Mastering Retail Essentials: Boost Your Business with Key Terms

Table of Contents

• Sales and Marketing Terms
• Inventory and Operations Terms
• Finance and Pricing Terms
• General Retail and Business Terms
• Retail Terms FAQ

Sales and Marketing Terms

Augmented Reality (AR)

Augmented Reality is a transformative technology that allows customers to interact with 3D objects in their real-world environment. By integrating AR into your eCommerce platform, you can offer customers a virtual try-on experience for products such as clothing, accessories, or home decor. This not only enhances customer confidence in their purchasing decisions but also reduces return rates. For instance, Shopify provides tools to incorporate AR into your online store, making it easier for customers to visualize products before purchasing.

Average Order Value (AOV)

AOV is a metric that calculates the average amount spent by customers per order. It is determined by dividing total revenue by the number of orders. Boosting AOV can be achieved through strategies such as upselling, cross-selling, and offering bundle deals or free shipping thresholds. Shopify merchants can access detailed AOV reports to fine-tune their sales strategies.

Clienteling

This technique involves building personalized relationships with customers by utilizing data such as purchase history and preferences. By offering tailored recommendations and services, businesses can enhance customer loyalty and drive repeat sales. For example, after transitioning to a unified system on Shopify, AG Jeans was able to double its sales from clienteling by offering personalized experiences to customers.

Cross-Selling

Cross-selling involves suggesting related or complementary products to customers during or after their purchase process. This strategy not only improves customer experience but also increases AOV and brand loyalty. Implementing cross-selling can be as simple as offering discounts on bundled items or showcasing product compatibility.

Customer Acquisition Costs (CAC)

CAC measures the cost associated with acquiring a new customer. A successful business ensures that a customer’s lifetime value (CLV) significantly exceeds CAC. If your CAC is high, it may be time to reassess your marketing strategies to ensure efficiency and sustainability.

Customer Lifetime Value (CLV)

CLV represents the total revenue a business can expect from a customer throughout their relationship. A higher CLV indicates strong customer loyalty and reduced acquisition costs. Businesses can improve CLV by implementing loyalty programs, exclusive discounts, and upselling strategies.

Loss Leader

A loss leader is a product sold at a low price to attract customers, with the expectation that they will purchase additional, higher-margin items. This pricing strategy can help businesses penetrate competitive markets and gradually increase prices as customer loyalty grows.

Merchandising

Merchandising encompasses the presentation and promotion of products to boost sales. Effective merchandising strategies include creating eye-catching displays, strategically placing products, and highlighting promotional items.

Mobile Commerce (m-commerce)

M-commerce refers to transactions conducted via mobile devices. To capitalize on the growing trend of mobile shopping, businesses should optimize their websites for mobile, develop mobile apps, and create a seamless omnichannel experience. Shopify offers mobile tools to streamline mobile purchasing for customers.

Personalization

Personalization involves tailoring the shopping experience to individual customers. This can be achieved through personalized product recommendations, targeted email campaigns, and customized in-store interactions. Businesses that excel in personalization can create memorable and engaging customer experiences.

Point of Purchase (POP)

POP displays are strategically placed in-store to encourage impulse purchases and enhance the shopping experience. These displays can include digital coupons, self-checkout kiosks, and promotional signage. Positioning POP displays near checkout areas or high-traffic zones can increase brand visibility and customer purchases.

Point of Sale (POS)

POS systems encompass hardware and software used for processing transactions and managing sales data. A robust POS system should offer features like mobile checkout, inventory management, and customer data integration. Shopify’s POS system provides these functionalities and more, enabling businesses to sell both online and in-store seamlessly.

Popup Shop

Popup shops are temporary retail spaces that allow businesses to connect with customers face-to-face, create buzz, and test physical retail concepts. When launching a popup shop, consider location, visibility, and convenience for your target audience.

Social Commerce

Social commerce involves selling products directly through social media platforms, allowing customers to complete their purchase journey without leaving the app. Shopify offers integrations with major social media channels, enabling businesses to reach customers where they are most active.

Upselling

Upselling encourages customers to purchase higher-priced items or add-ons, thereby increasing sales. Businesses can implement upselling by highlighting premium products, suggesting enhancements at checkout, and offering post-purchase add-ons.

Visual Merchandising

Visual merchandising involves creating appealing displays and experiences to attract customers and encourage purchases. This can include playing with colors, lighting, layout, and sensory elements to create an immersive shopping environment that reflects your brand’s personality.

Inventory and Operations Terms

Third-Party Logistics (3PL)

3PL providers manage logistics services such as inventory, storage, shipping, and fulfillment. Selecting a 3PL with industry expertise and strategic location can enhance service efficiency and customer satisfaction.

