THE DEFINITIVE RETAIL DICTIONARY: 96 RETAIL TERMS
Below are 96 of the most important retail terms that every successful small business owner should be aware of. We tried to choose terms that ranged all facets of the retail industry without including frivolous items. So check out KORONA’s retail dictionary and let us know what you think!
1. Anchor Store
The largest, or one of the largest, retail stores in a complex. This store helps drive traffic the area as a whole and supports neighboring retailers. This is sometimes also referred to as a draw or key tenant.
2. Average Transaction Value
The ATV is exactly what it sounds like: the average amount each customer spends. Retailers benefit from training their staff how to sell and improving their store layout and POS marketing areas to raise the average transaction amount.
3. Balanced Tenancy
A retail area, like a mall or shopping center, which is carefully planned to have a complementary mix of stores. It’s the equivalent of a one-stop shop for malls.
Used by more tech-advanced retailers, beacons can send messages through bluetooth to nearby activated devices. This allows retailers to interact and communicate with shoppers on yet another level. For instance, one could send a customer a greeting message when they are within a certain distance of the store. They can also be used to measure store performance, such as foot traffic and average time spent in the store.
5. Big Box Store
As the name suggests, these are the retail giants. Big box stores are typically large warehouse-style stores that offer a wide variety of products. Walmart, Costco, Target, and Home Depot are all examples of this.
6. Big Data
This refers to the deepest level of shopping analytics currently available to retailers. This investigates in-store behavior, social info, demographics, and online action to help retailers customize the retail experience.
7. Buy Online Pickup in Store
Also referred to as Click & Collect, or, BOPIS, this is tool helps alleviate long lines, especially around the holidays. More and more consumers are using it to save time in the store as well, and it’s highly recommended that every retailer have both an online and in-person presence.
8. Brand Awareness
This measures the average consumer’s overall knowledge of a certain brand. Great branding becomes more imperative each year.
9. Brick and Mortar
This term has become more commonly used to distinguish online merchants from those with a physical location. Thought eCommerce continues to explode, most consumers still prefer shopping at a brick and mortar store.
10. Bundled Pricing
A type of promotional technique, bundled pricing groups various products together into a single discounted price. There are endless variations on how to structure this. It’s most useful to increase the average spend or to run through a certain product’s stock.
Not as gruesome as it typically means, retail cannibalization occurs when a retailer introduces a new product that ruins the sale of an existing one. You want to develop new products that fill a void or complement existing products, not replace them.
A secure way to store customer’s payment information, card-on-file technology speeds up the checkout process and rewards regular customers with a smoother experience. It can also easily integrate loyalty rewards into the system.
13. Cash Wrap
This is another term for the area around the point of sale system. Generally, it is recommended that you fill your cash wrap with impulse purchases and small, inexpensive items that a customer may have forgotten they needed.
This is a disputed charge from a customer. Chargebacks can be a nuisance but can be almost wholly avoided with a great POS system and an up-to-date EMV or contactless credit card machine. Remember, without this, any fraudulent transactions that are charged back must be reconciled by you, the retailer.
The process of creating a more personalized shopping experience, retailers are using more in-depth data and analytics to increase sales. The technology used behind this, like big data, is still state-of-the-art and expensive, but as with any technology, will soon become more affordable for small and medium-sized retailers.
16. Cloud POS
This is a web-based point of sale that runs through the internet rather than a few computers on site. Cloud technology makes payment processing and inventory much more reliable and simpler.
17. Consignment Merchandise
Consignment shops don’t own the products that they sell. Rather, individual consignors (the owner of the product) uses the consignee’s (owner of the retail space) shop to sell their goods. The consignee will usually receive a percentage of each sale.
18. Consumer Packaged Goods
These are usually inexpensive, perishable goods that have a fast turnover time. Examples include pre-packaged foods, drinks, and other edible, non-durable items. The market for CPGs is highly saturated and extremely competitive due to the constant demand.
19. Contactless Payment
A safer, more modern form of payment by card, contactless payments use dynamic processing technology to protect the financial information of the consumer. Every retailer should accept all major forms of contactless payment. It’s expected that the majority of U.S. consumers will use this form of payment by 2020. Click here for a full guide to contactless and mobile payments.
A term used to describe the finalizing of a sale. This usually goes in conjunction with “leads.” A lead is a prospective sale, while the conversion is the actual sale.
