Are you coming across retail terms and business acronyms you aren’t familiar with? If so, you’ve come to the right place. This post is meant for anyone new to the retail industry, or for anyone looking to brush up on the current lingo. Depending on your job function, you may not be directly impacted by every term in this glossary, but you are likely to come across these terms throughout your professional journey in the retail industry.
Retail Glossary Categories:
Retail Ecommerce Terms
When customers shop online, they browse your catalog of products, and when they find items they want, they’ll add the items to their cart. From the cart they’ll review, edit, and finalize their order before proceeding to the checkout.
The cart is a great place to tailor your shopper’s experience. You can make related-product recommendations, provide incentives for adding more items, or offer a reward if they sign up for your marketing emails, all of which can increase your customer LTV (see LTV definition) as well as your AOV (see AOV meaning).
Once your customer has filled their cart with everything they want, they need to complete their order; the checkout is where this takes place. The customer uses the checkout to pay for the items remaining in their cart.
AKA: Ecommerce Store, Online Store, Online Boutique, Online Shop, etc.
Ecommerce is a business model by which a business entity sells goods to customers through an online website that they own (not to be confused with marketplace selling, see definition below).
Product Display Page (PDP)
The product display page, or PDP for short, is a page on your website dedicated to showing off your products one at a time. The goal of your PDP is to present your product to the customer so that it’s easy to understand if it fits their needs or not. For example, if you are selling apparel, you can help your shoppers understand what the product looks and feels like through quality copy writing and product displays (imagery, videos, AR, etc.).
Getting to the PDP is the same step as someone picking an item off the rack in a physical store. Once they pick that item up, what should happen next? They want to know what does this cost, what does it feel like, and what does it go with, etc.
To build a PDP that converts, you need to keep the shopper focused, giving them the info they want with as little friction as possible, and making it easy to checkout.
Retail Finance Terms
“In the Black”
Every business wants to be “in the black.” This means you have more revenue than expenses for a given time period. Being “in the black” indicates that a time period was profitable.
Markdowns are permanent discounts to the retail ticket price of a product. This is typically done with products that you do not plan to carry any longer.
Net terms is a time period, usually expressed in days, that a purchaser is granted to complete payment for an order of goods. Typically, written as net-30, net-60, etc., where the number represents the days.
AKA: Buys, Orders, Units, Purchases
Receipts refers to the units of inventory that a business has purchased or plans to purchase. Receipts can be expressed in “actual” or “planned” number of units during a selling period.
“In the Red”
If you’ve ever heard someone say that their business is “in the red,” that means their expenses have exceeded their revenues. Your goal is to always be “in the black” so that you are bringing IN more money than you’re spending on running your business. If your business is in the red, your business is not generating any profit, but instead is generating losses.
Retail Marketing Terms
Blogs are not exclusive to retail, but retailers can find value in connecting with the consumers through this channel. Blogs can be used to build credibility, brand awareness, and brand engagement by sharing value-rich content that connects with your target audience. That content is typically done in written form, however a blog can consist of audio, video, or a creatively immersive experience. Infact, this post that you are reading right now is a blog post.
BOGO (Buy one, Get one)
Buy one, get one promos, or BOGO for short, are popular retail discounting techniques used to incentivize customers to buy multiple items. Customers purchase an item, and get a second item at a discounted rate, or for free. For example, you might run a BOGO promotion to offload unwanted inventory, or to increase your ATV (average ticket value). Just keep an eye on your margins.
A bundle is a special offer for customers to get multiple related items at a discounted rate. For example, a fashion boutique could pair complimentary items together to create an outfit and sell it at a discounted rate. For more info on bundling, check out this Skubana post.
To put an item “on clearance” means you have made the decision to discontinue that product (meaning you have no intentions to ever replenish that product/category), and have permanently marked the price down.
Any permanently discounted product that is no longer being sold at its original ticket price would be considered clearance. Not to be confused with event or promotion discounts, which are only temporary, and are planned strategically to drive incremental traffic and sales.
Clearance usually includes goods that are out of season or goods that did not sell well during the regular season. Retailers take markdowns to avoid having excess inventory. You can consolidate your clearance inventory to one section that can be easily shopped.
A call-to-action, or CTA, is a marketing tactic to influence your target audience to do something, “take action.” For example, a button on your website to “BUY NOW,” or maybe an email, or social media post posing a question to your target audience soliciting some kind of response.
Discounting is a pricing strategy to sell a product for less than the original retail value. This can be done through a temporary promotion, or to resolve a customer service issue. A discount that becomes permanent would be considered a markdown. See retail markdown definition.
