Retail Lingo: 25 Terms Every Brand And Retailer Needs To Know To Navigate The Modern Sales and Service Industry.
Are you up on the latest retail terminology? If not, this post will help broaden your retailing vocabulary.
Every industry has its favorite buzzwords and phrases; however, few boast a list of terms quite as expansive as the retail industry. From merchandising and marketing to product stock and inventory to customer service and sales revenue, retailing enjoys a language all its own. More importantly, the retail dictionary is continually expanding, adding new terms and phrases as advancements like big data and omnichannel marketing play more significant roles in the sale of goods and the ways retailers engage customers in a high-speed retail world.
So are you ready for a quick lesson in retail vocabulary? What follows are a number of retail terms and phrases that we’re sure will help expand your personal retail dictionary and give you a better idea of the ways shopping, merchandising, marketing, the retail store, and retail sales are continuing to evolve. We’ve narrowed it down to 25 key terms with, perhaps, a few bonuses thrown in for good measure. Here we go.
Retail Terminology For Modern Retailers
- The Anchor Store
An anchor store is the major retail draw in a large mall or any collection of retailers. You’ve certainly been to a mall or shopping center where a core department store, and, perhaps, a big box store seem to hold court over the hundreds of small business retailers that also make up the complex. However, the strategy of an anchor store is not just to dominate, it’s to attract more customers to the venue, thus increasing foot traffic so that all the retailers benefit. If you’re a small business or medium-sized retailer, you most definitely appreciate the group of people who discover your store simply because they came to shop one of the anchor tenants or big box stores. It’s like free marketing you receive simply by sharing a location with a major retailer.
- Augmented Reality (AR)
Like we stated earlier, retail is advancing at a breakneck pace and technology is playing a tremendous role in shaping its future, particularly among brick and mortar retailers.
Augmented Reality (AR) refers to the ways retailers use virtual tools to enhance the shopping experience and increase sales. Augmented reality comes in a number of different forms. For example, customers might scan a QR Code to access livestreaming videos or detailed 3D demonstrations of a product or products. Augmented reality can also be found in the form of apps that allow customers to see in-store deals simply by pointing their phones in a certain direction or even at a featured product or products.
Retailers are using Augmented Reality to combine the “wow” factor that technology brings to shopping with the tradition of selling in a brick and mortar environment. It’s a combination that makes sense for today’s tech savvy customer.
- Average Transaction Size
Average Transaction Size, or ATS, is the average amount of dollars spent by a store customer during a transaction or purchase. The formula is relatively simple: divide the gross dollar value of sales by the number of transactions that take place during a specified period of time. This is an easy way for a retailer to measure whether or not the size of each sale is growing, declining, or remaining static. Ideally, the goal of any retailer would be gradually increasing the Average Transaction Size over time. However, even if this isn’t the case, determining the average size of each sale can help retailers make those critical adjustments to their sales and marketing strategies that can lead to greater success down the road.
- Big Data
This refers to the new wave of digital data capture technology out there that is transforming the way retailers understand their business operations, store conditions, customer behaviors, and more.
Big Data goes way behind the retail basics for areas like total sales, inventory, marketing, and pricing. It uses advanced digital technology to provide real-time insights that give retailers visibility into their businesses like never before. We’re talking real-time intelligence across the entire supply chain and product lifecycle; across in-store engagement, point of sale programs, and online selling; across visual merchandising and pricing strategies; across distribution and inventory management; across entire regions and down to each individual store.
Take Mobile Insight, for example. The software and digital platforms they’ve developed give brands and retailers instant insights into their retail operations, making it easy to see, shift and improve sales strategies with confidence because every move is based on hard data and real-time intelligence. Some of the insights this data provides include:
- Merchandising compliance (are products properly displayed and priced)
- Sales by region, store, product or any other KPI
- Real-time inventory and stock management
- Store, product and shelf appearance
- Customer data captured at point of purchase (emails, phones, addresses)
- Online and omnichannel sales (how, when and where shoppers like to buy)
- Social media engagement (how retailers can leverage social media to connect)
Today’s consumer is looking for a convenient and personalized shopping experience and new advancements in data and analytics technologies are helping retailers understand just how effectively they’re engaging and connecting with these shoppers.
