When it comes to talking business, the retail industry is a lot like NASA – there’s a specific name or acronym for every situation. If you don’t keep up with the jargon, you won’t know what anyone’s talking about. Retail jargon may pose a particular problem for the school supply industry since many of the small independent retailers who operate its network of teacher stores began their careers as educators, not merchants
Selling classroom supplies and resources did not start out as traditional retail. The precursors to today’s storefronts were warehouses for catalogers who called on school systems. Purchases were often made (and still are) using a purchase order. The closest thing to a retail transaction in our industry’s early days occurred when a teacher was allowed in a warehouse to shop its shelves, make some selections and pay with her own cash.
The industry’s retail side continues to evolve. While some of our retailers cling to their educational roots, others have become savvy merchants who, today, can walk the walk and talk the talk as they implement their CRP and practice their CRM.
In today’s up/more down economy, we could all use a healthy dose of retail savvy. That’s why we’re bringing you this list of helpful, interesting, and decidedly retail terms developed and used by Management Ventures Inc. (MVI). MVI is a leading retail research and consulting firm specializing in breakthrough retail insight, analysis and thought leadership. Headquartered in Cambridge, Massachusetts, with operations in London, MVI’s analysis and insight covers the big guys, including Target, Walgreens and Wal-Mart.
The company’s 25-page list of 300 terms pertains to retail accounting, marketing strategies, inventory, display, merchandising and fixturing. Some are industry standard, others were “invented” by MVI when the need arose. The list was designed to ensure that both manufacturer and retail clients, along with internal staff, are always speaking the same language, said Ray Gaul, MVI’s director of research. It’s featured prominently on their website (www.mvi-worldwide.com) so that it can be accessed by MVI clients at any time.
From the company’s 300 terms, we chose about 50. Here’s a look at what big retailers talk about.
4 P’s
A framework used to describe various merchandising attributes: product, price, promotion and placement.
5 by 5 rule
An item should convey its value proposition within five seconds from at least five feet away (derived from Costco).
Action Alley
The sales area of the store that customers see immediately upon entering.
Big Middle
An MVI classification for retailers who don’t target a particular type of shopper or consumer, or a particular type of shopping trip. These retailers try to be all things to all people, and their lack of focus tends to inhibit their growth.
Choosers
A retailer whose growth strategy focuses on a key consumer type – its target market.
COGS (Cost of Goods Sold)
A retailer’s cost to generate sales. This represents the retailer’s acquisition cost of products for resale.
Compliance Manager
A retail philosophy whereby the store manager is given very little autonomy or decision-making authority, reducing his role to executing direction that comes from a higher source in the company. It’s the opposite of an “empowered manager,” who has significant authority over significant areas of store operations.
CRP (Continuous Replenishment Process)
An ordering process based on the exchange of electronic data between a store and a distributor that indicates when a store is running low on a product and needs a new shipment. CRP programs reduce inventory levels and operating costs by having products delivered on a frequent, as-needed basis. With CRP, consumer demands based on scan data, warehouse movement and sales forecasts drive warehouse replenishment orders and shipping.
CRM (Customer Relationship Management)
All aspects of interaction a retailer has with its customers. This includes methodologies, software, and usually Internet capabilities that help an organization manage customer relationships in an organized way. In retail, it often refers to the systematic collection and utilization by a retailer of data such as the identity, spending patterns and interests of each of its customers, in order to foster customer loyalty through individualized correspondence and tailored benefits and offers.
Days Sales On Hand
The amount of gross inventory (expressed in days) that a retailer has on hand.
Destination
Sections of the store with high consumer traffic. (As an example, MVI director of research Ray Gaul noted that areas in a grocery store that feature Red Box video rental machines have become new destinations in those stores.)
DSO (Days Sales Outstanding)
The average number of days that a company takes to collect revenue after a sale has been made. A low DSO number shows that it takes a company fewer days to collect the revenue; a high DSO number indicates that the company is selling its products to patrons on credit and taking more time to collect revenue. DSO = (Accounts Receivable/Total Credit Sales)/Number of Days
Donor
A retailer that does not deploy either a Tailor or a Chooser growth strategy. A donor’s growth tends to be slow, and they “donate” their growth opportunity to retailers using one of the two other strategies.
EDLC (Everyday low cost)
A pricing strategy in which the cost of goods is consistently low. Also refers to Wal-Mart’s practice of ensuring that supply chain costs are kept low to supports its EDLP strategy.