Some retailers allow customers to purchase with credit (either from the retailer directly, or an affiliated lending company) to acquire goods without cash upfront for smaller payments to be made over time. For example, you may see purchasing terms like “Net 30” which means that you’d have 30 days to pay your invoice for merchandise that has been financed.
Virtual or physical cards that hold cash value and can be used to make in-store and/or online purchases with a retailer.
In retail, loyalty refers to your customers who repeatedly shop with you or advocate for your brand. Loyalty is hard to achieve. Brand loyalty requires good branding and skillful marketing. One way to drive brand loyalty is to create a loyalty program.
How can you incentivise customers to keep coming back?
Open Box Product
Open box products are inventory that have been removed from their original packaging that the retailer wishes to sell to customers. Oftentimes, the retailer will mark the price down on this item in order to incentivize consumers to purchase a product. Sometimes, this is an item that was on display in the store, sometimes this is an item that was returned in reasonable condition by another customer.
A promotion is a temporary discount applied to a product or group of products with a goal of increasing sales and stimulating retail revenue. Oftentimes, promotions are centered around various holidays, like Black Friday, Easter, President’s Day, Memorial Day, etc.
A popup is an engaging CTA that popup on a website to offer promotions, collect email addresses, gain social media followers, etc. Here are a few examples from the Beeketing team, with some helpful no, nos. For example, you could automate a popup with a coupon code when a browser shows intention to leave your site without action.
Retargeting is an advertising tactic in which you collect information about your site visitors and target them with paid advertising or email/text campaigns at a future point in time in the hopes of getting them to return to your store and make a purchase.
SEO (Search Engine Optimization)
Search engine optimization, better known as SEO, is the art and science of optimizing your website presence in search engines like: Google, Bing, and DuckDuckGo. The goal is to increase your brand’s organic visibility and traffic.
Ready to get your feet wet with SEO, check out this beginner’s guide from Moz.
Retail Merchandising Terms
AKA: Product Mix, Product Lineup
A product assortment is a collection of goods that are curated (a.k.a. “assorted”), and then made or purchased by a business to re-sell directly to consumers. Your assortment should consider and anticipate the wants and needs of ideal customers in your particular niche.
Most fashion, beauty, and home decor brands launch between 2 to 4 seasonal assortments per year, usually corresponding with spring, summer, fall, and winter weather. Although some brands only have one collection per year — and fast-fashion brands have new product drops as often as weekly.
Regardless of how often you plan and launch new inventory, brands should strive for a product mix that is approximately 50-60% basics. Meaning, these are products you carry, sell, replenish, and market all year long. These are core pieces, and what your customers come to know and love you for. The other 40-50% should be fashion items. Your fashion collection can and should be focused on rising trends, small buys, testing new styles, and highly seasonal items, like swimwear, christmas pajamas, etc.
AKA: Planning, Buying, Purchasing
Buy planning, which takes place after you have completed your seasonal category planning, is the process of planning the number of units you will purchase from a vendor or manufacturer for each SKU you plan to carry. The goal is to purchase enough units to meet consumer demand for a season. All without buying so much that you’re left with too much inventory (lost profits), or so little that you’re running into stock out issues (leaving money on the table).
AKA: Product Hierarchy, Product Categories, Collection Planning, Target Setting
During the planning stage of the retail merchandising process, in order to understand your capacity for new inventory in an upcoming season, you’ll use the insights from your seasonal Post-Mortem Report to calculate and validate the total amount of revenue and unit sales you reasonably expect for that planning period. Then, you assign percent contributions by category to divide up your total into targets for each product category in your assortment. After Category Planning has been completed, the Open-To-Buy (OTB) can be determined at the total, and by department. See Open To Buy / OTB meaning.
If you are a business owner who has purchased materials or finished goods from wholesale suppliers, you have likely seen visual linesheets full of products from these vendors. As a retailer, you need to create similar documentation for your business.
Your seasonal line sheet is a spreadsheet that you create each season, containing information about all of your product offerings for that season. Your line sheet should contain information organized into single header columns. This enables you to run detailed analysis on the information using pivot tables and other data visualization techniques. Some examples of product data that should be included in your seasonal line sheet are:
- All new, aged, and clearance goods that have any available inventory
- Product Department, Class, and Subclass
- Product Title
- Product Color
- Total Unit Buy (Or Beginning Available Inventory)
- Unit Cost (COGS)
- Original Ticket Price
- Country of Origin
- Style Attributes (ex: silhouette, fit, occasion, collections, prints, etc)
At the end of each buying cycle, you should save a new version of your linesheet.You’ll start by moving any SKUs categorized as new in the previous season to Carryover (C/O) or Drop status, then entering all of your new inventory towards the top of each section in your document. This file is basically the foundation for all of your data reporting and performance analysis that takes place during and at the end of each season to help you develop money-making strategies and decision-making.