Assortment

Assortment planning involves organizing products in a way that appeals to customers and aligns with store positioning. Consider customer preferences and product families when developing an assortment plan.

Back Order

A back order occurs when an item is out of stock but promised for delivery once restocked. Communicating back order status transparently can maintain customer trust.

Barcode

Barcodes are scannable codes that facilitate product identification and inventory tracking. Implementing barcodes can streamline checkout processes and improve inventory accuracy.

Consignment Inventory

Consignment inventory allows retailers to display products they don’t own, paying suppliers only after sales occur. This arrangement can reduce financial risk and expand product offerings.

Dead Stock

Dead stock refers to unsold inventory that is outdated or in low demand. Reducing dead stock can be achieved through inventory management software, conservative ordering, and promotional strategies.

Demand Forecasting

Demand forecasting involves predicting future customer demand using historical data and market insights. Accurate forecasting can optimize inventory management and supply chain efficiency.

Facing

Facing involves arranging products at the front of shelves with labels visible, creating an organized and accessible shopping environment.

First In, First Out (FIFO)

FIFO is an inventory management method where the oldest inventory is sold first. This approach is beneficial for perishable goods and cost tracking.

Fulfillment Center

Fulfillment centers handle order processing, packaging, and shipping for eCommerce businesses. Partnering with a reliable fulfillment center can streamline operations and ensure timely delivery.

Inventory Management

Inventory management involves tracking the movement of goods to minimize stockouts and surpluses. Implementing inventory management software can optimize stock levels and improve operational efficiency.

Inventory Turnover

Inventory turnover measures how quickly a company sells its average inventory. A high turnover rate indicates strong sales and efficient inventory management.

Just-In-Time (JIT) Inventory

JIT inventory involves receiving goods only as needed, reducing holding costs and improving efficiency. Successful JIT implementation requires reliable suppliers and accurate sales data.

Last In, First Out (LIFO)

LIFO assumes the newest inventory is sold first, impacting cost tracking and profitability. This method is primarily used in the US and may not be suitable for all businesses.

Last-Mile Delivery

Last-mile delivery refers to the final stage of the delivery process, getting products from the warehouse to the customer’s door. Efficient last-mile delivery is crucial for customer satisfaction.

Minimum Order Quantity (MOQ)

MOQ is the smallest quantity a supplier will sell, ensuring profitability for both parties. Negotiating favorable MOQs and automating tracking can optimize procurement.

Open-to-Buy (OTB)

OTB is an inventory management strategy that calculates how much inventory to purchase based on current stock levels and sales forecasts. Implementing OTB plans can help manage budgets effectively.

Planogram

Planograms are detailed store layout plans that optimize product placement and displays to drive sales. Specialized software or expert assistance can aid in creating effective planograms.

Purchase Order (PO)

A PO is a document requesting products or services from a supplier, specifying details such as quantities and prices. POs facilitate efficient purchase monitoring and management.

Radio Frequency Identification (RFID)

RFID technology uses radio waves to track product information, providing real-time data on inventory and transactions. Although costly, RFID can streamline inventory management and prevent theft.

Reverse Logistics

Reverse logistics manages product returns from customers back to the warehouse. A smooth returns process builds trust and loyalty with customers.

Safety Stock

Safety stock is extra inventory kept on hand to prevent stockouts during demand spikes or supply delays. Calculating appropriate safety stock levels can ensure product availability.

Shrinkage

Shrinkage refers to inventory discrepancies caused by theft, errors, or damage. Implementing loss prevention measures can minimize shrinkage and protect profits.

Stock Keeping Unit (SKU)

SKUs are unique identifiers for products, aiding in inventory tracking and management. Creating SKUs based on product attributes can enhance organization.

Supply Chain Management (SCM)

SCM involves planning and executing all steps from sourcing to product delivery. Optimizing SCM can reduce costs, speed up delivery, and improve customer satisfaction.

Universal Product Code (UPC)

A UPC is a unique barcode required by most retailers for product tracking and sales. Obtaining UPCs through GS1 ensures compliance with industry standards.

Finance and Pricing Terms

Average Transaction Value (ATV)

ATV measures the average amount spent per transaction, including taxes and fees. Increasing ATV can be achieved through upselling and flexible payment options.

Buy Now, Pay Later (BNPL)

BNPL allows customers to receive products immediately and pay in installments. Offering BNPL options can boost sales by providing payment flexibility.

Cash on Delivery (COD)

COD is a payment method where customers pay upon delivery. Offering COD can enhance convenience and brand loyalty.

Chargeback

A chargeback occurs when a customer disputes a charge, seeking a reversal from their card issuer. Implementing fraud detection software and clear return policies can reduce chargebacks.

