Articles for Retailers - by Kizer & Bender

25 Retail Terms Every Retailer Needs to Know

    by Rich Kizer & Georganne Bender

Perhaps you’ve been in retailing as long as you can remember, or maybe you’re new to the game. 

Either way, it’s good to have a glossary of retail terms handy for quick reference or to help training your newest store associates.

Here are 25 of the top terms you need to know:

  1. Add-On Sale.  Items customers buy in addition to items they originally came in to purchase because a store associate suggested that they buy them. Adding-on is an easy way to increase average sales and store profits.
  2. Allowance.  Price reductions that are taken for numerous reasons including, but not limited to, damaged or discontinued merchandise, floor samples, or late delivery of product.
  3. Big Data.  Large amounts of data that is analyzed to reveal patterns and trends that relate to human behavior and interactions. Data may include online consumer behavior such as clicks, open rates, the length of time a person spends on a website, income, and Census info, as well as what happens on social medias. Big Data is often referred to as “Analytics on steroids”.
  4.  Branding.  A brand is not your logo or slogan or merely the name of your store. A brand is the emotional connection – the physical reaction – customers feel when they hear your store name, see your logo, visit your website, or walk in your front door. It’s the concept you own in the mind of the customer; it’s the experience they can get only from you.
  5. Break Even Point.  The point where your sales are equal to your expenses. In other words, when your store has no profit and no loss.
  6. Charge Back.  A deduction taken by a retailer on an invoice to account for instances including freight allowances, short orders, or damaged merchandise and more.
  7. Cash Flow.  Money that comes in to your store, and goes back out again, resulting in available cash.
  8. Customer Relationship Management (CRM).  A business strategy utilizing techniques designed to build profit by keeping customers loyal to your store.
  9. Demographics.  The population categorized in groups by age, gender, income, occupation, education, religion, race, family size, life style, and more.  Understanding demographics is helpful in determining which products and services to offer to the consumers who live in your community.
  10. Drop Ship.  Items not stocked by a retailer that are shipped to the consumer directly from the manufacturer or distributor.
  11. Factor.  A bank or finance company that buys the receivables from a manufacturer. Retailers pay the factor for goods purchased instead of paying a vendor directly.
  12. Flow.  How shoppers move through your store. People shop your sales floor according to how you set your fixtures, creating flow.
  13. GMROI.  Gross Margin Return On Investment is commonly defined as “an inventory profitability evaluation ratio that analyzes your store’s ability to turn inventory into cash above the cost of the inventory”.
  14. Inventory Turnover.  “Turn” is the amount of times in a specific time period that your inventory is sold and replaced with fresh product.
  15. Keystone.  The retail price charged for an item that is double the wholesale price.
  16. Loss Leader.  An item that is sold at a loss in order to attract more shoppers to the store.
  17. Margin.   The amount of gross profit that is made when an item is sold.
  18. Markdown. The permanent lowering of the price of a product because it did not sell at full price. Markdowns are necessary to clear your inventory to make room for new items.
  19. Omni-Channel Retailing.  Establishing a presence on several channels and/or platforms. For example, having a brick and mortar store, an online store, mobile ordering capabilities, online services, etc. that enable customers to engage and interact with your store across several channels.
  20. Open to Buy (OTB).  Merchandise that is budgeted for purchase during a specific period of time that has not yet been ordered. OTB helps you budget and plan your future purchases.
  21. Profit Margin. The amount out of every dollar of sales a business actually keeps as earnings.
  22. Purchase Order (P.O.)  The form retailers use to place orders for goods and/or services. P.O.’s list the type, quantity, and agreed upon price for goods and/or services the seller will provide to the buyer. (Note: Always use your own P.O. when placing an order.)
  23. Radio Frequency Identification (RFID).  A chip embedded in an item’s label or packaging that contains important information about the product. It is used primarily for tracking purposes.
  24. Shrinkage.  The difference between the amount of merchandise you have on paper and the physical stock on your sales floor and/or back room. This difference is generally caused by shoplifting, employee theft, and administrative errors.
  25. Stock-Keeping Unit (SKU).  An item’s identification code that can be found on tags and/or bar codes that help the retailer track the item for inventory. An SKU lists the important attributes of an item, such as style number, vendor, size, color, etc.

There are many more retail terms, and more are added each week as new technologies are introduced. Remember, you can always give us a call or drop us an email if you have a question about retail jargon. We’re happy to help!

Rich Kizer & Georganne Bender are professional speakers, retail strategists, authors and consultants whose client list reads like a “Who’s Who” in business. Companies internationally depend upon them for timely advice on consumers and the changing retail market place. KIZER & BENDER’s observations are widely featured in national newspapers, national and international industry and consumer publications, and on radio and television programs across the U.S. You can learn more at