AKA: Assortment Plan
A merchandise plan is a document that outlines all of the seasonal investment strategies for a fashion brand. All decision-makers should sign off on the plan before commencing with assorting, buy planning, or purchasing.
A merchandise plan includes important information like the amount of revenue and unit sales that a brand is targeting for that season; and not just for the total company, but a sales target is set for each category of products. Additionally, a merchandise plan is considered ‘complete’ when it also contains your sales targets, your planned OTB in both units and cost, and has been agreed upon by all product decision-makers.
These figures are calculated and then validated using an analytical approach of your past performance, and key insights about your industry, social trends, and other economic indicators of future success. Your plan should account for ALL levels of planning, including: department, class, subclass, channel, store, etc. Using your past performance you will forecast all aspects of your sales, and plan things like: unit buys, COGS, and much more.
AKA: Assortment Planning, Assorting
In the retail industry, “merchandise planning” is sometimes used synonymously with “merchandising.” But, an important distinction to make is that merchandise planning is actually a specific step of the retail merchandising process.
Merchandise Planning is the process of using your business performance analysis to make decisions about your assortment for an upcoming season, like what products, styles, and colors to include, as well as how many units of each product you want to purchase from a vendor or manufacturer.
Retail merchandising is an umbrella term that encompasses all the business activities associated with sourcing, buying, and presenting your products to sell to customers. This includes:
Merchandising Process: There are five steps of the retail merchandising process:
- Business Analysis
- Retail KPI & Post Mortem Analysis
- Business Strategy & Planning
- Merchandising Planning
- Seasonal Stories & Trend Adoption
- Sourcing & Production
- Design & Product Development
- Buying & Replenishment
- Visual Merchandising & Promotions
- Branding & Visual Displays
- Planning Events & Promotions
- In-Season Management
- Product Placement
- Driving Store Traffic (ads)
- Order Fulfillment
- Post-Season Management
- Inventory Exit Strategy
Open-to-buy is the seasonal “budget” that you set as a merchant to purchase and acquire new inventory for an upcoming season. OTB planning helps prevent over and under buying, which lead to excess inventory and stockouts, respectively. Before your OTB can be calculated, you must first perform category planning to ensure your topline targets are set. What is category planning?
Overselling is the act of selling more goods than you have in inventory. This can get particularly troublesome for retailers who sell their goods in multiple channels. This is a bad thing, and can lead to very poor customer experiences.
A plan-o-gram is a diagram of how to set up an in-store display. Typically used to showcase products in a certain way, or call special attention to something.
AKA: Ticket price, Selling Price, Retail Price, Initial Markup, Markdown Price
The retail price is the dollar amount you set to sell your products or services to your customers. The primary objective when setting pricing is to make a healthy profit, so you must consider all of the costs associated with acquiring your products, preparing them for shipment, and sending them to customers when setting the selling price of a product.
The first price that you set is called your Average Initial Retail Price (AIR), and the difference between your COGS and AIR is your Initial Markup (IMU).
Check out these pricing tips by Inc.
In the business of retailing, brands make more informed decisions about their future investments when they have processes and tools in place to help them organize and analyze their product data in a way that is meaningful. By organizing product data according to various assigned attributes, or characteristics it unlocks insightful information about the product preferences your customers have.
Some examples of merchandising tools that help online retailers implement retail planning processes include:
- a Seasonal Product Line Sheet to help you assign and monitor various attributes (like what percent of your sales/inventory are each color, style, category, dept, etc),
- a Post-Mortem analysis template that’s been set up to receive and summarize their store data with ease,
- an OTB Calculator to plan upcoming targets and purchasing budgets,
- Product Buy Planner template, to keep everything organized as your are assorting and planning each SKU of your collection,
- as well as a Visual Content Planner to help you outline your long-term marketing, events, and product placement strategies.
AKA: Merchandise Mix, Category Mix, Merchandise Hierarchy
Your product hierarchy is the series of departments, classes, and subclasses that you might make to organize and attribute your merchandise. It is critically important to organize your merchandise in product groups and subgroups for multiple reasons.