Cost of Goods Sold (COGS)

COGS represents the cost of producing a product, excluding marketing and distribution expenses. Reducing COGS can be achieved through efficient production and supply agreements.

Gross Margin

Gross margin is the difference between revenue and COGS, expressed as a percentage. Analyzing gross margins can identify bestselling items and inform pricing strategies.

Keystone Pricing

Keystone pricing involves setting retail prices at double the wholesale cost. While providing healthy margins, this strategy may not always attract customers.

Manufacturer Suggested Retail Price (MSRP)

MSRP standardizes prices for high-ticket items but may limit competitive pricing. Consider costs and profit margins when deciding whether to adhere to MSRP.

Margin

Margin calculates the gross profit percentage on an item, helping businesses assess profitability. Higher margins are typical in luxury sectors, while competitive industries may have slimmer margins.

Markdown

Markdowns are price reductions used to drive sales and clear inventory. Implementing markdown strategies can improve inventory turnover and profitability.

Minimum Advertised Price (MAP)

MAP is the lowest price a retailer can publicly advertise for a product, protecting brand value and margins. Retailers can sell below MAP in-store but cannot advertise lower prices.

Net Profit

Net profit measures actual earnings after accounting for all expenses. Monitoring net profit margins ensures business sustainability.

Net Sales

Net sales represent revenue after sales-related deductions, excluding COGS. Analyzing net sales provides insight into business performance.

Retail Price

Retail price is the amount a customer pays, influenced by production and shipping costs. Online calculators can assist in determining optimal retail prices.

Return on Investment (ROI)

ROI evaluates the profitability of investments relative to their costs. Tracking ROI helps businesses assess the effectiveness of their strategies.

Wholesale Price

Wholesale price is the cost at which products are sold in bulk to intermediaries. Calculating wholesale prices involves subtracting retailer profit margins from retail prices.

General Retail and Business Terms

Brick and Click

Brick and click businesses offer both physical and online shopping experiences. Implementing a seamless omnichannel approach can enhance customer satisfaction.

Brick-and-Mortar

Brick-and-mortar stores provide in-person shopping experiences, allowing customers to view and purchase products directly.

Buyer

Buyers are responsible for sourcing and purchasing products for retail stores. They require industry knowledge and negotiation skills to build supplier relationships.

Catalog

Product catalogs provide detailed information about items, including prices and descriptions. Catalog management software ensures consistency across sales channels.

Category Management

Category management involves organizing products into categories for efficient sourcing and merchandising. Logical store organization enhances customer experience.

Click-and-Collect

Click-and-collect allows customers to buy online and pick up in-store. Offering this service can improve convenience and customer satisfaction.

Conversion Rate

Conversion rate measures the percentage of visitors who make a purchase. Optimizing page speed and creating compelling CTAs can improve conversion rates.

Direct-to-Consumer (DTC)

DTC brands sell products directly to customers, bypassing intermediaries. This model provides control over pricing and customer experience.

Flagship Store

A flagship store is a company’s most prominent and influential retail location. It serves as a showcase for the brand’s identity and offerings.

Key Performance Indicator (KPI)

KPIs measure progress toward business goals, such as sales growth and employee retention. Setting KPIs helps track performance and inform strategic decisions.

Multichannel Retailing

Multichannel retailing involves selling through various channels, offering customers flexibility and convenience. Ensuring consistent branding and experiences is essential.

Omnichannel Retailing

Omnichannel retailing provides a cohesive customer experience across multiple channels. Integrating sales channels enhances customer satisfaction.

Private Label

Private label products are manufactured by one company but sold under another brand. This strategy allows businesses to offer exclusive items and compete on price.

Retail Audit

A retail audit analyzes store performance by examining sales data and inventory. Conducting regular audits informs inventory and merchandising decisions.

Sales per Square Foot

Sales per square foot measures a store’s space utilization efficiency. Analyzing this metric helps optimize store layouts and operations.

Showrooming and Webrooming

Showrooming involves researching products in-store and purchasing online, while webrooming is the opposite. Understanding these behaviors can inform retail strategies.

Trade Show

Trade shows are events where companies showcase products and network within their industry. Participating in trade shows can generate interest and build relationships.

Unified Commerce

Unified commerce connects all sales channels into a single platform, providing a seamless customer experience. Shopify’s unified commerce solutions simplify business operations.

Conclusion

Understanding and mastering retail terminology is essential for navigating the complexities of the industry and driving business success. By familiarizing yourself with these key terms and applying practical strategies, you can enhance customer engagement, optimize operations, and improve profitability. Stay informed about the latest trends and continue to refine your retail vocabulary to stay ahead in this competitive landscape. Here’s to your retail success!
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