A business owned by a group of members instead of investors or stockholders. Co-ops can come in a variety of forms and are feasible in a variety of industries from retail to housing to health care.
A strategy that groups different, unrelated products together to encourage the sale of each or several of them together. It can feature products that more naturally pair or can get creative and have products that are more uniquely combined.
23. Customer Resource Management
CRM is a system that can be built into your POS to help organize and manage your communication and relationship with loyal customers. A powerful POS CRM software stores basic information, allowing your cashiers to know more about your customers, and helps personalize rewards and promotions.
24. Depth of Assortment
Retailers must determine the number of styles and product variations they will have in stock. It depends on how much capital and inventory space you have. It’s important to measure historical sales in order to determine the optimal depth of assortment levels.
25. Destination Retailer
Destination shops are those that consumers seek out specifically due to its selection, price, style, etc., often regardless of its location.
26. Dead Areas/Stock
Both dead areas and dead stock inhibit profitability. Dead areas of a retail store mean that whatever is stocked there sells poorly. If this is the case, it’s important to reevaluate your layout and change displays and shelving. Deadstock refers to a product that doesn’t sell no matter where it’s located. This takes up important space and should be run out of stock and replaced.
27. Drop Shipping
This form or logistics and shipping transfers orders from the retailer to the distributor upon a purchase. The retailer might have a showroom and manage the marketing and sales, but doesn’t have any actual stock. Though Amazon is fulfilling more and more orders internally, it still widely uses drop shipping.
28. Dynamic Clustering
Similar to segmented email campaigns, this technique for structuring sales is useful for retailers that have a varying customer base. It allows you to cater your products, pricing, marketing, and inventory to certain locations, thereby appealing to a wider audience.
29. Electronic Article Surveillance (EAS)
Similar to credit card processing, retail fraud prevention has to continue to evolve to face new challenges. One common technique uses tags and labels attached directly to the products. These devices will trigger alarms if not removed by a cashier. The technology is getting more subtle and cheaper, allowing more retailers to take advantage.
Standing for Europay, Mastercard, Visa, chipped credit cards offer a more secure way for consumers to pay. It is not required that every retailer in the U.S. offer this form of payment, but it is certainly recommended. Any fraudulent transaction run as a swipe instead of a chip must be reimbursed by the retailer instead of the bank. Here’s a great guide to EMV payments.
31. Endless Aisle
An endless aisle allows customers to look through the whole catalog of products electronically or in a booklet rather than require them to walk around a retail space. This highlights certain products that might otherwise have gone unnoticed in a normal shopping experience.
Perhaps more simply known as eCommerce, e-tailing just refers to the sale of goods and through the internet. More and more brick and mortar retailers are adding an eCommerce side of their operations. It requires careful website planning and a great eCommerce payment platform.
An inventory management system, FIFO stands for first-in-first-out. This means that whichever product in stock that was delivered first must be the first one sold. This system helps prevent waste and spoilage for perishable products. Here is a breakdown of the 4 most common retail costing methods.
34. Flash Sale
This type of sale is a limited time offer and typically features at least some heavily discounted products It’s a great way to start a buzz around your brand and also to create a sense of urgency. Black Friday and Cyber Monday are simply giant flash sales. They encourage larger purchases and more impulse, extravagant buys.
Footfall is a measure of foot traffic in a retail store. An accurate count of this coupled with over performance indicators can contribute vital metrics, such as conversion rates and average transaction values.
Franchising is a way of a successful business to expand by selling the rights to its name, brand, product, and operations to an independent party. In return, the owner of the initial franchise receives an upfront franchise fee to cover all initial overhead costs and residual royalties based on the store’s retail sales. Check out our franchise guide here.
The franchisor is the owner of the franchise, while the franchisee is the purchaser or one or more locations of the franchise.
38. Gross Margin
A business’s margin subtracts the cost of products from the overall sales revenue. That total is then divided by sales revenue to give a percentage. The larger the profits are, the higher percentage this will be.
These refer to the actual physical feel of goods. Hardlines are less personal and often made of metal. Electronics, vehicles, appliances, etc. are examples of hardlines. Softlines are soft feeling and often can be worn or edible.
40. High-Speed Retail
Consumers have a lot of expectations about their shopping experiences. One of the most important is convenience. This means creating a seamless and quick retail checkout experience. The most successful retailers are all thinking about ways to create a high-speed experience.