First, it allows you to analyze macro-level data about performance of your collection across various attributes, like color, silhouette, garment type, and more. This ability to review retail KPI results across product groups or collections enhances your data-analysis skills, and better informs your strategic decision-making.
Second, your product hierarchy is what determines your sitemap, and navigation menu, which helps your customers more easily navigate your online store and find exactly the products they’re interested in as quickly as possible, while also showing them other complementary or similar products.
A trend is defined as a general direction in which something is developing, proceeding, or changing. In the fashion/retail industry, there are two main types of trends to monitor:
- Internal Trends: trends that are present in your historical sales or inventory data that allow you to make predictions (or forecast) sales/demand for an upcoming season would be considered internal trends. An example of an internal trend could be that your blue products sell at a faster rate than orange products. That trend would inform you that you should invest more in blue merchandise and less in orange.
- Societal Trends: trends that develop and grow within society, or the larger market, are considered societal trends. Societal trends are external factors that are difficult to predict or foresee. Examples of societal trends would include the mass adoption of denim as a core fabric for pants, the invention of zippers which decreased the use of buttons on apparel, or the decline in the formality of fashion that has occurred over 150 years.
Visual merchandising is the process of creating visual presentations of merchandise (your products) — whether in a window display, landing page, or social media post — to capture the attention of current and potential customers, and hopefully, increase conversion rates.
Retail Operations Terms
3PL (Third Party Logistics)
A 3PL is a third party logistics company that can receive your goods, assemble products, package, ship, and more. Instead of maintaining your own warehouse and shipping, you can hire a 3PL to do it. The options vary from vendor to vendor. Check out this impressive list covering the “top 100 US and global 3PL companies.”
A bin location helps the warehouse to locate, pick, and pack merchandise for faster shipping.
When a business ships their product (or requires a customer to ship a product back to them) they use the services of a carrier. A carrier is typically a third party that handles the actual shipping of a product to and from anywhere. However, some retailers offer this service in house without the use of a third party. Common third-party carriers include: USPS, UPS, FedEx, DHL, etc.
The process by which a retailer has products shipped directly from a vendor or manufacturer, to the customer. Drop shipping is often confused with 3PL. To learn the differences, check out “Drop Shipping Versus 3PL” by Hollingsworth.
Inventory management is the process of organizing, analyzing, and managing inventory. Learn more about inventory management.
A kit is for a product that requires assembly. Imagine a customer purchases an item that uses interchangeable parts also used for multiple products. When a customer purchases a kit, they purchase it as a single SKU that then communicates to the retailers what parts and instructions to include in the packaging.
MVP (Minimum Viable Product)
In the worlds of software and product development, your minimum viable product, or MVP, is the sum of non-negotiable elements you are willing to accept on a project; things like features, qualities, attributes, etc. The purpose of preparing an MVP is to create a version of your product that allows a team to collect as many validated learnings with the least amount of effort possible.
Launching an MVP can be useful for a number of reasons, but some common examples include a brand wanting to release a new product as quickly as possible, testing a new idea before committing any major budget, or even to learn what products resonate with your customers.
Learn more about how to create an MVP here.
Customers love checking in on their order. Many retailers provide customers with a tracking link provided by the carrier as a method of order tracking. Instead, look for an app or build a page that allows you to sync this information on a page right on your website or app.
When a retailer places an order for goods from a vendor, manufacturer, or wholesaler, a purchase order (PO) is generated. The PO dictates things like price, quantities, discounts, etc, and are usually done on net terms. To learn more check out this definition by Shopify.
Shipping is the process by which a business sends goods to a customer after they have placed an order.
SKU (Stock Keeping Unit)
A stock keeping unit, generally referred to by the acronym “SKU”, is an internal barcode system unique to a specific retailer that holds valuable information about a product like price, size, color, description, manufacturer, etc.
UPC (Universal Product Code)
Universal product codes (UPCs) are an external product tracking barcode system. These barcodes are provided by the manufacturer and are unique to the product. Meaning, if the same product is sold across multiple brands the UPC will be the same no matter where you find it. To learn more read Shopify’s breakdown of the UPC.
A warehouse is defined as a large building where raw materials or manufactured goods may be stored before their export or distribution for sale. Many large retail corporations rely on warehouses and distribution centers (DCs) to house their inventory. However, a warehouse is not required in order to operate a retail business efficiently.
Independently owned startups or boutique brands often opt to go without warehousing entirely. Because inventory holding fees can be very expensive, if sales volume hasn’t yet reached six or seven figures, sophisticated warehousing may not be an option.
