If you’re new to the retail business, it can be hard to keep up with the jargon used in the industry. Knowing the retail terms that are used in shops and online is key to advancing and having your operations run smoothly.
Our retail dictionary can help you navigate all of the lingo you’re hearing day-to-day and keep you up to date with the latest trends.
One of the largest — if not the largest — retail shop in a shopping centre. Usually a department store or supermarket, this shop helps drive foot traffic, making it a great neighbour for smaller retailers. Also known as a draw tenant, anchor tenant or key tenant.
Augmented reality (AR)
This principle is about supplementing the user’s physical world with virtual things, so they appear to be in the same environment. In retail, it can be used in things such as shoppable catalogues, apps that let you see in-store deals by using your phone’s camera and virtual fitting rooms.
This is the acronym for average transaction size, or the average amount spent by a customer in a single transaction or purchase. It is calculated by dividing the total pound value of sales during a given time by the number of transactions during that time. This metric is a valuable way to determine whether the size of your sales is growing — ideally, you want increasingly larger sales over time.
This stands for average transaction value. Like ATS, this is the average amount customers spend every time they make a purchase.
A machine-readable code, which has alternating dark and light bars. The spacing between the bars signals to the reader what the numerical code is. Bar codes can be universal product code (UPC) or any other numerical format. Bar codes help you track inventory going in and out of the shop.
When a specific quantity of an item could not be filled by the requested date, it’s on backorder.
This refers to a massive data set that is so large you would need a sophisticated program — or a data scientist — to make sense of it. When you’re looking at big data (like census information or tweets), you’re looking to analyse customer behaviours, demographics, social information and more.
Brick and click
This term is used for retailers that integrate their e-commerce site and their traditional brick-and-mortar shops. When the two are integrated, it allows you to provide seamless web-to-store services, like ‘click and collect’ and in-store returns for products bought online.
The classic definition refers to distributing raw materials (such as coal, iron and grains) that are stored and transported in large quantities. The term may have a variety of definitions based on industry. It could mean buying a large quantity of a single item or it could refer to the storage area for pallets.
Companies that bundle together a package of goods or services to sell for a lower price than they would charge if the customer bought all of those goods or services separately, commonly seen with internet packages (bundled with line rental, TV packages or mobile phone deals), gaming consoles (sold with controllers and games) and holidays in the form of package holidays.
According to PCI-compliance standards, unsecured card files are generally a high-risk way to store and manage sensitive customer information.
Card on File (CoF)
Square offers CoF as a safe and secure way to store customer payment information when they pay via invoice. This is the equivalent of a house account.
This can also be referred to as a holding cost. It is primarily made up of the cost associated with the inventory investment and storage cost.
This is the main checkout area of a retail shop, where retailers set up their POS system and customers pay for items. Sometimes cashwraps have shelves with items that shoppers can pick up on their way out.
A chargeback happens when a customer disputes a charge from a business and asks the card issuer to reverse it. Credit card chargebacks are meant to protect consumers from unauthorised transactions, but they can mean lots of time and headaches for businesses. Learn more about chargebacks and how to prevent them.
Chargeback rebuttal letter
If a business wants to refute a chargeback, it might send a chargeback rebuttal letter to persuade the customer to withdraw the dispute. The letter would show evidence that the product was in fact delivered or that the service requested was rendered. Learn more about the kind of evidence you need to defend against non-fraud chargebacks.
Click and collect
This omnichannel feature allows customers who buy an item online to pick it up in the brick-and-mortar shop; it’s also called buy online pick up in shop, or BOPIS. Consumers love the ease and convenience of this feature, which allows them to avoid shipping costs and wait times.
This refers to the retail practice of displaying products from different categories together to create add-on sales. You’ve seen this in a supermarket that puts burger buns, crisps, dip — and all the other foods you’d need for a barbeque — in one area during the summer.
This term characterises activities retailers use to build relationships with their customers. One of the most popular ways to do this is to collect and track customer data with customer relationship management (CRM) software that can then be used to create customised communication and shopping experiences.
