Most Common Sales terminology in fmcg industry used by Top sales managers
Modern Trade has been seeing tremendous growth over the years, especially for FMCGs. With a tremendous and steady shift from general trade to modern trade, the companies are focusing on generating more revenue from the Modern Trade Outlets(MTO). Going further, you will be able to understand the concept of modern trade and how automating your sales force can be a beneficial option to reap the maximum benefits.
According to an article that was published in Financial Express, from the third quarter in 2016 to the third quarter of 2018, traditional trade grew at only 2 per cent while modern trade at a whopping 23 per cent. The growth in modern trade has been classified as 18 per cent from metros, 32 per cent from 5-10 lakh towns, 33 per cent from 1-5 lakh towns and 58 from less than 1 lakh towns.
Modern retail is seeing retailers launch new stores and expanding. For instance, in 2017-18, Avenue Supermarts Ltd, which runs the DMart chain of stores, added 24 stores, taking its total count to 155.
As we realize there has been a significant growth rate in Modern Trade as compared to the general trade, we also should be able to differentiate them both from each other.
Here are some of the key differences between General Trade and Modern trade-
The challenges, complexity, and cost implications, companies are looking at traditional trade with renewed interest. Modern trade has been growing steadily, but mom-and-pop shops still have a lot to offer. Micro-retailers provide a unique value proposition for its customers. They mostly can’t compete on price against modern retailers, but their close relationships and proximity to customers, make them competitive in many markets.
These modern terms are used by various retailers in modern times, now you know them, you must understand what they’re referring too.
These terms have now become the common lexicon of a retailer, you must learn and apply them in order to keep yourself connected with the modern time.
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Product Related Terms and Identifiers
Retailers use a slew of different identifiers to describe products and variants.
Color Choice (CC)
A customer’s unique style-color choice (e.g., Blue Crew Neck vs. Red Crew Neck) independent of sizing.
Continuity Product (same as Key Item, Never Out-of-Stock, Basics)
Basic products that are sold year after year with little variation.
These are often managed automatically, with little intervention from the buyer. T-shirts, socks, etc. are good example of these. Many buying platforms will have a key item management capability to manage these.
Seasonal Products (same as Fashion, Newness)
Products that are more appropriate for a limited time-frame or season. Fashion items are most often seasonal products.
Style Number (Style #)
A unique identifier describing the style of the product. Many retailers use Smart Style Numbers, that are composed of the concatenation of various attributes of the product.
An example style # from a multi-brand retailer is gucci-poolsliders-ss-21, which indicates that the products are Gucci products, of type pool slider, that are in the spring / summer collection for 2021.
Stock Keeping Unit (SKU)
SKUs are unique identifiers for the different variants of the product. Since these describe the most specific sellable unit, both inventory and sales should be tracked in terms of SKUs, hence the name stock keeping unit.
Variant
Different color / size combinations of a product. For example, the “Oxford Shirts” could be a product, and the variants would be the different color (say White, Navy and Black) and size combinations. In this example, some example variants would be: Oxford Shirt-White-Small or Oxford Shirt-Black-Large
Supply Chain Related Terms
Case-Packs (same as Carton Quantity)
Case-packs are pre-configured packs of the same SKU within a case. If the case-pack for a White SM Shirt is 5, it would mean that the vendor would be providing 5 of these shirts within a case, and that is the smallest shippable quantity by the vendor.
Vendors typically do Case-Packs to reduce the handling costs of SKUs. Case-packs can either be broken in a distribution center before sending eaches to the stores, or can remain unbroken which would mean a case of goods would be sent to a store.
Delivery Window
Start / end dates for each delivery.
This should be captured along with the assortment plan, so that the relevant parties know when the products will be hitting the store.
Drop
Some brands deliver all the SKUs in one go but other brands can deliver 10 SKUs in with drop 1, 10 SKUs with drop 2, etc.
End Date
The last day a product is available for ordering (or for sale).
This is particularly relevant for continuity products that are sold year after year. If you want to terminate that product, you place an end date so that the system stops ordering it.
First-In, First-Out (FIFO)
FIFO is a type of inventory management strategy where a retailer uses the product that has been on the shelves the longest to fill an order. This method is used in an effort to ensure that the business does not lose money if the product expires or falls out of demand over time. A business such as a grocery store may follow this strategy to ensure they don’t lose profit on foods that expire (i.e., keeping foods that will expire sooner more accessible on the shelves so that consumers purchase and use those before their expiration rather than products that have more time to expire and can be purchased later).
Last-In, First-Out (LIFO)
LIFO is an inventory management system alternative to FIFO where a business will sell their most recently acquired product. With LIFO, a business will use today’s prices to calculate the cost of goods sold (instead of the actual cost paid for the goods that were sold). This is usually used for products that don’t perish or become obsolete, such as gas or pharmaceutical products. LIFO generally reduces overall profit and is commonly used by businesses to minimize the amount of taxes they need to pay on reported profits (although you will eventually pay the same amount in the long term).
Launch Date
When a particular product will be hitting the stores.
Market Week / Buy Week
It is the time-frame during which brands (or suppliers) open up their showrooms for retailers to visit and place orders.
Pre-Packs
Pre-packs are multiple-sizes of a particular choice added in a pack for inbound fulfillment to DC and outbound to stores. The goal is to reduce cost of handling for the retailer. A typical pre-pack for a shirt could look like (1 SM, 2 M, 2 L, 1 XL) making a pack of 6 eaches. In this case, the retailer would typically send the pre-packs to the stores as they are and not break the pre-packs in a warehouse / fulfillment center.
Procurement
In retail, procurement is the process of acquiring and buying the products or services your business will sell or provide. If your business manufactures its own goods, procurement can also mean finding and purchasing the parts and materials you need to make the products. This process can also entail the purchasing of goods and services that are needed for your company’s daily operations. Although you may see “procurement” and “purchasing” used interchangeably, it’s important to note that procurement can also include activities in the buying process beyond just purchasing (for example, processing payments, approving expenditure requests, etc.).
Special Make Up (SMU)
Special make-up is when a Brand (i.e. supplier) manufactures an item that is special for a retailer. SMU orders typically have Minimum Order Quantity (MOQ) restrictions associated with them.
