Retail Dictionary: 101 Important Terms All Retailers Should Know

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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.

  1. Anchor store: 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.
  2. 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.
  3. ATS: 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 dollar 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.
  4. ATV: This stands for average transaction value. Like ATS, this is the average amount customers spend every time they make a purchase.
  5. Bar code: 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.
  6. Backorder: When a specific quantity of an item could not be filled by the requested date, it’s on backorder.
  7. Big-box store: Like the name says, this is a large store that’s usually part of a major retail chain. Rona and Best Buy are big-box stores.
  8. Big data: 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 analyze customer behaviours, demographics, social information, and more.
  9. Brick and click: This term is used for retailers that integrate their e-commerce site and their traditional brick-and-mortar stores. When the two are integrated, it allows you to provide seamless web-to-store services, like buy online pick up in store and buy online return in store.
  10. Bulk: 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.
  11. Bundled pricing: 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.
  12. Card file: According to PCI-compliance standards, unsecured card files are generally a high-risk way to store and manage sensitive customer information. Learn more about storing credit cards securely.
  13. Card on File (CoF): Square offers CoF as a safe and secure (PCI-compliant) way to store customer payment information. This is the equivalent of a house account. It rewards your regular customers by creating a fast and easy checkout experience (whether they are in person or not). Square offers this feature as part of its POS.
  14. Carrying cost: 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.
  15. Cashwrap: This is the main checkout area of a retail store, where retailers set up their POS and customers pay for items. Sometimes cashwraps have shelves with items that shoppers can pick up on their way out.
  16. Chargeback: 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 unauthorized transactions, but they can mean lots of time and headaches for businesses. Learn more about chargebacks and how to prevent them.
  17. 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.
  18. Click and collect: This omnichannel feature allows customers who buy an item online to pick it up in the brick-and-mortar store; it’s also called buy online pick up in store, or BOPIS. Consumers love the ease and convenience of this feature, which allows them to avoid shipping costs and wait times.
  19. Cross merchandising: This refers to the retail practice of displaying products from different categories together to create add-on sales. You’ve seen this in a grocery store that puts pop, chips, dip — and all the other foods you’d need for a barbecue — in one area during the summer.
  20. Clienteling: This term characterizes 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 customized communication and shopping experiences.
  21. Cloud POS: 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.
  22. Contactless payments: Contactless payments are powered by near field communication, or NFC. NFC-enabled cards or smartphones allow customers to pay for a purchase without touching the payment terminal — they just need to wave or tap. Mobile payments, like Apple Pay, are one of the more common types of contactless payments.
  23. 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.
  24. Consignment merchandise: 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.
  25. Convenience products: These are consumer products that are routinely purchased by customers, who usually give little thought or planning to them. They often appeal to a large target market.
  26. 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.
  27. CRM: Customer relationship management is an online system for managing relationships with your current and prospective customers, and stores a directory of their information online.
  28. Dead stock: Also known as dead inventory, it’s how retailers classify products that have never sold or have been in stock for a really 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 — ever. 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.
  29. DC: This is an acronym for a distribution centre. A distribution centre is a warehouse or specialized building that stores a set of products to be distributed to retailers (or directly to consumers).
  30. Dog: This is retail slang for products that aren’t selling. See Dead stock.
  31. Drop shipping: 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.
  32. Durable goods: These are products that can be used daily, but have a long, useful life expectancy. Examples are furniture, jewelry, and major appliances, such as dishwashers.
  33. Dry storage: 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.
  34. E-tailing: Short for electronic retailing, this is the practice of selling products on the internet. E-tailers range from the very big, like Zappos, to the small, like your local clothing boutique that also has an online store.
  35. EMV: EMV stands for Europay, Mastercard, Visa. The technology is the global standard for credit cards that use computer chips to authenticate (and secure) chip-card transactions. Because this technology encrypts bank information, chip and PIN cards have almost entirely replaced traditional cards which had to be signed for.
  36. Endless aisle: This is a feature of a brick-and-mortar store that enables customers to browse and shop a retailer’s entire catalog. But, instead of stocking up on every item, the store can provide the entire catalogue through a touchscreen or tablet.
  37. Everyday low pricing (EDLP): This is a pricing strategy that promises consumers a consistently low price without comparison shopping or a sale.
  38. Fast fashion: This is clothing that moves from the catwalk or fashion shows to stores quickly. The clothes represent the most recent trends. Stores like H&M and Zara have built their businesses on fast fashion.
  39. Flash sales: 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.
  40. Forecast: An estimation of future demand for products or services. Historical demand is used to calculate future demand, with adjustments for seasonality and trends.
  41. 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.
  42. Franchise: 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.
  43. Green retailing: This refers to the environmentally friendly business practices that retailers commit to. This can range from giving customers reusable shopping bags to adding solar panels to supply electricity to their stores.
  44. Gross margin: 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.
  45. High-speed retail: This practice speeds up the customer’s shopping experience. Drive-thrus, pop-up stores, and mobile businesses like food trucks all fit in this category.
  46. Impulse purchase: 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 store. Some retailers set up small items around their cashwrap to encourage this behaviour (like a grocery store that puts magazines and candy in the checkout lane).
  47. Inventory management: 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.