- Brick and Click
Brick and click refers to how effectively a retailer unites its brick and mortar stores with its online shopping experiences. This omnichannel retailing strategy gives the customer added control over how and when the buy is made, e.g. a shopper can browse online before visiting a store to make the purchase whenever its convenient. Or, items purchased online can be returned or exchanged at a physical store location.
One of the most common brick and click methods customers have adopted is the “click and collect” purchase, often referred to as BOPIS (buy online and pick up in store). Just like the name describes, the customer makes the buy online and picks up the product or products at a brick and mortar store location.
- Cross Merchandising
Cross merchandising refers to the way retailers will pair products from different categories in an effort to increase the likelihood a consumer will make an impulse purchase. Cross merchandising is particularly popular among grocery stores and supermarket chains. Have you ever noticed those holiday endcaps that feature all the different goods necessary for the perfect holiday dinner? That’s because the retailer knows you’re likely to spot an item you either forgot about or didn’t know you wanted to purchase in the first place. Ever notice how the wine section is often close to the gourmet cheeses? Or the peanut butter and jelly share space on the bread aisle? These are all good examples of cross merchandising.
- Contactless Payments
Due to the COVID-19 Pandemic, contactless payments have grown in popularity. Essentially, this refers to any form of payment that can be made without requiring the consumer to touch either a salesperson or payment terminal. This is done through a technology called Near Field Communication (NFC) and includes forms of payment like smartphones and smart credit cards equipped with NFC technology that allow customers to simply wave their card or device over the payment system to complete the transaction.
- Dead Stock
Not every retail term that made our list is a positive one and dead stock, also called dead inventory, is anything but a good thing. Dead stock refers to those goods that have been sitting around store shelves far too long. They’re not selling, and it could be for a number of reasons – the price is too high, the time of year is wrong, or, it may be that consumers simply don’t like the product all that much.
Inventory that doesn’t move is a very heavy and costly weight for a retailer to bear. Sometimes a flash sale or other limited time pricing can spark a little short-term demand among consumers and help sell some of that dead stock.
However, the best solution for dead stock is to avoid it altogether. That’s done by making sure you understand what customers want and are meticulous about managing inventory and stock turnover. Know what items you need to keep in stock, how much quantity on hand you need, and how often you need to replenish that inventory. Identifying the right amount of product to stock is a fine line. You never want to run out of goods that are in high-demand, however, you also don’t want to end up carrying goods that are stuck on your shelves and costing you time, space and money.
- Drop Shipping
Drop shipping is an agreement between a manufacturer and a retailer that prevents the retailer from having to carry any product inventory. With a drop shipping sales model, a retailer only places an order to the manufacturer after it has received an order from a customer. The brand or manufacturer then fulfills the order by “drop shipping“ the goods directly to the customer.
- EVM
EVM stands for Europay® Mastercard® and Visa® and it refers to the recent chip technology that has made purchasing with credit cards far more secure.
Prior to EVM, credit cards were read at retail stores using a magnetic strip. It worked just fine until fraudsters began finding ways to compromise them. Cards that use magnetic strips store a great deal of proprietary customer data on them, which is highly susceptible to hackers who are able create counterfeit cards and set off on their own shopping sprees.
EVM cards, on the other hand, create a unique code for every transaction. So, on the off chance a hacker is able to compromise the card and obtain the data code from a recent transaction, that data would be invalid upon the next transaction and any counterfeit card would be rejected at the point of sale.
- The Endless Aisle
Here’s one more way retailers are integrating digital solutions into their brick and mortar stores. The Endless Aisle refers to a new method retailers are using to showcase their entire range of product offerings using digital tools like smartphones and mobile devices.
Think of it as both an inventory solution and a customer engagement tool that is particularly advantageous for retailers selling a large volume of goods. Now, instead of being obliged to stock every single item and SKU, retailers can invite customers to shop their entire inventory using these digital tools.