Supply Chain
The retail supply chain encompasses everything involved in getting your products to your customers. It includes the people, resources, technology, and processes that come together in order to create and distribute a product or service to the consumer. For example, a typical supply chain may start with inventory management and the selection or design of product offerings. It typically also includes packing and shipping considerations and the process for returns. Supply chain management refers to the act of coordinating all of these moving parts, from supplier relationships to warehousing and more.
Inventory Terminology
Allocation
Allocation is a term used in retail inventory management that describes the tracking and distribution of products to a retailer’s various store locations (i.e., their distribution network). The goal of merchandise allocation is to maximize sales and avoid markdowns as much as possible.
Available To Promise (ATP)
Number of units that can be promised to the customer. Let’s say that you have 0 units available on stock currently, but you will be receiving 10 more units later today. Assuming that you can fulfill incoming orders tomorrow, your Available to Promise (ATP) inventory would be 10, since you can fulfill new orders with the incoming order. Along with Available to Sell (ATS), Available to Promise (ATP) are better measures to use while determining which products to mark as in-stock on their website.
Available To Sell (ATS)
Number of units available on hand to sell. This is especially important when there is a big time period between when a Sale Order (SO), i.e. customer order happens, and when it gets shipped. During this period, the physical inventory will not be reflecting these SOs, since they haven’t been shipped yet, but it is best for the retailer to stop taking new orders on this inventory, since that would run the risk of running out of stock on these items. Therefore, it is best practice for a retailer to use either Available to Sell (ATS) inventory or Available to Promise (ATP) inventory when determining which products to mark as in-stock on their website.
Available To Ship (ATS)
When brands have products in their warehouses that are available to ship to retailers immediately.This is more important within in-season planning, where retailers could request more products if they are selling out.
Cover Level
This tells you the number of weeks of sales you would be able to support with the inventory at hand. Typically measured in weeks, but can also be measured in days or months.
Ideally cover level should be low enough to reduce your inventory cost and high enough to protect you from disruptions in your suppliers.
Lead Time
The time it takes to receive a SKU after ordering it from the supplier. Lead times in fashion are typically measured in weeks, but they could also be referred to in days or months, depending the type of product.
Lead times will vary depending on the supplier (whether it is a manufacturer or distributor) and the complexity of the product.
Nearshore manufacturers or distributors could supply a product in as little as 2-3 weeks, but manufacturing a product in Asia and getting it delivered could take as long as 6-9 months.
Minimum Order Quantity (MOQ)
The minimum number of units that the supplier requires to manufacture or supply a particular product. An example might be, a supplier not supplying orders of a white T-shirt if the order is less than 100. Suppliers set a MOQ, because there is a fixed overhead of fulfilling each order.
MOQs could be for a particular style, a particular color or for an overall order.
Order Cycle
The time period between two replenishment cycles at a retailer. This is typically measured in weeks, but could also be measured in days or months depending on the category of the retailer.
For example, if a fashion retailer replenishes their core products once a month, then the order cycle would be 1 month.
Out-of-Stock Rate
This gives the percentage of missed sales opportunities on a product or category for the retailer. There are different ways to measure this. Given the challenge of capturing every sales opportunity, retailers use other proxy metrics to measure this metric. A typical approach is to look at the percentage of days that a particular SKU had no stock available at the point of sale.
For example, if a product is meant to be selling for 365 days, and in the trailing year, it was out of stock for 10 days, then the out-of-stock rate would be 10 / 365 = 2.7%
Another typically used metric is called in-stock rate, and that is equal to 1 – Out-of-Stock-Rate.
Retail
Simply put, retail is the selling of products to a customer. This is usually a small transaction (as opposed to large-scale wholesale transactions) and the consumer buys this product for their own personal use.
Retailing refers to the processes involved in the selling of goods to consumers in stores, as well as the processes involved in providing services to consumers in physical locations such as repair shops, restaurants, etc.
Lastly, the retailer is the business or person selling the products in exchange for compensation in an effort to make a profit.
Safety Stock
Additional inventory to maintain to shield the business from supply and demand fluctuations. Best way to think about Safety Stock is in forward weeks of supply. If a retailer is maintaining 3 weeks of safety stock, it means that, that retailer is aiming to never dip below 3 weeks of inventory, and that safety stock makes sure that they don’t run out of stock if customer demand turns out higher than expected, or if there are delays (or out of stocks) from suppliers.
Setting a safety stock target that takes into account deviations on sales forecasts and lead times is critical to ensure a low out-of-stock rate for a retailer.
Wholesale
Selling products in bulk quantities to other businesses or even other retail stores is known as wholesale.
A wholesaler business may buy products directly from a distributor or manufacturer to resell, or they may produce the goods themselves. Purchasing from a wholesaler is cost-effective because they can keep shipping and handling times/costs low by requiring a minimum amount of products for each order.
Retail shops will then alter the products (for example, by adding branding) and charge more for the goods they buy from a wholesaler in order to make a profit.
Planning Terminology
Annual Operating Plan (AOP)
This is the plan set for the business at the beginning of the year. Usually set at the beginning of the year and not changed.
Assortment Planning
Assortment planning is a practice where retailers choose which products to keep in their inventory for the upcoming season. During this process, they consider and select both the number of product categories they plan to sell as well as how many product types will be available within each category. Assortments can be categorized as shallow (department stores that offer a bit of everything like Target) or deep (specialty stores that focus on certain products with lots of options for each product type like Ulta focuses on beauty products).
Bottom Up
Bottom-up selling is another sales strategy that is more common in business-to-consumer sales. This strategy targets the direct users of the product or lower-level management and often results in smaller sale amounts than top-down strategies. With this approach, it is smart to make sure the product adoption process is relatively easy and low cost.
Forecasting
Forecasting refers to the use of past data and market research metrics to anticipate the future of consumer behavior. This process usually accounts for seasonality in certain markets and works to identify purchasing patterns that will likely continue in the coming months or years. These predictions can often translate to more efficient amounts of inventory being held and stocked on shelves, as well as effective pricing of goods and long-term success for the business.