A cloud POS is a web-based point-of-sale system that lets you process payments through the internet, rather than on your local computer or servers. Learn more about the benefits of a web-based point-of-sale system.
Contactless payments are powered by near field communication, or NFC. NFC-enabled cards or smartphones allow customers to pay for a purchase with tap and go at the payment terminal — they just need to hold their card or phone against or above it. Mobile payments, like Apple Pay, are one of the more common types of contactless payments.
Consumer packaged goods
This describes products that are in a form that is ready for sale to the consumer. CPGs include non-durable goods like packaged foods and beverages and other consumables. They are often sold quickly and at a low cost.
This is inventory that a retailer does not own or pay for until it’s sold. In a consignment arrangement, goods are left by an owner (consignor) in the possession of an agent (consignee) to sell them. The consignor continues to own the merchandise until it’s sold. Typically, the agent, or consignee, receives a percentage of the revenue from the sale.
These are consumer products that are routinely purchased by customers, who usually give little thought or planning to them, like sugar or toilet paper. They often appeal to a large target market.
Cost of goods sold
The accounting term used to describe the total value (or cost) of products sold during a given time period. Also referred to as COGS, this appears on the profit-and-loss statement and is used for calculating inventory turnover.
Customer relationship management is an online system for managing relationships with your current and prospective customers, and stores a directory of their information online.
Also known as dead inventory, it’s how retailers classify products that have never sold or have been in stock for a long time. Sometimes dead stock is the result of seasonality (people don’t buy Christmas ornaments in May), while other times the stock just isn’t in demand. Also called dead inventory, this is one thing no retailer wants to have. You can get rid of dead stock with sales and promotions, or you can avoid it all together with careful analysis and planning.
This is an acronym for a distribution centre. A distribution centre is a warehouse or specialised building that stores a set of products to be distributed to retailers (or directly to consumers).
This is retail slang for products that aren’t selling. See Dead stock.
This refers to an arrangement between a retailer and a manufacturer in which the retailer transfers customer orders to the manufacturer, which then ships the products directly to the consumer. In this case, the retailer doesn’t keep the products in stock. The order and shipment information is just passed on to the manufacturer. Sometimes referred to as direct shipping.
These are products that can be used daily, but have a long, useful life expectancy. Examples are furniture, jewellery and major appliances, such as dishwashers.
Though dry storage can have other meanings in different industries, in warehousing it is typically used to describe non-refrigerated storage of food products, such as canned and dry goods.
EFTPOS is short for electronic funds transfer at point of sale. It’s also become synonymous with card payments in general, and EFTPOS machine is another name for a card terminal or reader used to take card payments from your customers.
EMV stands for Europay, Mastercard, Visa. The technology is the global standard for credit cards that use computer chips to authenticate (and secure) chip and PIN transactions. Because this technology encrypts bank information, chip and PIN cards have almost entirely replaced traditional magstripe cards which had to be signed for.
This is a feature of a brick-and-mortar shop that enables customers to browse and shop a retailer’s entire catalogue online. This is well demonstrated by shops like Debenhams which allows customers to request an item from the stockroom of a bricks and mortar shop if it has gone out of stock on the main website. By utilising their own stockrooms as secondary website order warehouses, Debenhams increases customer fulfilment and lessens the possibility of stock going unsold and having to be set at a discount at the end of its season.
Everyday low pricing (EDLP)
This is a pricing strategy that promises consumers a consistently low price without comparison shopping or a sale.
This is clothing that moves from the catwalk or fashion shows to shops quickly. The clothes represent the most recent trends. Shops like H&M and Zara have built their businesses on fast fashion.
These are sales that are available for a limited time. The huge discounts (we’re talking 50 percent off and up) entice consumers to buy, and the limited time frame — usually anywhere from several hours to a couple of days — forces them to act quickly.
An estimation of future demand for products or services. Historical demand is used to calculate future demand, with adjustments for seasonality and trends.