41. Impulse Purchase
Impulse purchases are made solely because the item is in front of the consumer’s face. There was no plan beforehand to make the purchase, and there probably won’t be in the future. The most common spot for impulse products is the area around your POS, or, for eCommerce retailers, on the checkout or receipt pages.
42. Integrated Supply Chain
Consolidating processes into a single platform saves time. The supply chain is no exception. Managing all relationships with suppliers and distributors through a centralized system is a great way to save time.
43. Inventory Management
Inventory management software is now so much more than just counting your products. Not only can the counting be done in the fraction of the time through scanning and cloud-based systems, but, your inventory management can also provide actionable advice on your ordering, shelf placement, pricing, and par levels.
44. Isolated Store
This type of retailer has a freestanding location, adjacent to no other stores. It typically faces less competition, cheaper rent, and more visibility. It might, however, be inconvenient to get to and offer no variety for shoppers who visit.
45. Key Performance Indicators
KPIs help retail stores measure their overall success. Different metrics are important to give a broad picture. Some of the most important KPIs include gross margin, sell-through rate, year-over-year sales, conversion rates, stock turnover, and product returns.
46. Keystone Pricing
This pricing model makes it simple for retailers. It simply states that merchandise will be marked up double the wholesale cost of the product. The can also be looked at as a 50% initial markup, or a 50% gross margin on the product. Most goods cannot be priced at keystone rates, especially if you run a store that requires quick product turnover.
Layaway is a sort of credit purchasing method. The customer places a deposit on a product that will be picked up later and paid for in full at that time. The retailer may not give the consumer the product prior to the balance being paid, but they may guarantee holding the product for a set amount of time.
48. Leader Pricing
This common strategy is a way to lure new customers into a retail store and familiarize them with a brand. Choose a product that you’d like to offer at lower margins or even at a loss. This gets people introduced to a product and brand and hopefully results in them being a long-term customer. This product is also referred to as the loss leader.
The opposite of FIFO, last in, first out, is more commonly used for accounting purposes. Here, a business records the most recently ordered products as the first sold. This helps stabilize financial reporting for retailers in an industry where prices change often. If prices were stable, there would be no difference between the two inventory costing methods.
50. Loss Prevention
Loss prevention can be a variety of techniques retailers use to combat lost product, whether it’s due to theft, spoilage, or inventory mistakes. Theft alone accounted for nearly $50 billion in lost revenue in 2017, so it’s important for all retailers.
At its broadest level, merchandising is anything that helps promote the sale of a product. It could be in-store marketing, advertising, pricing, etc.
52. Market Penetration
This metric measures the total amount of sales of a product for a particular retailer against the total possible market for the product. This might also be referred to as a market share. If your product has large market penetration, you might be able to offer the product at smaller margins, for instance. Knowing your market penetration can also help determine advertising budgets or target demographics.
53. Market Research
Research into a market is simply the study of what consumers want and need. This can come in many different forms depending on what type of good a retailer is selling.
54. Mass Customization
This refers to the production of goods that can be specifically catered to a person or group, but also still mass produced. Domino’s Pizza, for instance, has gone even further, and even just given consumers the illusion of mass customization. We’ve always been able to choose what kind of pizza you would like, but Domino’s makes the ordering experience much more personalized. Other companies, like Nike, have allowed consumers to design their own shoes.
55. Mobile Payments
Mobile payments are quickly becoming the payment form of the future, already replacing a lot of cash, credit card, and check transactions. It’s expected that the majority of U.S. consumers will use mobile payments by 2020. Retailers should get POS systems compatible with mobile payments as soon as possible.
56. Model Stock Plan
The idea behind a model stock plan is to organize your inventory with maximum and minimum levels for each product. In doing so, you eliminate overstocking and ensure that you always have an adequate amount on hand to sell.
57. Monthly Sales Index
This is a simple way of measuring sales from one month against the average. Divide sales from one month and the average sales. Multiply by 100. A number greater than 100 indicates growth while a number less than 100 means there has been decline. This is just one of many KPIs that a retail business can use.
58. Near-Field Communication
More commonly referred to as NFC, this radio frequency technology is used to facilitate secure communication for contactless payments. The credit card machine is only capable of communicating with one device at a time. And the communication uses dynamic banking numbers, making the theft of the data worthless.