In-Season Planning
Adjustment of the plans you have in place based on the latest data in-season. Typically done as a part of the open-to-buy management process.
Middle Out
The middle-out approach combines both top-down and bottom-up sales strategies. In merchandise planning, the ‘middle’ in middle-out usually refers to middle management.
Open-to-Buy (OTB)
OTB, or open-to-buy, is a merchandise planning formula that allows retailers to define a specific budget for future inventory orders over a set time frame. Having an OTB plan is an effective way to ensure you always have a balanced amount of available stock (not too much or too little) to meet your consumers’ demand. Toolio offers an Open-to-Buy Template that bases projections for the upcoming year on the previous year’s performance. This template can help you utilize the OTB formula and organize your plans, allowing you to overcome the challenges of maintaining the right amount of inventory for positive cash flow.
Pre-Season Planning
Creating a plan before the beginning of the season. Typically done 6-18 months ahead of the start of the season. How far in advance you do this planning process will depend on your lead times and the length of your product development process.
Purchase Orders
A purchase order is an official contract between a buyer and a seller, created by the buyer before their purchase is made. This document includes a variety of important order details, such as the number of products needed, product type specifications, and payment and delivery information. Purchase orders are very common for small businesses buying large amounts of products in bulk, and these orders can be specialized to be recurring if needed or if the relationship between buyer and seller is particularly strong. Check out Toolio’s Purchase Order Template for a centralized location to track the purchase orders you want to send to vendors and have sent to vendors.
Scenario Planning
An essential part of operating a retail business, scenario planning allows you to consider various ‘what-if’ situations and how your business can adequately respond to them. One key factor to note is that scenarios in this type of planning are events that could realistically happen, and are different from one another. Planning for negative situations that disrupt regular business flow should help improve your retail company’s overall resilience, team coherence, decision making, and structural capabilities. The COVID-19 pandemic is a great example of a type of scenario that could have been considered by businesses several years ago. In this scenario, a business would ideally consider what resources would be needed to accommodate rapid changes in consumer behavior and how team members would need to adapt to sustain business growth.
Seasonal Assortment
Seasonal assortment, or seasonal merchandising, is the strategy of keeping and managing inventory in alignment with seasonal trends and fashions in your industry. This could refer to traditional seasons such as summer and winter, holiday seasons, recurring trends that happen around the same time every year, or trending fashion styles. Using a retail calendar can also help you keep track of important dates to your specific retail market and help you plan for how your assortment may need to change well in advance.
Top Down
Top-down is a type of established sales strategy where a product is positioned to sell to the leadership or executives of a potential customer. This is a popular approach for products that can be used throughout a large company, especially in B2B sales.
Working Plan (WP)
This is the latest plan adopted by the business based on the latest learnings on sales performance.
Weekly Sales, Stock and Intake (WSSI)
WSSI stands for aWeekly Sales, Stock and Intake report. This is a report used for planning purposes to understand Sales, Inventory and Purchase Order over time, to understand stock levels and plan out Purchase Orders. WSSI is also known as an Open to Buy, and is a term used more often in the UK vs. Open to Buy being a terminology used in the US.
Curves
Retails and planners rely on curves or ratios to determine optimal levels of inventory to hold or purchase. Below are typical curves that are used in retail.
Color Curve
Color curve gives the ideal breakdown between different color variants of a style. This is calculated using historical demand ratios. A sample color curve can look like:
Black: 40%
White: 30%
Navy: 20%
Gray: 10%
Sale Curve (same as Seasonality Curve)
Sale curve describes the week-over-week change in demand on a particular item (or a collection of items like class or department). This is calculated by studying historical sales rates. A sale curve would look like:
Week 1: 2%
Week 2: 3%
Week 3:23.5%
Week 4:52 5%
Size Curve
Size curve gives the ideal breakdown between different size variants of a color-choice. This is calculated using historical demand ratios. A sample size curve can look like:
XS: 10%
S: 15%
M: 25%
L: 25%
XL: 15%
XXL: 10%
Activities
Merchandise Reporting
Merchandise reporting is the creation of regular merchandising reports.
These reports inform your business about the products that are on the shelves in physical stores. This reporting practice is a helpful way to keep tabs on inventory availability and avoid out-of-stock products.
Merchandise reporting may include collecting details such as records of how much inventory is on the shelves and in the backroom, how many new product units have been ordered and when, what discounts are applied to the product and how long have they been in effect, what the quality of available products is like, and more.
For a centralized location for your merchandising report and financial planning, try Toolio’s Merchandise Planning Software.
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Receipt Activity
Anything that impacts the future inventory position.
Examples are, placing a buy, cancelling a purchase order (PO) or moving the delivery date for a PO.
Sales Activity
Any retailer activity that will increase or decrease sales, hence change inventory position (e.g. markdowns, marketing, reallocation, etc.).
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Retail industry evolving everyday and we have seen the era where it has risen to influence of day to day life to such an extent that we can’t live without it.
If you’re a retailer, you already have knowledge of getting things done, buying and selling stuff.
But retail is more than just selling stuff.
There are new retail terms and definitions that add up every day into the retail business and should know them clearly.
These terms are frequently used in modern day retail business, and if you’re not familiar with them, you might end up doing some bizarre mistake and embarrass yourself.
These retail terms are a must know for every retailer today, let’s get hold of them.
Retail Terminology for Modern Retailers
Anchor Store
It is the biggest store set up in the mall or shopping center. It could be one of the biggest stores.
Having a shop next to anchor store helps in getting the footfall from that store. So the traffic gets diverted to your store with the help of anchor store.
You get the advantage from the popularity of an anchor store.
Next time, be sure of an anchor store while looking for a space for your shop.
Big Data
It is a set of huge data that would require a program, software, or complicated algorithms to make sense of it all.
Usually, the data collected from a huge number of customers, their behavior and their interests. This data can be very useful in giving the product the customers actually want or need.
Consumer behavior studies are important in today’s times for creating an influential marketing strategy. Analyzing big data requires a lot of work, but it pays when you apply it.
Click and Collect
The feature of buying things online through a store’s website and then picking it up later.
It allows the consumer to buy products before stock lasts. It is also convenient for them because now they can pick them whenever they want to.