FIFO (first in first out)
This is an inventory management cost strategy that assumes the first units of stock purchased are the first ones that are sold, regardless of whether or not they were. It’s a common way to calculate the value of inventory: If you assume the first inventory in (the older inventory) is the first out, then the cost of the older inventory is assigned to the cost of goods sold and the cost of the newer inventory is assigned to ending inventory. The cost of goods sold is essential to evaluating inventory turnover and determining the efficiency of your inventory management.
This is a way that some businesses expand by distributing their goods and services through a licensing relationship. In this contractual relationship, a franchisor grants a license to a franchisee to conduct business under the business’s name. Usually the franchisor specifies the products and services to be offered by the franchisee and provides an operating system, the brand and operational support. McDonald’s and Subway operate through franchise systems.
This refers to the environmentally friendly business practices that retailers commit to. This includes things such as the 15c plastic bag charge and using solar power to run the stores electrics.
The difference between how much an item costs and what it sells for. On a larger scale, it’s how much sales revenue a company keeps after all the direct costs of making a product or performing a service are accounted for. It’s also called gross profit margin.
This practice speeds up the customer’s shopping experience. Drive-throughs, pop-up shops and mobile businesses like food trucks all fit in this category.
Also called an impulse buy, this happens when a customer makes an unplanned purchase of a product or service right before checking out at the shop. Some retailers set up small items around their check-outs to encourage this behaviour, notably many supermarkets have banned the use of candy in these displays as this encouraged unplanned additions of unhealthy snacks to customer diets.
This is a system a retailer uses to make sure the right inventory is in the right place, at the right time and in the right quantity. As a part of this, the retailer is making sure that ordering, shipping, handling and related costs are kept in check.
The average number of times that inventory on hand is sold or used during a specific time period. Most of the time, high stock turn is good — it means you’re selling a lot without stocking too much. To calculate it, divide the cost of goods sold by the average inventory.
This is a method of selling merchandise for double its wholesale price. It’s an easy way for retailers to cover costs and make a reasonable profit.
Also known as payment in instalments. This is a service that allows the customer to put an item on hold with a retailer until the item is paid for in full. The customer pays instalments on the product until it’s entirely paid off. While some retailers offer this kind of program all year, it is commonly advertised during Christmas. Layaway programmes make it easier for the consumer to afford products and reduce financial risk for the retailer.
Leveraged buyout (LBO)
An LBO is the purchase of a company using borrowed funds (such as loans from banks and investors). The purchaser uses the company’s assets as collateral for the funding and its cash flow to pay back whatever is owed.
LIFO (last in first out)
This is a principle that assumes new merchandise sells before older stock. It matches current sales with the current cost structure.
A marketing tool for retailers, a loss leader is an item that’s sold below cost, or at a loss, in an effort to attract new customers. Retailers that use loss leaders rely on the fact that once customers are in the door, they buy other items that do turn a profit.
Also called order quantity, this is the quantity of an item you order for delivery on a specific date.
A markdown is the difference between the original retail price and the reduced price — it’s the devaluation of a product, usually because it’s not selling at the original price. A markup is the amount of money added to the wholesale price to obtain the retail price.
This is a sign used to display a retail shop’s name and/or logo.
This is a product that can be produced at a low cost in high volume, but still provide each customer with a customised offering. Nike’s NIKEID is a prime example of a shoe that can be mass produced but in the specific colours a customer wants.
This is the way a product is displayed in your shop that encourages customers to purchase it. Merchandising includes embellishments like price, packaging, offers, vouchers and more.
Minimum advertised price
This is a supplier’s pricing policy that doesn’t permit resellers to advertise prices below a specific amount.
Mobile payments are regulated transactions that take place digitally through your mobile device. They are enabled by near field communication (NFC). Popular mobile payment apps include Apple Pay and Android Pay.
Monthly sales index
A measure of seasonal sales that is calculated by dividing each month’s actual sales by the average monthly sales, and then multiplying results by 100. If the result is more than 100, that means there’s been growth; if less than 100, there’s been a loss.
Selling merchandise through more than one independently managed channel, such as brick-and-mortar shops, catalogues and online. This is the precursor to omnichannel retail, which aims to tie those channels together.
