Retail Terms Everyone Should Know
If you’re here to learn about the basics of retail terminology (aka retail 101), you’ve come to the right place. In order to understand the retail industry, it is beneficial to learn a bit about retail terms so that when someone is discussing ‘RFID’ you don’t double check that you’re still speaking the same language.
If your idea of retail is going to the mall, let’s start off with these retail terms:
- Discount – a price reduction of an article of clothing due to the customer making the purchase.
- Consumer – the people who purchase the items for their own use.
- Off-price goods – brand-name merchandise that is sold for less than its usual retail price.
- Markup – the price difference between the wholesale and retail price. For example, if the wholesale is $5, and the retail is $10, the markup is $5 (or a 100% increase). It is how a business makes a profit.
- Markdown -The reduction of a price on a product that is unable to be sold at its original price.
- Off-Price Retailer – A company that buys merchandise from other brands to sell to their direct consumers.
- Buyer – a person who is manages the purchasing process of products for the retailer.
- Brand – a company that creates merchandise to both sell directly to their consumer and to sell to other retailers (who will then sell it to their consumers).
- Seller – a person who manages the selling process for the brand to the buyer.
- Jobber – a person or company who buys unwanted merchandise in bulk at incredibly low prices from brands and then sells it to off-price retailers.
- Target Market – The group of consumers the business aims to attract and then sell their merchandise to.
It’s time to up your discount game and take this retail 101 crash course to the next level. Let’s continue:
- MSRP (Manufacturer Suggested Retail Price) – the price at which merchandise is sold to the consumer (full-price).
- Wholesale Price – the price of merchandise sold from brands to retailers. The price of wholesale goods (usually sold in large quantities) are always several times lower than the MSRP.
- Unit Price – the price of one unit of product.
- Excess Inventory – merchandise that is left unsold, or overstocked, due to high supply and low demand.
- B2B (Business-to-Business) – a company that sells its products to or does business with another company rather than an individual end consumer.
- Purchase Order – the official document containing the final order from a buyer. It usually contains specifics, such as product number, quantity, price, and color.
- SKU (Stockkeeping Unit) – the identification number or code of a particular product. The SKU allows the item to be tracked.
- Private Label – Merchandise that a store brands as its own.
- Line Sheet – A document that provides information and details about the merchandise being sold. It helps retail buyers identify and place orders on the items.
- COGS (Cost of Goods Sold) – the sum of all costs used to create a product. This includes the cost of raw goods, direct labor, and overhead.
- Loss-leader – an item sold at a price below its actual cost in order to attract new customers. This is a strategy used commonly by new businesses.
- UPC (Universal Product Code) – a number code (or barcode) bar code that is specific for a product and used to track the item.
- ROI (Return on Investment) – a ratio used to determine the profit made from merchandise. It is usually calculated as gross profit divided by total inventory value.
Think you’re ready to open the store? These retail terms are a must-read:
- Case Packs – the packaging of the same item in specified quantities.
- Pre-pack – the unit of shipment using size and color configuration of the merchandise.*
*INTERJECTION: Case packs and pre-pack sound pretty similar. So if you’re confused, here’s the difference: Case packs are the product units in specified quantities crated together to be shipped. On the other hand, pre-pack is the specific SKUs, sizes and color in quantities per pack. Got it? Great! Now let’s keep going with the last retail terms.
- Open-to-Buy – the budget allotted for purchasing new merchandise for retail stores. It is designed to help retailers not overspend and over-stock their store.
- Margin (Gross Markup) – the profit that is made when an item is sold. It is calculated by taking the difference of the cost of the item and its actual selling price.
- Inventory Turnover – the measure of times inventory is sold and replenished within a specific time period (usually a year). It is usually calculated by dividing the net sales by the average inventory.
- EDI (Electronic Data Input) – the computer-generated orders and instructions that are placed by a retailer and sent to the manufacturer.
- RFID (Radio Frequency Identification) – the method for tracking an SKU throughout a store using “electromagnetic fields embedded in “smart” tags attached to merchandise and read by electronic readers.
If you are still reading this, it means you’re ready to check out from retail terms 101! You got the 411 on the EDI, SKU, MSRP, and the rest. Now go take your knowledge and your new retail lingo to the stores… Happy shopping!