Cross Merchandising
Putting up together two products that consumers usually use together is called cross-merchandising.
For example, having lemons with a bottle of tequila.
This cross merchandising can raise the sales of the other commodity, in this case, is lemons.
You can practice this on regular basis with different products like pasta and sauces, or, whiskey and coke, there are oodles of combinations, you just have to improvise.
Dead Stock
The stock of a commodity which is just lying and doesn’t getting purchased by consumers.
Most of the items that constitute to dead stock are seasonal or only require at a particular time. It also can happen that you may buy the item more than you can sell, which is a bad thing.
So dead stock hurt your retail business by consuming space and money.
You can avoid it by managing the items on the basis of demand and other factors.
Endless Aisles
The showrooms, instead of showing all their stocks, have smart screens or iPads in the store that can show all the inventory stock on the screen, the later consumer can just buy it after seeing it, or order it to their home.
This has become a thing nowadays and people like to shop this way.
Etailing
This a short form of electronic retailing. Basically, the practice os selling things online on a platform is called etailing.
There are many etailers on the internet, from amazon to local internet stores.
A platform that sells goods online is etailing. It is a modern word and widely used by people.
Flash Sales
Sales that happen for a limited period of time is called flash sales.
A lot of online e-commerce attract consumers by having flash sales regularly with unbelievable discounts and prices.
Flash sales usually happen by giving proper notice to consumer days prior to it.
This is a solid way to market your e-commerce store among people. People also take part in these flash sales enthusiastically.
Green Retail
Retailers indulging themselves in environment-friendly practices is called green retail.
This can include going for recyclable packaging, using paper shopping bags instead of plastic, going for solar panels and led lights.
Green retail is getting popular for all the right reasons.
High Speed Retail
High speed retail is a process of retail where you reduce the time of purchasing by conveniently providing things the consumers need.
Drive-through are the best example of high speed retail.
You give an order, and then take it by the end of the drive-thru. High speed retail can increase your sales drastically.
Other examples are mobile trucks and pop-up stores. mPOS systems can be helpful in high speed retail because you can have real time data.
Integrated Chain Supply
A chain supply that works together as a whole unit, including manufacturer, transport, distributors, everyone constitute to a chain.
This type of chain supply is responsive to minor change and very quick in delivering products.
Integrated chain supply can work collaboratively efficiently, sharing information at every point.
Keystone Pricing
When you sell the merchandise double the cost of wholesale price, that price is called keystone price.
Doubling up usually covers storing, transporting and service costs.
It is an easy way to cover up and make decent profits.
Keystone pricing is an old way of estimation of the selling price.
Layaway/ lay-by
An agreement in which the seller reserves an item for a consumer until the consumer completes all the payments necessary to pay for that item.
The arrangement is good for both seller and consumer because, in that way, the consumer can afford products, meanwhile, the seller is getting the money he wants.
Mass Customization
Every customer has different needs from the same product.
Mass customization means, altering or tailoring the product from every consumer according to its needs and still be able to produce it in large numbers.
It can be achieved by making the final product, a combination of small parts and elements.
A lego is a good example, you can make anything from a single building block. Nike has these stores where you can tailor a certain design your way.
Niche Retailing
Retailing by targeting a certain segment of the market is called niche retailing.
Suppose you’re only selling smartphones or electronic items, or brick and mortar.
Niche retailing gives you a set growth pattern and you tend to learn things of a certain business easily.
It is easy to target one segment of the market than selling in different ones.
This can make you see your strengths in one segment and weaknesses in other so that you can focus on one particular segment and know which.
Omni-channel Retailing
The phenomenon of creating the effects of your sales on multiple platforms is called omnichannel retailing, and making consumers choose from different channels of retailing and buying different products.
This type of retailing usually requires large initial investment but if you successfully pull this off, you’re going to create huge profits.
This type of retailing usually is common if your retailing shop has an app.
So you can give customers an option to choose your other segments. This is the future of retailing and soon everyone is going to omnichannel.
Prestige Pricing
A brand that has a price on the items way more than their actual costs, because of the name associated with it, exclusivity, design or any reason for it, is called prestige pricing.
The prices are decided on the basis of the value of a brand, rather than product. For example Louis Vuitton.
Planogram
The way of setting merchandise on the shelves so that it can attract maximum consumers.
Arranging certain items in a visual representation that look better can boost up sales.
You can place an item that can represent your whole segment of a particular part of the shop. There are so many ways where a single item can be used for display in different ways.
This is art that needs to be practiced a lot before you can deliver it.
Relationship Retail
Prioritizing relationship between the seller and consumer by selling them items is called relationship retail.
It can come from various loyalty programs, by giving points to the consumer who buys goods, and various discounts.
You can build a strong relationship with the customer in order to take his business. There is no better marketing strategy than consumer service.
Stock Keeping Unit
SKU is a unique code given to a product by the inventory so that they can keep track of the product and manage it properly in the inventory.
It represents all the attributes of the given product, like the brand, type, size, color and more.
SKUs are important in the modern inventory system and gaining popularity due to simplicity they have.
Showrooming
When a customer sees the product offline in showrooms to check the size and material, only to buy it from the online store at low prices.
This practice is quite common where the online stores reach fast. People want to check the product offline, which gave rise to this term. Online stores are better at sales because they have dedicated apps.
Tribe Trailing
You tailor everything, from store design, ads, product design, according to the consumer needs. This way you can better connect with the people.
Tribe trailing is basically to focus on particular type of people and making products according to that.
Unified Brand Experience
Maintaining the consistency of a brand through all platforms and giving the consumer same quality no matter where you are is called unified brand experience.
This way, you can give the people same experience. This requires a lot of investment, skilled staff and time.
It doesn’t matter how you’re marketing yourself, your experience with the people is always going to same.
One of the successful examples is Apple. They have the same product everywhere, giving everyone a great experience.
Webrooming
The practice of exploring products online and then buying them from an offline store is called web rooming.
It is opposite of showrooming.
People often are lazy to explore offline stores, so they go online and look for what they want, and then walk into the particular store for it.
Wearable Technology
Smartwatches, health gadgets like a fit bit, or simply gadgets which can connect to your smartphones and you can wear them as a watch are known as wearable technology.