Customers can purchase in the store and if the retailer doesn’t have the item in stock, it is shipped to the customer ASAP.
- Flash Sales
Flash Sales are special limited time events during which retailers dramatically reduce the prices for their products. We’re talking bargains that often exceed 50% off the retail price. These discounts are so steep that retailers aren’t about to keep them around for long. Flash sales might last for a day or two, or they might be active for just a few hours. Shoppers have to act in a “flash” or miss out on the incredible savings.
Flash sales are often announced online, usually over a retailer’s social media channels, without any sort of lead time or advanced notice to the consumer. However, some companies, do choose to provide a little notice to their customers, particularly those selling niche products and services.
- Gross Margin
Gross Margin, also called gross profit, is defined as the difference between how much an item costs retailers and how much they sell it for to buyers. In other words, if you’re a retailer, it’s the amount of profit you take home at the end of the sale. Calculating the Gross Margin means taking into account all the expenses that went into producing or procuring that product or service and might include things like manufacturing costs, distribution costs, marketing, etc.
- High Speed Retail
We live in a world of instant gratification and retail is no exception. High speed retail refers to any number of methods by which purchasing goods has gone into hyper speed. Think drive-thru convenience stores, pop up retail locations, food trucks that bring lunch to a parking lot near you, even those flash sales we just discussed can be considered a product of high speed retail.
One of the technological advancements that has made high speed retail, so commonplace is the mobile point of sale system (POS system). Using smartphones and tablets, pos systems operate over the cloud and can instantly process mobile payments, email the customer a digital receipt, and update product stock and inventory – all in real-time using any mobile device.
The ability to process mobile payments from just about any location at any time has given rise to a faster, more fluid way of selling and more and more retailers are capitalizing on it.
- The Internet of Things (IoT)
Digital and data technology strikes again! The Internet of Things refers to the linking of different products using web connectivity. For example, these days smartphones can start the car, turn on an entertainment system, control home thermostats and lighting, and so much more.
So, how does linking items equate to shopping? For starters, consumers are now looking for merchandise that is web-enabled, even when shopping for things like automobiles and other items that traditionally were not. Plus, savvy brands and retailers are using connected devices to communicate with shoppers as they browse through stores – sending them customized offers and marketing promotions tailored to their specific preferences and needs.
- Keystone Pricing
Keystone Pricing is a very specific method of setting the price for merchandise. Goods are sold for exactly double the wholesale price, which is both easy for retailers to manage and provides plenty of wiggle room for them to see a reasonable profit margin. Keystone Pricing allows retailers to cover both their operating costs and the wholesale price they pay for goods, and still enjoy a good bottom-line number after the sale.
- Layaway/lay-by
This retail term refers to an agreement between the retailer and the customer whereby the retailer holds a specific item until the customer has paid it off in a specified number of installments. There’s no interest attached to a layaway item; however, the consumer cannot take home the item until it is paid for in full.
Layaway/lay-by programs benefit both the buyer and the retailer. The buyer is able to afford the desired item thanks to the no interest payments. The retailer wins over another satisfied customer with very little risk attached as the item remains in the store until it is paid for in full.
- Loss Leader
This a retail strategy that tends to frustrate, if not infuriate, many consumers. A Loss Leader is a single item, or, in some cases, just a few items, that are sold at such giant discounts the retailer actually takes a loss on each sale.
From the retailer’s perspective, the entire goal is to bring a large number of new customers into the store. Here’s the catch. There’s only one or two loss leaders on sale during any given promotion, which means it’s first-come, first-served and anyone arriving after the loss leader is sold is simply out of luck. In other words, there might be a 50” plasma television on sale for 60% off – but there’s only one. If someone beats you to it, then you’re paying full price for that very same plasma television.
The rationale behind a loss leader is that once in the store, customers who miss out on the sale item will decide to make other purchases, which do bring the retailer significant profit.