59. Net Profit
The net profit is sometimes called the bottom line. This is the amount of money earned after all expenses are accounted for. The gross profit is the total sales made prior to any expenses being taken out.
60. Never-Out List
A marketing term, a never-out list contains the retailer’s best selling products. The model stock plan is in place to ensure that no products are out of stock. This list is an additional buffer for those products that the retailer cannot afford to be off the shelves.
61. Niche Retailing
A niche retailer caters to a very specific audience, specializing in just one product, or a small group of closely related products. This allows them to be more creative and targeted with advertising, design, and marketing. Unlike big box stores or more broad retailers, niche retailers don’t benefit from reaching a large audience. TOMS and LuluLemon are examples of this type of retail store.
62. One-Stop Shop
As the name suggests, one-stop shops offer a wide variety of products in hopes of attracting more shoppers. This is the exact opposite approach from niche retailing.
63. Off-Price Chain
These retailers sell higher-end products at large discounts. They are able to do so by buying straight from the manufacturer, often getting off-season items, products with slight imperfections, or overstocked inventory. Sometimes off-price chains also sell second-hand goods.
64. Omni-Channel Retail
This is the wave of the retail future. Omni-channel retailing involves reaching your customers and selling on multiple avenues. Typically, this includes a physical/brick and mortar location, an online shop, mobile optimization, and perhaps even phone and catalog ordering. It also involves marketing through email, social media, and apps. Furthermore, the experience should be one that gives the customer a seamless journey through each channel.
65. Order Lead Time
Sometimes just called lead time, this is the time between an order being initiated from a retailer to a supplier and the product actually arriving. Depending on the industry, order lead time can range from a day to months.
66. PCI Compliance
This is the Payment Card Industry Data Security Standard that every retailer must follow if cards are accepted. The PCI DSS is in place to protect banks and cardholders. Make sure that your credit card processing company is PCI compliant.
67. Perceived Risk/Reward
This measures a consumer’s feeling about a product. Retailers must try to lower the perceived risk and raise the perceived reward. This can be accomplished in a number of ways, including through salespeople, peer reviews, authoritative reviews, guarantees, warranties, to name a few.
68. Perpetual Inventory
Done through a retail point of sale system, a perpetual inventory count updates your product levels automatically and immediately upon each sale. This saves time and improves accuracy, keeping a retail store running more smoothly.
This representation allows retailers to analyze the space to optimize store layout and merchandising. Product placement, aisle lengths, displays, POS marketing, and other factors are scrutinized in order to improve the average customer spend and overall sales.
70. Point of Sale System
A great retail POS system is essential for all shop owners. At the most basic level, a point of sale completes each the exchange of a product for payment. It comes with a credit card reader and receipt printer. There is also a wide range of software available with a POS. Points of sale can offer retail management, too, from inventory and order automation to customer data and accounting.
71. Point of Purchase Display
This is a form of merchandising found near or at the point of sale and checkout area. It’s meant to attract last-minute purchases that raise the average transaction value. Typically, these feature promotions, bundled deals, impulse buys and easily forgotten everyday items. Managing the marketing around your POS can have a big impact on a bottom line.
72. Pop-Up Shop
This type of retail attracts attention with its limited availability. Pop-up shops are short-lived and or sporadically occurring. They might be found in a mall, festival, fair, or park. Pop-ups have become increasingly popular for small niche retailers and restaurants/QSRs.
73. Predatory Pricing
Many of the big box retailers have been accused of predatory pricing at some point. The idea behind it is that large retail chains can afford to undercut their competition with prices so low that smaller retailers are left helpless. A smaller retail store must either lower their prices and take a loss or lose the majority of their business to the larger chains. The practice is now more widely regulated.
74. Prestige Pricing
One of many pricing strategies, prestige pricing is an artificially high price on a product to give it a sense of higher quality. It can also be used as a decoy to make similar products that are priced much more cheaply seem like a bargain.
75. Price Look-Up
4 or 5 digit PLU codes are attached to each product in order to provide a name and brief description. This ensures that the sale is being recorded correctly in the inventory system, keeping ordering and accounting efficient and organized.
76. Product Depth/Breadth
Larger retailers usually reach a deeper product depth and larger breadth. The depth refers to the number of products within a single line, while the breadth refers to the number of lines that are owned or carried by a retail store.