They can sync to the software present for that gadget in your smartphones, and give the real time required data. They are future of wearables and companies are continuously inventing something new.
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Anchor Store
Also known as “draw tenant”, “anchor tenant”, or “key tenant”, an anchor store is one of the largest—if not the largest—store in a mall or shopping center. It’s usually a well-known department store or retail chain. Anchor stores are great neighbors to have if you’re a small or medium retailer. These stores bring in a ton of foot traffic into your vicinity, which opens up more opportunities for your business to get discovered.
Augmented Reality (AR)
This concept is all about supplementing the user’s real, physical world with virtual things, so they appear to coexist in the same environment. AR brings computer-generated objects into the real world — kind of like how in the movie Space Jam, Michael Jordan can be seen playing basketball with Looney Tunes characters.
In retail, AR can be implemented in several ways, including shoppable catalogs, apps that let you see in-store deals when you point your phone’s camera towards a specific direction, or even fitting room simulators.
Case in point: Topshop teamed up with AR Door to create a virtual fitting room for its Moscow location. Using augmented reality technology and Microsoft Kinect, they were able to create a fitting room simulator that allowed the customer to see how a dress looks on her without actually trying it on. A built-in camera tracked the shopper’s body and superimposed a 3D model of the garment, so the dress moved and turned with the customer.
Big Box Store
Its name pretty much says it all. A big box store is a large establishment (often in a square or rectangular-shaped building), that’s usually part of a major retail chain. Examples of such stores include Target, Home Depot, and Best Buy.
Big Data
This refers to sets of data so massive, it would take sophisticated programs and really smart data scientists to make sense of it all. When you’re dealing with Big Data, you’re not just looking at traffic or conversions; you’re analyzing behavior (clicks, open rates, time spent on site), demographic (Census information, income), social information (tweets, shares, etc.), timing, and so much more. Think of it as analytics on steroids.
Crunching the numbers, analyzing, and extracting action steps from all that information takes a ton of work, but it usually pays off for retailers because Big Data gives them tremendous consumer insights. Big Data allows businesses to personalize each customer’s experience and it even lets them predict consumer behavior (i.e. when a customer is in the mood to buy, when they’re about to lapse, etc.).
Take Macy’s, for example. With the help of IBM, the US retailer is able to gather torrents of customer information and behavior at a variety of touch points in order to serve up personalized experiences and recommendations.
According to IBM’s report, Macy’s combines customer preferences with recent purchase data to deliver “dynamically customized recommendations (such as a complementary clothing accessory or color) or personalized promotions.” Macy’s implements this across multiple channels (i.e. Macy’s physical store or macys.com) to give the customer a seamless experience no matter where they’re shopping.
On top of that, the retailer also factors in social engagement such as blogs and gift registries to further connect with its customers.
Brick and Click
This term refers to retailers that integrate their brick and mortar store with their ecommerce site. These retailers bring the best of both worlds into their business. Most brick and click companies even offer seamless web-to-store services such as in-store pick ups and returns.
Beacons
Powered by BLE (Bluetooth Low Energy) technology, Beacons are devices that can transmit messages to other Bluetooth-enabled gizmos, such as smartphones, tablets, and smartwatches. More important, beacons have the capabilities to “recognize” devices based on their location or previous interactions. This enables retailers to send tailored notifications to shoppers depending on where they are in the store or what type of customer they are.
So, if say, a returning customer walks in, the store’s beacon can send her a “welcome back!” message, and when that shopper passes by the footwear section and the merchant happens to have a sale on shoes, the store can give her a heads up via a smartphone alert.
Beacons can also be used for in-store analytics purposes. Most solutions come with tools for measuring foot traffic, dwell time, and more, enabling retailers to gather data and further get to know their customers and their store.
Cashwrap
This is the main checkout area of a retail store. In other words, this is where shoppers head to when they’re ready to pay for their items. It’s where merchants set up their POS system and ring up sales. Most cashwraps even have shelves containing merchandise that shoppers can pick up on their way out.
Click and Collect
This is a service in which retailers enable shoppers to buy items online and pick them up in their physical stores. Modern consumers love stores that offer click-and-collect because it makes their life a lot easier. They can buy something from the comfort of their home, and just pick up the item whenever it’s convenient for them, instead of paying for shipping or waiting for the mail to arrive.
Cross Merchandising
This refers to the practice of displaying or putting together products from different categories to drive add-on sales. Picture this: You’re at the grocery store browsing the liquor section when you see a pack of lemons tacked to the tequila shelf. This is cross merchandising in action. Groceries know that people often take lemons with their tequila shots, so they strategically placed the two items together.
Clienteling
This is a technique used by retail associates to deepen their relationship with each customer. Clienteling involves relationship-building activities such as using CRM software to collect and track customer data, providing personalized shopping experiences, and following up with shoppers in a relevant and timely way.
Contactless Payments
This refers to a system of payments powered by near field communication (NFC). They include NFC-enabled credit and debit cards, smart cards, and smartphones that allow customers to complete transactions without physically touching a payment terminal.
Instead of having to swipe their card, shoppers can pay for their purchases just by waving their card or phone over a terminal.
Dead Stock
Sometimes called dead inventory, this is one thing no retailer wants to have, ever. Dead stock pertains to merchandise that has never been sold or has been in stock for a while. Sometimes this is because a particular item is just seasonal, but other times it’s because the product simply isn’t in demand.
Retailers can get rid of dead or unmoving inventory through sales or donations, but the best way to deal with dead stock is not to have it in the first place. Analyze the demand in your market to determine the items that you should keep in stock. Also, be sure to manage your inventory well and keep communication lines open between your sales and your purchasing departments.
Drop Shipping
This refers to an arrangement between a retailer and a manufacturer/distributor in which the former transfers customer orders to the latter, who then ships the merchandise directly to the consumer. In other words, the retailer doesn’t keep products in stock. Instead, it sends orders and shipment information to the manufacturer/distributor and they will be the ones who will ship to the consumer.
Dynamic Clustering
If you have a fragmented customer base (i.e. your customers are scattered across different locations or fall under various socio-economic categories) then you know that growing your business as whole can be quite a challenge. This is where Dynamic Clustering comes in.
