’t have to wait for the product to arrive in the mail.
A white label product is manufactured by one company but sold by another company under that company’s branding. White label and private label products are similar. The difference between white label and private label products is private label products are produced exclusively for the retailer, whereas a supplier offering white label products will sell many retailers the same product just with different branding. However, the term is often used interchangeably, even by product suppliers.
Wholesale is the selling of goods in bulk quantities to businesses for the purpose of reselling those products at a higher price to customers. A wholesale price is the price retailers pay suppliers for products, which is typically well below the retail price a customer would pay.
Running a retail business is no easy task. There’s a lot that happens behind the scenes with product sourcing, marketing, and general business management. Knowing the proper retail terminology when interacting with suppliers and other industry professionals can make the process easier and help avoid any miscommunications.