77. Product Life Cycle
A product’s life cycle refers to the time from when the product was an idea in development until it’s taken off the shelves. This length of this cycle can vary greatly. Retailers always try to extend the length of their product life cycles through marketing, branding, and promotions. It’s important to pay attention to trends with product lines to better determine overall performance.
78. Psychological Pricing
Another common pricing strategy, this attempts to trick the consumer into identifying something as being cheaper than it actually is. Psychologists have long concluded that the average person gives higher priority to the first number in a price, leading most retailers to price items and $1.99 instead of $2.00, for instance. Another common theory maintains that the average consumer is more attracted to odd priced items than even.
This just means the amount a retailer has in stock. Many retailers also refer to quantity-on-order, which means the amount of a product that is currently an open order with a supplier.
80. Radio Frequency Identification
RFID is a form of communication between devices that are used to complete the secure transfer of banking data for contactless payments. RFID technology is also used in the products themselves, often as an anti-theft device.
81. Relationship Retailing
Relationship retailers seek to build long-term or even lifetime relationships with their customer base. This can be done through loyalty programs, rewards, and excellent customer service.
82. Return on Investment
An ROI is the amount of money returned to the retailer after an investment is made. This can refer to the money spent and earned on products themselves, but it can also be applied to many other areas of retailing: email marketing, product photo shoots, store renovation, eCommerce platform, or many others.
83. Routine Decision Making
People make hundreds of routine decisions each day without even thinking about them. Retailers often try to offer and market products that tap into these easy sales.
84. Sales Forecasting
A sales forecast estimates the future performance of a product or group of products. Its accuracy is important so that retailers can plan business operations, workforce, and cash flow each year.
Showrooming is a recent trend that stems from the rise of eCommerce. More and more consumers will shop for a product at a physical location only to buy the same thing online at a cheaper price. Consumers often like to see the product in person prior to committing to a purchase. Price comparison apps and online price matching can turn brick and mortar stores in no more than showrooms.
Shrinkage refers to any loss of goods for a retailer. This can have a variety of causes, including shoplifting, employee theft, supplier mistakes/fraud, wasted product, damaged goods, cashier errors, or administrative mistakes. It’s important to account for shrinkage in order to maintain an accurate inventory.
87. Social Commerce
Social commerce uses social networks to facilitate eCommerce. Some social media platforms sell products through the website itself. Other social commerce sites encourage purchases through product reviews.
Standardization is used by retailers who require a perfectly consistent product each time it is purchased. It uses a series of checks and balances to ensure a uniform standard for each item sold.
89. Stock Keeping Unit
Similar to a PLU, an SKU is just exclusively for inventory purposes. Each product is assigned a unique code that can be used to accelerate inventory counting or quickly identify a product.
90. Stock Turnover
Turnover of any inventory stock is an important unit of measurement for retail stores. Knowing how quickly something sells helps optimize ordering and inventory par levels.
This is a synonym for niche retailing. In this scenario, everything a retailer does is catered to a specific tribe or group of people.
92. Triple Net Lease
In a triple net lease, the retailer is responsible for all building utilities, insurance premiums, and repair issues. The rent is typically much cheaper than standard retail rent agreements.
93. Unified Brand
This goes hand in hand with the omni-channel experience. If you offer products on multiple platforms, it’s important to maintain a unified brand and experience through each of them. This way, your customers feel no different shopping on your website, on mobile, or in person.
94. Units Per Transaction
Another retail KPI, units per transaction measurements help determine where you can improve your store layout, pricing, or employee training. Encouraging more units per transaction will boost retail sales.
The exact opposite of showrooming, webrooming is when a customer shops online for a product and then leaves to purchase it at a brick and mortar store. Webrooming is facilitated by image-based sites like Pinterest and Instagram. It makes browsing much each. The trends of webrooming and showrooming are great examples of why creating an omni-channel experience is so important.
Many distributors and suppliers practice wholesaling. They sell products to another business rather than to a customer. Because these products are often bought in bulk, sometimes raw, and come with basic or no packaging, the prices are much cheaper, allowing retailers to sell individual products at a premium and make a profit.
Your Retail Dictionary and KORONA
Phew, that was a lot of retail terminology. Many of these, though, are important to keep in mind as you’re trying to grow your business. We have blogs on a lot of these topics if you want a more in-depth look at any of them in particular. And let us know if you would like us to write any more on a specific topic. We started to blog to help retailers learn and grow so feedback is always great. And if you’re looking for a new POS system, click the link below to check out KORONA!