But, other solutions are available. Some brands may decide to build/rent their own private space, usually in the form of a storage building or office, while others may seek 3PL services to store and ship their inventory.
Retail Reporting Terms
ATV (Average Transaction Value)
AKA: Post-Mortem Analysis, Seasonal Performance Analysis, Retail Data Analysis, Hindsight Analysis
It is important to perform regular analysis of your sales and inventory results, as well as to perform a hindsight, or post-mortem analysis at the end of a month/season/year to understand the trends and consumer demands for your business across all of your designated retail KPIs (See Retail KPI meaning below).
Hindsight meaning: have you ever heard the saying ‘hindsight is 20/20?’ It basically means, if you would have known then what you know now, you would have done things differently. The same concept applies to your business. Using data analysis techniques, you will evaluate your past performance (hindsight – look into the past), and use that analysis to make more informed decisions about your future.
Cart abandonment is when a customer adds an item to their cart, but does not complete the purchase. Merchants follow this metric closely, and work hard to keep this rate down. The lower, the better.
Did you know that 44 different studies from 2012 – 2020 show on average nearly 70% of all online shopping carts are abandoned. The numbers are even higher when talking about mobile (86%) and tablet (81%). That is a lot of missed opportunities.
COGS (Cost of Goods Sold)
AKA: Cost, Unit Cost, Final Cost, Landed Cost
Cost of goods sold, commonly referred to as COGS, is the financial commitment required for you to produce &/or acquire goods from your suppliers. The unit COGS typically includes the sum of materials, construction, labor, and packaging if you’re having the products packaged by your vendor.
However, your unit COGS does not necessarily reflect your entire financial commitment (known as your Landed or Final Cost/COGS) in sourcing and/or selling a particular product. You may also need to account for packaging, gift-wrap, any special details like hand-written thank you notes for customer orders (see customer service meaning below), or shipping rates to/from vendors and customers.
Basically, the landed cost is your break-even point for a given product, so it’s important to know the final cost of a product before you set your markup prices. By tallying your landed COGS first, you have the opportunity to ensure that your selling prices truly reflect all your expenses (outside of marketing/ads) in getting your product into the hands of your customers.
Conversion rate is the percentage of traffic to your store or website that completes a desired action on one of your CTAs. Traditionally, this KPI has been used to determine what percent of your foot traffic turned into paying customers. However, you can track conversion rates for a variety of things, especially when selling online, like email/blog subscribers, email effectiveness, or even a social media post.
CLV (Customer Lifetime Value)
The lifetime value of a customer (commonly abbreviated as CLV, CLTV, or LTV), is a business metric that indicates the total amount of revenue a business can reasonably expect from a single customer throughout the entire business relationship.
It is crucial for small businesses to monitor and strategically grow their CLV. Doing so helps you make important decisions around your customer journey and customer acquisition efforts. To learn about ways to improve your CLV, check out this Shopify article.
Additionally, the odds of selling to an existing customer are much higher than the odds of selling to a brand new customer. Thus, spending time and resources to improve your CLV directly affects your revenue by reducing customer acquisition costs, and simultaneously boosting customer loyalty.
The art and science of predicting future retail sales targets and inventory needs. To get it right, you need to have a thorough understanding of past performance and current market trends.
KPI (Key Performance Indicator)
Key Performance Indicators, or KPIs, are metrics that help you measure, monitor, plan, control your business performance over time. Some commonly used KPI’s are:
- Retail Sales Revenue ($): The sum of retail revenue
- $ to LY: A percent that indicates how a retail business is doing relative to last year
- Unit Sales (U Sls): The total number of units sold
- Regular (“Reg”) Sales: The percent of total retail sales made by full price goods
- Markdown Sales: The percent of total retail sales made by markdown goods
- Blended Sales: The sum of both Reg Sales $ and Markdown Sales $
- Sell-through %: The percentage of units sold of an item relative to the total number of units owned or purchased
- Gross Margin $: (Retail Sales) – (COGS)
- Gross Margin % = (Total Revenue – Cost of Goods Sold)/Total Revenue x 100
Learn more using the KPI cheat sheet (coming soon).
Productivity is the measure of how productive a product is in the assortment. Usually reflected in terms of dollars.
AKA: Profit Margin, Gross Margin, Net Margin
Profit is the amount of money you make by selling products or services, after deducting your expenses to operate, acquire or make inventory, and acquire and manage your customers.
The sell-through rate (ST%) is the percentage of a unit buy, or available inventory, that has sold over a season or other specific period of time. The ST% is used to compare how various products in your collection have sold in comparison to other products in your current or previous collections.