- Mass Customization
Mass Customization refers to a brand or manufacturer’s ability to cater to the personal preferences of each individual customer, while also scaling production costs through the efficiencies of mass production.
In a piece featured in the Harvard Business Review entitled Beyond Mass Customization, B. Joseph Pine II warns businesses that it is imperative to discover the multiple markets within each customer. He goes on to talk about modularizing capabilities by looking at product offerings and separating them into modular elements much like LEGO bricks. “What can you build with LEGO bricks?” he asks. Pine then follows with the answer, “Anything you want!”
Thanks to the large number of different sizes, shapes and colors that fit together with a single and simple linking system, people are free to create what they desire.
Mass Customization is a way for brands and retailers to involve consumers in creating their own, personalized experiences and products in ways that don’t break the production bank.
Shoe companies, like Vans, are a great example of mass customization in action. On the Vans website, customers can go to the “custom shop” and create their own pair of shoes, selecting materials, colors, graphics, soles, laces, and more. When they’re finished designing, customers simply go through the normal online checkout process and their custom shoes are shipped directly to them.
- Mystery Shopping
Mystery shopping is a method of gauging store and sales staff performance from a customer perspective. A mystery shopper is a highly trained expert who enters a store unbeknown to any of the managers or employees and acts just like any other customer. However, this consumer is trained to engage salespeople, ask questions about products or services, sometimes even log a serious compliant in order to see how store personnel react.
Afterwards, the mystery shopper provides detailed reports to the retailer describing their experience while shopping the store. Were the salespeople friendly? Were they knowledgeable? Did they handle questions and concerns in a professional manner? Did they provide great customer service or not?
Mystery shopping might sound a little bit sneaky, but it is an invaluable way for retailers to understand the customer journey from a customer’s point of view, which enables them to continually improve the in-store experience.
- Niche Retailing
A niche retailer refers to a company that sells goods or services exclusively to a specific market segment. This can be a large audience or a very limited one, but regardless, these customers are looking for highly specialized items or, at the very least, a number of items for a highly specialized purpose. For example, a wine and cheese shop might offer a very limited selection of high-end wines and cheeses for its discerning customers. However, your local Pet Supermarket, is also a niche retailer that just happens to cater to a wider audience of pet owners. One advantage of niche retailing is the ability to focus marketing and sales strategies on a specific audience who shared common interests. It’s a lot harder to understand the wants and needs of customers when you’re selling a broad range of products than it is when your hyper focused on a narrow group of customers.
- Omnichannel Retailing
Omnichannel selling has become essential to brands and retailers looking to connect with today’s consumer. As you might infer from the name, omnichannel retailing refers to a company’s ability to market and sell its goods and services across a number of retail platforms: online, in stores, at events, using mobile devices and social commerce channels, via catalogs and other sales vehicles.
However, omnichannel retailing isn’t just about making goods and services available over multiple sales channels. It’s about linking all your sales channels to provide the customer with a seamless and personal shopping journey. In fact, an effective omnichannel strategy usually relies on solid market research and customer data in order to understand how customers move from one sales channel to another. Then, the brand or retailer is able to provide a journey built around the customer’s needs and shopping preferences.
For instance, a retailer might integrate a smartphone app into its marketing and promotions program to provide customers with instant access to downloadable coupons redeemable in stores on a new product. They might up their relationship retailing efforts by creating customer loyalty programs powered by social media channels. Omnichannel marketing also includes things like BOPIS programs (buy online pickup in store), home delivery options with online purchases, in-store returns for online purchases and other channels that allow customers to control the buying experience.
- Prestige Pricing
This pricing strategy is also a marketing strategy. With prestige pricing, a brand or retail business deliberately sets the price of its products extremely high in order to give them an air of exclusivity and luxury. In other words, this pricing structure is all about appealing to the customer’s ego. These shoppers aren’t looking for a lower price, they’re looking to show people what they can afford.