This is an activity where a market research company, watchdog group or even a retail owner sends in a decoy shopper to evaluate the products or the customer service in a shop. The mystery shopper behaves like a regular customer (or performs specific tasks) and then provides feedback to help the shop improve its practices.
The practice of selling only to a specific market segment. A niche retailer specialises in a specific type of product or a set of related products. A brand like Archibald London is a niche retailer specialising in eyewear. But your local pet shop is also a niche retailer, despite offering a wide range of products.
The actual profit after working expenses have been paid. It’s calculated by subtracting retail operating expenses from gross profit.
Net profit margin
This is the percentage of revenue left after expenses have been deducted from sales. It’s a performance metric that shows how much profit a business gets from its total sales. It’s calculated by dividing net profit by net sales.
This is the revenue a retailer makes during a specific time period, after deducting customer returns, markdowns and employee discounts.
This refers to products that have no sales or aren’t used during a set period of time (it could be weeks or years, depending on the retailer). See Dead stock.
This is merchandise purchased for less than the regular price. Selling off-price merchandise can be a great way to get customers to your shop. There are some retailers that only sell off-price merchandise, like TK Maxx, which sells designer merchandise at drastically discounted prices.
Omnichannel marketing aims to create a seamless experience across all of a brand’s marketing channels. This is different from multichannel marketing. Most retailers already have multichannel marketing; they use a website, social media, email and other channels to push out brand messages, promotions, etc. Where omnichannel differs is that it takes into account how consumers interact with all of those channels and how they move from one to another; omnichannel marketing is all about connecting the dots between the channels. The goal is to keep customers moving around within the brand ecosystem, with each channel working in harmony to nurture more sales and engagement. An omnichannel marketing strategy may include things like cross-channel loyalty programs, in-store pickup, smartphone apps to compare prices or download coupons and interactive in-store digital lookbooks, in addition to more traditional channels.
Order lead time
The number of days from when a company buys the production inputs it needs to when those items arrive at the manufacturing plant.
PCI DSS stands for Payment Card Industry Data Security Standard. It sets the requirements for organisations and sellers to safely and securely accept, store, process and transmit cardholder data during credit card transactions to prevent fraud and data breaches. Any organisation that processes credit card payments needs to prove it is PCI compliant. Read more about PCI compliance in our guide.
This is a detailed floor plan of a shop. It visually represents the placement of products and product categories throughout a shop (on shelves, racks, etc.) that best drives sales. A planogram is a helpful tool for thinking about how placement impacts purchase behaviour and how retailers can be most efficient with their space.
This stands for price look up. It’s a system that displays the description and price of an item when the item number is entered or scanned at the point of sale. PLUs are often printed on the customer receipt to remind the customer what was bought.
A short-term shop that keeps a physical space for a limited amount of time. Pop-ups can be set up anywhere — empty shops, shopping centre units, stations, etc.
This is a pricing strategy used by high-end retailers in which an item is priced at a high level to denote its exclusivity, quality or luxury. Prestige pricing is intended to attract status-conscious consumers or those who want to buy premium products.
This is the process of sourcing, negotiating and strategically selecting goods for your retail shop.
Product life cycle
This describes the stages a product goes through once it’s in market. There are four: introduction, growth (in sales), maturity and decline, and they show whether the expected sales are strong or poor. By paying close attention to the life cycle of each product, you can gather information to improve future product, promotions and offerings.
A document that outlines the commitment on the part of the seller to deliver products or services to the buyer for a specific price. It’s sent in advance of a shipment, so it’s not a true invoice.
Point-of-sale (POS) system
At the most basic level, a point-of-sale system includes the hardware and software that allows a retailer to check out customers, record sales, accept payments and route those funds to the bank. But the right POS can do more than record sales. With the right software integrations, it can help you run your entire business and affect your long-term growth. Read more in our handy guide to choosing the best POS system for your small business.
A brand that is not owned by a manufacturer but by the retailer or supplier. Retailers and suppliers buy the goods and market them under their name. Target’s Up&Up and Simply Balanced are both examples of private label lines.