For example, if you know that your average rate of sale for your business is 70% (meaning you usually sell about 70% of the inventory you buy before marking it down), then a new product that had a ST% of only 50% would be performing below average, or below expectations.
If a product is performing below expectations, this should be a cue that your customers have less demand for that product, so you either need to change the design, change your marketing, reduce your buys, reduce your price, or eliminate the product entirely from future collections.
This year/Last year (TY/LY)
This year/Last year (TY/LY) comparison is used to juxtapose the results of any retail KPI or metric this year compared to the previous year. For example, a CEO might ask, “what was our revenue TY/LY?” An acceptable answer to that question would be, “This year we did $1M in revenue, while last year we only did $.7M.”
In a retail KPI report template, you would have a column for TY and another column for LY so the two figures can be compared to one another as absolute values. To take your analysis even further, you would also want to perform a YoY percent-change calculation (see YOY meaning).
Weeks on Hand (WOH)
AKA: WOS (Weeks of Supply)
Weeks on hand (WOH) represents your current rate of sale. It tells you how many weeks it should take to completely sell out of a product. WOH is a great indicator of your realtime performance, and it provides you with an opportunity to course correct.
Are you selling an item too quickly? If so, consider increasing the price, buying more, or both. Are you selling an item too slowly? If so, consider a promotion to move the product.
YOY (Year over Year)
A year-over-year (YOY) calculation compares a metric from one period to the same period in the previous year. The YOY growth rate calculates the percentage change in that KPI over the past twelve months of selling. Comparing your results from one year to another is a great way to measure growth for two reasons.
First, it alleviates the need to account for seasonality, because you are comparing results from the same selling period the previous year. In contrast, by just looking at your percent growth since last month, or last quarter, you’re not comparing apples-to-apples, because traffic and sales vary throughout the year.
Second, YOY comparisons help you identify long-term trends, whereas comparing current results to the most recent month/quarter, you could miss key long-term learnings that would aid in your strategic decision-making.
B2B (business-to-business) is a business model of selling goods from one business to another business. Let’s use wholesale as an example. Levi’s sells their denim to other retailers, like Dillard’s, Macy’s, etc., so they can resell them to the end user: the customer.
B2C (business-to-consumer), commonly confused with D2C, is a business model where a company sells a third-party vendor’s products to their customers. Real-world examples include stores like Dillard’s, Macy’s, Walmart, etc. They buy their planned goods from third-party vendors, then turn around and sell them to their customers.
BFCM (Black Friday, Cyber Monday)
BFCM, also known as Black Friday/Cyber Monday, is an acronym used to describe the busiest holiday weekend of instore and online sales. Black Friday is the 4th Thursday/Friday of every November, known for door-buster deals and deep discounts in stores. Cyber Monday is the Monday immediately following Black Friday Weekend, and is mostly geared towards online shopping of electronics, but many other categories promote on Cyber Monday as well.
Black Friday follows the United States holiday of Thanksgiving, which is observed on the 4th Thursday of every November. This day is huge both for retailers, and consumers kicking off the holiday shopping season. Typically, shoppers will get up extra early (or never go to sleep) and wait in lines to get door-buster deals offered both by D2C and B2C retailers. This event peaks the morning of Black Friday, however, most retailers are offering promotions before and after Black Friday, with the event now spanning multiple days for many retailers. Want to know more, check out this overview by Investopedia.
B+M (Brick + Mortar)
A store is considered brick and mortar when it sells merchandise from a physical location, a retail store. Current data suggests B+M makes up for about 86% of total commerce. B+M’s contribution of total retail sales has dropped about 2% every year since 2000, and the trend doesn’t appear to be stopping anytime soon. Infact, there was a unique drop in B+M contribution from Q1 2020 – Q2 2022 (nearly 5%) as a result of the COVID-19 pandemic. Many retailers scrambled to get their ecommerce operations under control to serve the evermore socially distanced, homebound public.
A consumer is a shopper, or a potential buyer of products and/or services. Once they complete a purchase with you, they become a customer. While people are consumers, it is important to remember they are people first, and consumers second.
Customer Service (CS)
Customer service is defined as the support you offer to your customers that helps make their shopping experience easier and/or more enjoyable. Good customer service occurs at all stages, including before, during, and after they have made a purchase with you.
Examples of providing customer service include sharing product knowledge with customers, asking questions about their needs and preferences, facilitating their checkout process, and following up with them after purchases to thank them, ask for feedback, and/or invite them back to your shop to find something new or complementary. Learn more about good customer service here.