These emotional purchases cost more because they reflect a certain station in life and usually exude an aura of superiority. The funny thing is that consumers who purchase these goods are well aware that they are paying a premium price and not necessarily buying a higher quality product. What they are getting, however, is an elevated social status. A brand or retail business that adopts a prestige pricing strategy rarely, if ever, hosts sales or offers any special discounts leading to a lower price. The price of an item is the price of an item. It’s . What it buys is prestige.
Many designer fashion brands and high-end sportscars are good examples of this marketing approach. If you want to own the name, you’re going to have to pay a rather steep retail price.
- Point of Sale
Point of Sale refers to the final step in the sales lifecycle – the place and process by which retail transactions are made. In days gone by, the point of sale might have been nothing more than a simple checkout area with cash register near the store exit. But time and progress have changed all that. These days, advanced point of sale systems, powered by advanced hardware and software, do a whole lot more than ring up baskets full of items. Today’s point of sales systems have become an integral part of retail management, helping any number of retail business types run their entire operations. Along with handling daily customer transactions, advanced point of sale solutions also perform real-time functions like tracking sales volume, managing inventory and store stock, capturing customer information like email addresses and phone numbers, handling returns, integrating online sales, and more.
Simply put, Point of Sale now refers to a comprehensive digital solution that impacts almost every aspect of the retail lifecycle. It’s an integrated system that’s there to checkout customers, as well as help a retail business make sense of its entire product lifecycle – marketing, operations, inventory, pricing, and other areas of business.
- Radio Frequency Identification (RFID)
RFID refers to a small chip embedded in a product’s packaging or labeling that helps retailers track and protect their goods. Radio Frequency Identification (RFID) uses radio waves to track, read and capture information about the product, including where it is at any given moment in the supply chain. Currently, RFID is being used by retailers primarily as a way to manage inventory. However, as with most retail technologies, retailers are also exploring ways to use RFID to learn more about their customers and purchase patterns.
The Bonus Round
Remember, at the beginning of this post, we hinted that there might be a few bonus additions to our retail lingo dictionary. Well, we couldn’t help ourselves. So without further ado, here are some quick retail snippets worth knowing.
Consumer Packaged Goods (CPG)
Consumer Packaged Goods are products that are ready to be sold to consumers, e.g. packaged foods, six packs of beer, and other consumables. These tend to be items that are sold at low cost with quick inventory turnaround.
Cost of Goods Sold
Cost of Goods Sold is an accounting term that refers to the total cost of products sold during a given time period. It appears on the profit-and-loss statement of a retail business and is used for calculating inventory turnover.
Stock Keeping Unit
Usually referred to as a SKU [skyoo], this is a number (usually eight digits) that retailers use to keep track of stock and inventory. A Stock Keeping Unit identifies every aspect of a given product: color, material, size, brand and any other key attributes.
Social Commerce
Social Commerce is the art of incorporating social media and user-generated content into your marketing and promotional programs. These third party social venues, like Facebook and Instagram, don’t sell the merchandise. Instead, they provide platforms where customers can engage with brands and their attributes in order to generate buzz and drive sales.
Units Per Transaction
Units Per Transaction (UPT) is defined as the average number of items sold during each sales transaction. By tracking this over time, retailers are able to get a better handle on overall growth, as well as customer buying patterns.
Conclusion
For starters, it’s pretty clear that the retail industry has a language and lingo all its own. The truth is, the terms and phrases we’ve introduced here are just the tip of the iceberg, and, while we hope you find them useful, they don’t begin to cover the entire retail dictionary.
That being said, what must be abundantly clear to anyone keeping an eye on retail is that technology is playing a greater and greater role in defining how business is done.
Go back and look at the descriptions of Point of Sale, Omnichannel Retailing, Mass Customization, Internet of Things, and some of the other lingo included in this post. There’s no denying that digital and data solutions have completely revolutionized how goods and services are sold, and how customers are choosing to shop.
There’s every indication that this trend towards retail technology is going to continue at an even faster pace. It’s up to brands and retailers to make the most out of it. Because the one term you never want to hear in retail is obsolete.
If you found this post helpful and would like to learn more about how we’re innovating retail and driving sales for virtually all retail business types, contact us.