EDLP (Everyday low price)
A strategy that keeps product prices consistently low. (See hi-lo and price elasticity.)
Facing
The number of times a product is merchandised on a shelf or peg hook. Better selling products may have more than one facing. A “dummy facing” is used when the actual product is not in stock. Another product with the same dimensions is temporarily faced backwards to make sure that the space remains available when the “real” product is restocked.
Flex Space
Space within a store that can be manipulated to feature various types of merchandise such as promotional or seasonal items. It does not have designated year-round merchandise.
FOB (free on board)
When shipping goods, a term to indicate who pays transportation costs, and /or the point at which ownership of the goods transfers from seller to buyer.
Gondola end
A key location at the end of an aisle where the product stands alone and is highly visible to customers. According to MVI’s Ray Gaul, gondola end is often used interchangeably with “endcap” although an endcap has a more promotional connotation.
Hi-Lo
A pricing strategy that varies between pricing product low to stimulate selling, and high to augment margin, usually leveraging circulars to support the strategy.
Hurdle Rate
A category-specific measurement of expected or required sales per SKU per building.
Incremental
An increase in product sales volume attributed to a special promotion, merchandising plan, or distribution through a particular retail outlet (incrementally).
IRC
Stands for Instant Redeemable Coupon or Instant Rebate Coupon.
Loss Leader
Merchandise that is sold at or below cost intended to bring customers into the store.
Mapping
The process of determining locations and adjacencies of departments and merchandise inside a store.
Merchandising Ladder
A framework that plots items on a continuum that ranges from “Opening Price Point” (OPP, the lowest price point in a particular category) to “Good,” “Better” and “Premium.” Items often enter the merchandise ladder at the good or better levels, and are either pushed down to OPP or rise up to the premium classification due to added features and benefits.
Mystery Shop
A form of market research. A store visit requiring merchandiser anonymity in order to evaluate customer service or gather product information in an unbiased manner.
Natural
When a product is literally “all natural” and contains no synthetic ingredients, like artificial colors, flavors or preservatives. “Organic” is a subset of natural. An organic product has been certified by a third party to meet USDA organic standards.
Open-to-buy
A monetary balance, similar to a line of credit, which is used to commit product purchases. Existing inventory is counted against the balance.
Overhead
In store fixturing, it refers to the shelf above a section that holds overstocks or discontinued items. Also known as cap shelf.
PDQ (Pretty darn quick) Displays
A display that allows for quicker stocking of merchandise (e.g. merchandise shipped from the manufacturer in its own display case). It requires little effort on the retailer’s part.
Preferred Product
Shelves that are located between hip level and eye level.
RACI (Responsible, Approver, Consulted, Informed)
A framework used to map where decisions are made within an organization.
Retail-tainment
Used to describe the entertainment factor or excitement created in a store through various marketing activities.
Scorecard
A tool that helps measure performance by tracking various metrics including sales, profitability and inventory.
Secret Shopper
A merchandiser who samples services or products without the knowledge of the employees, and reports the findings to the retailer or the manufacturer.
Service Recovery
Dealing effectively with customer complaints, problems and dissatisfaction.
Shopper
The purchase decision-maker at the shelf. Shoppers are frequently not the end users and have various shopping purposes or “shopping modes” – social, planned, immediate, expert, constrained and opportunistic. Here’s an example: An individual who comes into your store on a Saturday to select a birthday present (planned), versus the same individual who stops in on a Tuesday afternoon to buy file folders, library-card envelopes, and several packs of origami paper (immediate).
Shopper ROI
A concept that relates the functional performance and emotional connections consumers have to a product and/or store to the cost of the product and or/shopping trip (in terms of both time and money).
SKU
Stock Keeping Unit
Tailors
A retailer whose growth strategy focuses on adapting their format to meet the needs of a trading area in a regional location.
Trade Down
When a consumer chooses to purchase a lower-priced item. Often this is done so the consumer can purchase a higher priced item in another category in which he plans to shop. This enables the consumer to “trade up” somewhere else in the store or at another outlet.
Treasure Hunt
A merchandising technique used by retailers in which certain unexpected items, often high-end/high-value, are included in the assortment. It creates a sense of excitement for the shopper and encourages additional trips to the store to see “what might be there today.”
Trip Driver
Specific items or services that prompt a consumer to shop a particular retail outlet.
Value Proposition
“A value proposition is a clear statement of the tangible results a customer gets from using your products or services. The more specific your value proposition is, the better.” (Jill Konrath, author of Selling to Big Companies.) |