The Monday following Thanksgiving. Much like Black Friday, retailers offer special deals to their customers. As the name would imply, this event takes place online (think retail websites, and marketplaces).
Direct-to-consumer is the business model of selling your own products directly to your customers. See difference between D2C vs B2C here.
Inventory are the units of products owned by a retailer. Typically inventory is discussed in terms of volume or value. For example, the total number of units of an item you have on hand, or the total retail value of all the inventory you own.
Liquidation is the act of taking deep markdowns to incentivize customers to purchase and clear out inventory. Oftentimes, liquidation events drive little or no profit margin, but the point of a liquidation event is to clear out inventory that is unwanted or excess without taking a loss, like you would if you donated the goods or sold them below your landed cost.
Typically, in the retail industry, a liquidation event takes place when a company has inventory they need to get rid of in a hurry. Liquidation can be a useful strategy at the end of a season to make room for new incoming goods, or if they are moving to a new location/store/warehouse. On the less glamorous side, when a store is going out of business, a liquidation event can help clear out inventory before they shut their doors for good. In these cases, a liquidation specialist is usually hired to help get rid of the unwanted merchandise while maintaining as much profit as possible.
A convenient place where consumers go to find products from many retailers. As a retailer, marketplaces get your products in front of millions of people. But it is at the cost of fees to the platform, and way less control of your branding and business data. Marketplaces include farmer’s markets, malls, Amazon, eBay, Etsy, etc.
A merchant is an individual or entity who sells their goods and services to customers.
MSRP (Manufacturer’s Suggested Selling Price)
Manufacturer’s suggested retail price is the ticket price, set by the manufacturer, intended to cover the cost of producing a product and achieve a target gross margin percent.
An outlet store is a discount version of a brand’s retail store. Some retailers stock their outlet stores with special cost-engineered assortments made specifically for a lower price point, while others choose to send all of their out-of-season goods to their outlets to be sold at marked down prices.
AKA: Merchandise, Goods
A product is a sellable item designed for use by a consumer and/or business.
A popup retail store is a temporary store, often seen in a small footprint like a kiosk or other temporary structures, that is intended to generate in-person buzz around a brand or product. Sometimes a popup is intended to create brand awareness, while others are actually selling goods. Some popups can even be found in other complimentary retail stores.
Retail is a business operation where goods are marketed and sold to customers.
A subscription is defined as “the action of making or agreeing to make an advance payment” in order to receive regularly scheduled deliveries of a product or service. A good use-case for offering subscriptions would be to sell a product that customers keep coming back for. Subscriptions can be particularly convenient for home supplies, health supplements, and beauty products, as consumers regularly return to refill items they have run out of.
Retail Sales Terms
Some retailers sell in one place, while others sell in many. Each place a retailer sells their products is considered a channel. For example, a website, marketplace, and physical store are each their own channel. When a retailer uses more than one channel, it’s considered an omni-channel approach.
A return is the process by which a customer has chosen to give you back a product you sold them in exchange for all/some of their money back, or a replacement product. Returns can occur for any reason, and it’s not always a bad thing. Sometimes, a customer just ordered two sizes and is returning the size they don’t need. But, returns most often occur for a few primary reasons:
- if the customer feels the product did not meet their expectations
- the product(s) arrived defective or in damaged condition
When customers contact you inquiring about returns, it is important to stay calm, open, and understanding, and to always lead with kindness.
You’ve heard the saying “the customer is always right?”
No they are not; they are humans like everyone else. Regardless of how upset a customer may be, it is important to always maintain your professionalism, as your brand should always strive for a reputation of excellent customer service.
Wholesale is a B2B business model where one company sells goods to another for the purpose of resale. A great example is Levi’s. Not only can you buy their denim directly from their stores and ecommerce websites, but you can also find their denim in department stores around the world like Macy’s, Dillard’s, and Nordstrom.
In this example, Levi’s sells their denim and other merchandise at wholesale prices department stores (B2B wholesale) in their wholesale program, and then those department stores mark up the product and resell it to their customers (B2C).
Retail Technology Terms
API (Application Programming Interface)
An API is a software interface communication protocol – in other words, it’s a gateway for software applications to share information with each other. APIs can be private or public, but they are access points and permissions to specific sets of information.
The important thing to know about APIs as an ecommerce merchant, is that they have made integrations and automation possible for businesses of any size. Many software companies release public APIs to allow outside developers to build 3rd party solutions that can access certain information natively.