This is a document used to communicate a purchase to an employer. It can be used to approve, track and process purchases as well. A purchase order usually indicates types, quantities and agreed prices for products or services, as well as delivery dates.
Quantity on hand
This describes the physical inventory that a retailer has in possession.
Quantity on order
This is all the stock that you have in open purchase orders or manufacturing orders.
This is an incentive offered to a buyer to purchase a certain quantity for a decreased cost per unit.
A strategy that businesses use to build loyalty and create lasting relationships with customers. There are numerous tactics retailers can use to reach those goals, including loyalty programs, first-class customer service, great return policies or personalised experiences.
This is an advertising practice in which online ads are targeted to consumers based on their previous actions. A fashion retailer, for instance, may retarget consumers based on what they’ve browsed on its site. A consumer may have looked at a pair of shoes, and is then retargeted with an ad for those shoes on Facebook.
Radio frequency identification is the technology that provides radio waves to track, read and capture the information that lives in a chip on a product’s label or packaging. RFID is used to take accurate measures of inventory, but retailers are also looking at how to use it to learn more about customers.
This is the difference between the amount of stock that a retailer has on the books and the actual stock that’s available. To put it simply, it’s inventory loss that can be attributed to factors such as employee theft, shoplifting, administrative error, vendor fraud or damage.
Stock-keeping unit (SKU)
This is a number (usually eight alphanumeric digits) that retailers assign to products to keep track of stock internally. It’s used in inventory management to track and distinguish one item from another. A SKU represents all the attributes of a product, including brand, size and colour. For example, one type of shoe could have 40 SKUs, in various combinations of sizes and colours. A SKU is often confused with a UPC (universal product code), as they both are used to identify products. The difference is that SKUs are unique to a retailer, whereas a UPC applies to a product no matter what retailer is selling it.
New retail and e-commerce practices that incorporate social media, user-generated content or social interaction. This doesn’t mean that social platforms, like Instagram, are the platforms where purchases happen; instead, the social networks help drive sales. There are a variety of types of social commerce: peer-to-peer marketplaces, group buying, peer recommendation sites, social network–driven sales and user-curated shopping, to name a few.
The consumer practice of examining products in a shop and then purchasing them online at a lower price. Showrooming becomes more and more common as mobile usage increases and new price-check and shopping apps emerge.
When a buyer likes and trusts a shop, and therefore systematically goes there again and again to make purchases. A retailer can encourage this with loyalty programmes and special promotions for regular customers.
Large shops that cover far more space than an average shop, usually part of a chain and sometimes stand-alone, located near retail parks or shopping centres but with its own dedicated parking and plot. Supermarkets will often have superstore varieties, Ikea can also be considered a superstore.
Supply chain management
The management of the flow of goods and services, involving the movement and storage of raw, work-in-process and finished goods from the point of origin to point of consumption.
The retail practice of tailoring what you do — everything from your products and shop design to marketing and communication — for a specific group of people, or tribe. The goal of this is not to appeal to the public or a mass market, but to capture a niche, a good example of this is JD Williams, which offers fashion for women over the age of 50.
Triple net lease
This is a rental agreement on a commercial property in which the tenant agrees to pay all ongoing expenses of the property (like building insurance and maintenance) as well as things like rent and utilities. Because the landlord doesn’t have to worry about variable costs of ownership, this type of lease generally has a lower rental rate than a standard lease.
This is a typical merchandising fixture to hang clothing from. It can have straight or waterfall arms.
Units per transaction (UPT)
This measurement is an average of the amount of items sold during each sales transaction. It’s one metric to track over time to see growth.
This is the practice of creating visually appealing displays, in-store experiences and designs that drive traffic and maximise sales. Studies have shown that visual merchandising can influence a customer’s perception of item quality and likeliness to purchase.
Warehouse management system: Computer software designed for managing the movement and storage of materials throughout a warehouse. The system is usually divided into three operations: putaway, replenishment and picking.
This is the sale of goods in large quantities to retailers, who then resell them