Dynamic Clustering is all about identifying patterns or opportunities in various and diverse segments to bring about the best strategies for each cluster. Let’s say you’re a national US apparel chain that operates stores in all 50 states. By using Dynamic Clustering, you are able to identify similar patterns and trends in four different states, namely California, New York, Nevada, and Massachusetts. This then enables you to make better and more relevant sales, purchasing, or marketing decisions for that cluster of states.
Etailing
Short for “Electronic Retailing”, this is the practice of selling goods over the Internet. Etailers come in all shapes and sizes, from big name giants such as Amazon and Zappos to neighborhood mom & pop stores selling items on their website.
EMV
EMV was developed Europay®, Mastercard® and Visa® (hence the name) as a way to combat fraud. It’s a technology that powers chip-and-pin cards, a breed of debit and credit cards that’s far more secure than magnetic stripe (i.e. swipe-and-sign) cards.
See, unlike a mag stripe card, which stores static information about the cardholder, an EMV card is embedded with a chip, which creates a unique code that changes for every transaction. This makes it less susceptible to fraud because even if a hacker manages to counterfeit a chip card, the original transaction code is not usable again and the card would get declined.
Endless Aisle
An endless aisle is a feature of brick-and-mortar stores that enables customers to browse and shop the retailer’s entire catalog of products. So rather than stocking up on every item and SKU, you can implement an endless aisle by giving shoppers access to devices like touch screens and iPads.
One example of a retailer using endless aisles is Nike. Their store Pasadena CA has large touch screens that enable customers to browse the retailer’s entire inventory. If they see something they like, the customer can purchase it in-store and Nike will ship the item to them.
EPOS
EPOS is an abbreviation for electronic point of sale. Basically, any computerized system used to record sales and control inventory. Learn more about EPOS for retail.
Flash Sales
Closely related to daily deals, this term refers to sale events that take place for a limited time. Flash sales can last anywhere from several hours to a couple of days and entice consumers with huge bargains (usually 50% and up). The catch is, shoppers have to complete the purchase ASAP. Otherwise, they risk losing the items to other shoppers or they run out of time and miss their chance to grab the deals they want.
Zulily, a shopping site for moms, babies and kids, is an example of a flash sale website. Zulily’s events “open at 6am PDT and usually last 72 hours (some are one-day sales). After that, they scoot away to make room for new events.”
That’s why customers are encouraged to shop early and shop fast, so they can get their hands on the widest selection. Zulily does announce its flash sales in advance so moms can mark their calendars and prep for the sales they wish to attend.
Green Retailing
This refers to the environmentally-friendly practices that retailers get into. These can include switching a product’s packaging to a recyclable one or giving customers reusable shopping bags instead of plastic. Other practices, such adding solar panels or replacing store lighting with energy-saving alternatives can also be considered as green retailing.
High Speed Retail
Born out of people’s need for faster services and less wait time, high speed retail is all about making the customer’s shopping experience go by much quicker. Examples of High Speed Retail can include drive-thru grocery stores, pop-up stores, mobile businesses such as food trucks, or any retailer that implements urgent promotions or limited-time sales.
The use of mobile POS systems is extremely common in High Speed Retail. This is because aside from being fast, lightweight and easy to set up, mPOS solutions run in the cloud and can update every aspect of the business (inventory, CRM, payments, etc) in real-time, thus helping merchants stay up-to-date at all times. Most mPOS systems also come with convenient capabilities such as emailing receipts and processing mobile payments, making it easy for High Speed Retailers to conduct business much faster.
Integrated Supply Chain
This is a network of businesses and contractors that work and coordinate closely together to manufacture, transport, distribute, and sell retail goods. Unlike a regular supply chain which is more of a linear process that follows a product from one phase to the next, an Integrated Supply Chain is more collaborative and can entail joint product development, shared information, and common systems.
Internet of Things (IoT)
IoT is the concept of getting objects such as cars or household appliances to “talk” to each other. More and more things can now connect to the web, and this enables them to communicate with one another. Smartphones can connect to speakers, clocks, lamps, and more.
How does this apply to retail? Forward-thinking retailers are now using connected devices to streamline in-store shopping and communicate with shoppers. A few examples of IoT in action include merchants using in-store devices to track real-time shopping behaviors and send tailored offers to customers.
Keystone Pricing
This is the practice of selling merchandise at a rate that’s double its wholesale price. Retailers use the keystone pricing formula because it’s simple and it usually covers costs while providing a sound profit margin.
Layaway / Lay-By
This is an agreement between the retailer and the customer in which the retailer puts an item on hold for the shopper until it is paid for in full. The consumer pays for the product in installments (interest-free), and will only receive the item once the payments are complete. The arrangement is a win for both parties. Layaway programs make it easier for the consumer to afford the products that they want, while minimizing risk on the retailer’s side.
Leveraged Buy-Out
An LBO is the purchase of a company using borrowed funds. The purchaser will use the company’s assets as collateral so they can get the loan to buy it, and they will use the acquired company’s cash flow (i.e. retail sales) to repay said loan.
Loss Leader
A known marketing tool in retail, a loss leader is an item that’s sold at a loss in order to attract more customers into a store. Once they’re inside, the retailer counts on the customer to buy other things together with the loss leader, thus generating profits for the business.
Markdown
Unlike limited-time sales or promotional discounts, a markdown is a devaluation of a product due to its inability to be sold at the intended price. The price of the merchandise is permanently reduced to move inventory and make room for new products.
Mass Customization
Author B. Joseph Pine II said it best: “Today I define Mass Customization as the low-cost, high-volume, efficient production of individually customized offerings.” Mass Customization refers to the practice of offering products that can be tailored to each person’s preferences, but can still be produced with mass-production efficiency.
Pine, in his Harvard Business Review piece entitled Beyond Mass Customization, advised businesses to take their offering (i.e. product or service) and break it apart into modular elements, similar to LEGO blocks.
According to Pine: What can you build with LEGO bricks? Anything you want, thanks to the large number of modules (with different sizes, different shapes, different colors) and the simple and elegant linkage system for snapping them together.