APIs are request-based. When information is needed – for example, monthly sales numbers from your Shopify store – your reporting system makes an ‘API call’ that, when answered, allows access to the requested information. This can be an effective method to automate data into your retail business reports, like your monthly sales forecast template or seasonal product line sheets.
If you’re not a developer, worry not. You likely won’t have to stress much about APIs, because developers and engineers around the world have done the work for you by creating applications with API connections already built in. If you are using a software that does not have a public API you need access to, you can ask them if they will create one for you, or work with a developer to come up with another solution.
Many of us think of applications (apps) as the convenient programs we download on our phones, tablets, and computers. In the business world, applications are similar, but more specialized, and they tend to cost money. There is not a convenient marketplace for business owners to shop around and download applications. But, there are some decent places to find reviews and do research. One place you could start is G2.
CMS (Content Management System)
A content management system, or CMS for short, is a place to create and manage your digital content. For example, this website is built using Wordpress.org, which acts as our CMS. If you are on Shopify, there is a good chance you use it as your CMS, unless you have more advanced needs. To learn more, check out this post by HubSpot.
CRM (Customer Relationship Management)
Customer relationship management, better known as a CRM, is software designed to help businesses manage their customer relationships. The CRM is where all your customer information lives, including details like: name, email, phone, address, notes, purchases, email preferences, etc.
CRMs come in many different flavors, shapes, and sizes. For example, we use ActiveCampaign not only as a customer database, but also for website forms, email marketing, marketing automation, pipeline management, and more.
For more options, check out G2’s top ranked CRM software list.
ERP (Enterprise Resource Planning)
An ERP is a single system to help you manage multiple areas of your business. Various systems can be integrated from: inventory, orders, payroll, and more. Large retailers traditionally opted for large, resource-heavy ERP systems in the past. Today, retailers are finding ways to create ‘virtual ERPs’ by connecting specialized systems together.
Connecting two different systems together. Typically, integrations happen between software systems that do not otherwise communicate with one another. Three ways to integrate apps together:
- Native integrations: The app you are using has a built in ability to connect and sync information with another app you use.
- Middleware integrations (iPaaS): Using a separate piece of software in between two different apps to facilitate the syncing of your data. These apps fall under the category iPaaS (integration platform as a service). Check out G2’s list of best iPaaS software.
- Custom integrations: If native and iPaaS integrations are not an option, consider doing it custom. Check with the app makers to get their recommendations.
IMS (Inventory Management System)
An inventory management system is used by a retailer to create a more efficient inventory management process. This system usually keeps track of things like location, quantities, and COGS of all your inventory.
Notifications are alerts sent to you or your audience based on certain triggers (ideally, these are automated). For example, automated emails sent to customers who abandon their carts, or order confirmation emails.
OMS (Order Management System)
A system to manage all of your orders, and things like sales, inventory, and fulfillment. If there is a way for your customers to acquire your goods, it needs to communicate with this system. Learn more here.
Payment processors are a way to collect money from customers who wish to pay for your goods and/or services with a credit card, debit card, EFT (electronic funds transfer), or check. The processor takes the money from the customer’s account and deposits it in a merchant’s account or an account managed by a third-party. Check out G2’s list of top payment processors.
A point of sale, better known as POS, is a system that businesses use to process transactions in person. Some examples include: Square, Shopify POS, and QuickBooks POS.
Shopping Cart Platform
AKA: Ecommerce Platform
A shopping cart platform is the software or application where an online retailer hosts their store. The primary function of an ecommerce platform is that it “facilitates the purchase of a product or service. It accepts the customer’s payment and organizes the distribution of that information to the merchant, payment processor and other parties.” The most popular examples of shopping cart platforms include Shopify, Square, BigCommerce, and WooCommerce. Check out G2’s top ranked shopping carts.
SaaS (Software as a Service)
Software as a service (SaaS) is commonly used to describe a third-party hosted software that is licensed to you, the consumer. For example, a CRM, or a hosted shopping cart platform. Odds are, most of your business is being run on some kind of SaaS. Want to learn more about the pros and cons, check out TechRadar’s post, “What is SaaS?”
Technology stack, or “tech stack” for short, refers to the list of all the different technologies/software/applications you use to run your business. Common examples of tools in a tech stack would include accounting software, shopping cart platform, order fulfillment software, email marketing solutions, and more.
WMS (Warehouse Management System)
Warehouse management systems are designed to improve the efficiency and visibility of your warehousing operations. A WMS can help with things like warehousing, distribution, and supply chain. Check out G2’s best list of warehouse management software solutions.