  48. Inventory turnover: 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.
  49. Keystone pricing: 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.
  50. Layaway/lay-by: 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 installments on the product until it’s entirely paid off. While some retailers offer this kind of program all year, it is commonly advertised during the holidays. Layaway programs make it easier for the consumer to afford products and reduce financial risk for the retailer.
  51. 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.
  52. 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.
  53. Loss leader: 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.
  54. Lot size: Also called order quantity, this is the quantity of an item you order for delivery on a specific date.
  55. Markdown/markup: 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.
  56. Customer-facing display: A customer-facing display (CFD) — also known as a customer display or monitor — is usually a separate screen that allows customers to view their order, tax, discounts, and loyalty information during the checkout process. Because they can view what you are ringing up, CFDs help reduce inaccuracies and incorrect purchases, creating a better experience for your customers.
  57. Mass customization: This is a product that can be produced at a low cost in high volume, but still provide each customer with a customized offering. Nike’s NIKEID is a prime example of a shoe that can be mass produced but in the specific colours a customer wants.
  58. Merchandising: This is the way a product is displayed in your store that encourages customers to purchase it. Merchandising includes embellishments like price, packaging, offers, vouchers, and more.
  59. Minimum advertised price: This is a supplier’s pricing policy that doesn’t permit resellers to advertise prices below a specific amount.
  60. Mobile payments: 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 Google Pay. Read our handy guide to learn more about mobile payments.
  61. 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.
  62. Multichannel retailing: Selling merchandise through more than one independently managed channel, such as brick-and-mortar stores, catalogues, and online. This is the precursor to omnichannel retail, which aims to tie those channels together.
  63. Mystery shopping: 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 store. The mystery shopper behaves like a regular customer (or performs specific tasks) and then provides feedback to help the store improve its practices.
  64. Niche retailing: The practice of selling only to a specific market segment. A niche retailer specializes in a specific type of product or a set of related products. Lululemon is a niche retailer specializing in athletic apparel. But your local pet store is also a niche retailer, despite offering a wide range of products.
  65. Net profit: The actual profit after working expenses have been paid. It’s calculated by subtracting retail operating expenses from gross profit.
  66. 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.
  67. Net sales: This is the revenue a retailer makes during a specific time period, after deducting customer returns, markdowns, and employee discounts.
  68. Obsolete inventory: 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.
  69. Off price: This is merchandise purchased for less than the regular price. Selling off-price merchandise can be a great way to get customers to your store.
  70. Omnichannel marketing: 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 vouchers, and interactive in-store digital lookbooks, in addition to more traditional channels. Learn more about how to run an effective omnichannel marketing strategy for retail.
  71. 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.
  72. PCI compliance: PCI DSS stands for Payment Card Industry Data Security Standard. It sets the requirements for organizations and sellers to safely and securely accept, store, process, and transmit cardholder data during credit card transactions to prevent fraud and data breaches. Any organization that processes credit card payments needs to prove it is PCI compliant. Read more about PCI compliance in our guide.
  73. Planogram: This is a detailed floor plan of a store. It visually represents the placement of products and product categories throughout a store (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.
  74. PLU: 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.
  75. Pop-up store: A short-term shop that keeps a physical space for a limited amount of time. Pop-ups can be set up anywhere — empty retail spaces, shopping centres, stations, etc.
  76. Prestige pricing: 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.
  77. Procurement: This is the process of sourcing, negotiating, and strategically selecting goods for your retail shop.
  78. 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.
  79. Proforma invoice: 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.
  80. 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 retail point of sale 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.
  81. Private label: 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.
  82. Purchase order: 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.
  83. Quantity on hand: This describes the physical inventory that a retailer has in possession.
  84. Quantity on order: This is all the stock that you have in open purchase orders or manufacturing orders.
  85. Quantity discount: This is an incentive offered to a buyer to purchase a certain quantity for a decreased cost per unit.
  86. Relationship retailing: 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 personalized experiences.
  87. Retargeting: 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.
  88. RFID: 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.
  89. Shrinkage: 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.
  90. Stock-keeping unit (SKU): The meaning of SKU can be confusing. 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.
  91. Social commerce: 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.
  92. Showrooming: The consumer practice of examining products in a store 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.
  93. Store loyalty: When a buyer likes and trusts a store, and therefore systematically goes there again and again to make purchases. A retailer can encourage this with loyalty programs and special promotions for regular customers.
  94. 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.
  95. Tribetailing: The retail practice of tailoring what you do — everything from your products and store 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.
  96. 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 real estate taxes, 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.
  97. T-Stand: This is a typical merchandising fixture used to display clothing. It can have straight or waterfall arms.
  98. 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.
  99. Visual merchandising: This is the practice of creating visually appealing displays, in-store experiences, and designs that drive traffic and maximize sales. Studies have shown that visual merchandising can influence a customer’s perception of item quality and likeliness to purchase.
  100. 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.
  101. Wholesale: This is the sale of goods in large quantities to retailers, who then resell them.

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