Then you must work with each individual customer, creating a design experience through some sort of design tool that helps customers figure out what they want.
If you want to see great Mass Customization in action, take a look at what NIKE is doing. Through its NIKEiD service, the shoe retailer gives customers a truly personalized footwear experience, allowing them to build their own pair from scratch.
Customers can simply go online, select the type of shoe they want to design (i.e. running, tennis shoes, etc.), and customize its look, fit, and performance. Everything about the shoe can be personalized, from the material that it’s made of, to the color of the famous NIKE swoosh on the side. Once they’re satisfied, shoppers can just hit the “add to cart” button and proceed to checkout.
Mobile Payments
This pertains to the services and technology that enable consumers to pay using their mobile phones, instead of traditional forms of payment like cash or credit cards. Mobile payment solutions come in many forms. These days, the most popular ones include NFC-based solutions such as Apple Pay or Google Wallet, and app-based solutions like PayPal.
Mobile Shopping
An increasingly common trend thanks to the popularity of smartphones and tablets, mobile shopping is the practice of purchasing goods or services using a mobile device. It’s almost like shopping online using a computer, only with a smaller screen. Mobile shoppers can complete their transactions either on a retailer’s mobile site or with the use of an app.
Mystery Shopping
This is an activity practiced by market research companies, watchdog groups, or even retailers themselves to evaluate product or service quality or compliance. The mystery shopper acts like a regular consumer and performs tasks like asking questions, submitting complaints, or simply completing a purchase like they normally would. They would then provide feedback or write reports detailing their experience with the retailer.
Niche Retailing
This term refers to the practice of selling only to a specific market segment. In other words, if you’re a niche retailer, you specialize in a particular type of product (or sometimes a few closely related ones). Niche retailers can be more nimble with their strategies, compared to broader businesses because they cater to specific audiences. This enables them to identify market segments easily and deploy unique and more targeted strategies to address their market’s needs.
A good example of a niche retailer is Sunglass Hut, a popular retail chain that specializes in selling sunglasses.
Omni-Channel Retailing
Consider this as the next generation of cross-channel and multi-channel retail. Omni-channel means establishing a presence on several channels and platforms (i.e. brick-and-mortar, mobile, online, catalog etc) and enabling customers to transact, interact, and engage across these channels simultaneously or even interchangeably.
Giving the customer the convenience and flexibility to purchase an item using your shopping app, and then letting them pick up the merchandise in your store, plus allowing them to process a return via your website, is an example of omni-channel retailing.
It’s important to note that omni-channel goes beyond simply being on multiple channels or platforms. Just because you have a website, a mobile app, and a physical store doesn’t necessarily mean that you’re an omni-channel retailer. In order to truly be one, you must fuse all those channels together so they give customers a seamless experience.
Planogram
This is a visual representation that shows how merchandise should be arranged on store shelves in order to drive more sales. It’s a model that indicates the best placement and positioning of your merchandise. Remember that product positioning can influence consumers’ purchases, so planning how they’re displayed and organized can maximize sales. Planograms can also guide and assist in store mapping and they enable retailers use space more effectively.
Pop-Up Store
Pop-Up-Stores are short-term shops or sales spaces that come and go within a given period. These stores can be set up in empty retail spaces, mall booths, or even in the middle of a park.
Looking to set up one for your business? Here are ten ways to save money on your pop-up store.
Prestige Pricing
Usually implemented by high-end retailers and lifestyle brands, prestige pricing is a strategy in which an item is priced at a high level in order to denote exclusivity, high quality, or luxury. When an item is prestigiously priced, it is meant to attract status-conscious individuals or consumers who want to buy premium products.
Louis Vuitton is a prime example of a retailer with a prestige pricing strategy. The French fashion house implements premium pricing on all its products; it doesn’t conduct sales, nor does it have any outlet stores.
Product Life Cycle
This term is used to describe the series of stages that each commercial product goes through when it hits the market. These stages include introduction, growth in sales revenue, maturity, and decline. You must pay attention to the life cycle of each of your products. Take note of their performance at each stage, and gather info that you can use to improve future products or offerings.
Point-of-Sale (POS) System
At its most basic level, a POS system functions as a cash register or till system that lets retailers ring up sales and keep a record of those transactions in their stores. But thanks to advancements in technology, POS systems – or ePOS systems – can now extend beyond the point of sale. These days, many POS solutions serve as retail management systems that handle everything from sales and inventory, to customer management and ecommerce.
Private Label
These are brands owned not by a manufacturer, but by a retailer or supplier. Retailers and suppliers purchase the goods, then label and market them under their name.
Relationship Retailing
This is a strategy that businesses implement to build loyalty and forge long-term relationships with customers. Relationship Retailing can come in the form of loyalty programs, personalized experiences, or superb customer service.
RFID
An acronym for Radio Frequency Identification, RFID is a chip embedded in an item’s label or packaging. It stores information about the product and is primarily used for tracking purposes. Thanks to RFID technology, retailers can increase their inventory accuracy and reduce out of stocks.
Inventory however, is only the beginning. Retailers are now looking into using RFID to get additional customer insights that would allow them to implement more effective marketing strategies and provide better customer experiences.
Self-Serve
In retail, this means letting customers select and pay for goods themselves, without requiring the assistance of a live staff member. Vending machines, kiosks, as well as self-serve checkout lanes in grocery stores all fall under this category.
Shrinkage
This pertains to the difference between the amount of stock that you have on paper and the actual stock you have available. In other words, it’s a reduction in inventory that isn’t caused by legit sales. The common causes of shrinkage include employee theft, shoplifting, administrative errors, and supplier fraud.
You can prevent shrinkage by beefing up security in your store. Monitor customers, employees, and vendors/suppliers for suspicious behavior. Have accountability policies to reduce human error. Also, do inventory counts regularly especially when it comes to high-theft items.
Stock-Keeping Unit
More commonly known as SKU, this term pertains to the unique identification of a particular product. It’s used in inventory management and enables retailers to track and distinguish products from one another. A SKU represents all the attributes of an item, including style, brand, size, color, and more.
Social Commerce
S-Commerce refers to retail models or ecommerce practices that incorporate social media, user-generated content, or social interaction. Do note that the role of social networks like Facebook or Twitter in S-Commerce isn’t necessarily to serve as platforms for buying and selling; rather, they’re meant to assist the process and help drive sales.
Mashable provides a great rundown of the types of Social Commerce on the web. According to the site, the seven species of Social Commerce are:
Peer-to-peer sales platforms (eBay, Etsy, Amazon Marketplace)
Social network-driven sales (Facebook, Pinterest, Twitter)
Group buying (Groupon, LivingSocial)
Peer recommendations (Amazon, Yelp, JustBoughtIt)
User-curated shopping (The Fancy, Lyst, Svpply)
Participatory commerce (Threadless, Kickstarter, CutOnYourBias)
Social shopping (Motilo, Fashism, GoTryItOn)
As an example, let’s look at Threadless. Threadless is an online apparel store that sources its designs from its community. The company enables artists to earn money and recognition for their designs by allowing them to submit their creations to the site.
The Social Commerce aspect kicks in when the Threadless community votes and scores the submissions in order to determine which designs are chosen for print. The winning artists are then paid with cash prizes as well as royalties from their shirt sales.
Showrooming
Showrooming is the consumer practice of examining products in a store, only to buy them for a lower price online. Shopping and price check apps perpetuate showrooming because they allow shoppers to compare prices and products using their phone as they browse the store.
Tribetailing
This term refers to the retail practice of tailoring everything you do–from your store design, to your ads, to your employees–for a specific tribe or group of people. With Tribetailing, you’re not trying to please the public or the masses. Instead, you’re zeroing in on a particular niche and are catering to them and only them.
Unified Brand Experience
In retail, this concept is all about establishing a consistent brand or identity throughout multiple channels or platforms, including brick-and-mortar, ecommerce, or mobile. So whether you’re marketing and selling to customers face-to-face, on your mobile app, or doing it online, you’ll be able to deliver the same messages and give them the same great experience. Successfully implementing this involves properly training your staff, investing in the right tools, and more importantly, having one clear strategy and message.
Webrooming
This is the practice of looking at products online before buying them in actual brick-and-mortar stores. It’s the opposite of showrooming, where customers look at products in physical stores only to buy them online. Image-based websites and social networks such as Pinterest or Instagram help perpetuate webrooming. Users see items that they like while browsing these sites and then go out in the real world to test or try them on.
Wearable Technology
Smartwatches, smartglasses, and fitness devices like FitBit all fall under the wearable tech. These are gadgets that people can wear, and they can often sync to an app or other cloud-based software.
Wearable technology can have some interesting applications in retail. For instance, merchants can potentially use them to gain insights into customer movement, activity, and behavior as they move about the real world.
On the backend, wearable tech can allow retail employees to do tasks such inventory counts hands-free. It can also aid communication by enabling team members to communicate with each other without having to use hand-held devices.
How MTO Operations Works?
Terms of trade agreement between manufacturing company and retailer will include product name, minimum stock quantity, margins, customer schemes, schemes and discounts, off-take activities.
Place the purchase order sent from retail HQ to manufacturer HQ mentioning the outlet location or centralized retail warehouse.
Supplier MTO manager receives the PO will forward the PO to company owned warehouse or to the distributor.
Distributor will supply the products and will create an invoice.
Now retailer will acknowledge the goods received with GRN (Goods received note).
Company merchandiser showcase the product to increase the off-take.
If the available stock goes below the threshold MBQ, the purchase manager release the PO.
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Differences between traditional trade and modern trade
| Issue | Modern Trade | Traditional Trade |
| Profile | – Chains with multiple locations with investors run by a trained management team | – Mostly one outlet run by an entrepreneur, family or employees |
| Decision maker | -Multiple layer decision-making process that requires time – Central offices and in some cases individual branches | – One or two decision makers – Often the owner or manager |
| Relationship with customers | – Limited inter-personal relationships | – Focus on inter-personal relations between the customers and retailers |
| Demand | – Consistent demand | – More seasonal — stop selling certain products during off-season |
| Customer base | – Large customer base and service areas that could include thousands of customers | – Mostly services the neighbourhood and local community |
| Brand and pack listing | – Required and could include lengthy and detailed processes, presentations, and documentation, prior to receiving approval | – Not required — negotiate with owner |
| Product range | – Extensive range with thousands of products | – Mostly limited range with hundreds of products |
| Economies of scale | – Retailers can absorb costs, often sell products as a loss leader or give promotional discounts to drive purchases | – Goods are traded mostly on maximum retail price (MRP) |
| Out of stocks | – Less common with improved inventory management | – More common and substitute brands based on availability at wholesale or distributor level |
| Promotions | – Provide ongoing promotions – Centralised promotion negotiations | – Some promotional prices – Negotiate promotions with owner or manager |
| Location | – Often in high traffic areas in a strategic location | – All locations, but some in congested areas and narrow streets |
| Financial flow | – Long credit cycle & bank transfers | – Cash and short credit cycle – Often provide credit to customers based on relationships |
| Procurement | – Purchase directly for manufacturers – Mostly centralised procurement – Require sales teams to provide detailed information e.g. sales, pack contribution, trends | – Mostly procure products though intermediaries, such as distributors and wholesalers – Purchase for a single store – Owner or manager makes the procurement decision |
| Deliver | – Scheduled – on-time delivery – Deliver to specified stores or warehouses | – More flexible on delivery times – Deliver to individual store |
| Lead times | – Longer but more structured | – Shorter to manage cash flow |
| Merchandising equipment | – Require specialised equipment – Multiple points available to display or cross-promote products – Placing equipment requires detailed negotiations with multiple stakeholders | – Standard equipment e.g. racks – Limited space available for equipment placement – Often use equipment such as coolers to store personal items e.g. milk, butter |
| Technology | – Enterprise point-of-sale (POS) scanning, vendor management inventory (VMI) and electronic data interchange | – Mobile phone or smartphone, and limited technology such as personal computers |
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I had never heard the term PLANOGRAM before reading this! I’m new to retail marketing and am now considering making a planogram for my mum’s boutique, just to try it. Thanks for the idea!
Hello! Thank You for the kind words.