Back-Order: Products ordered but not shipped, usually due to depleted manufacturer’s inventory.
Balance Sheet:A financial document that illustrates the relative financial strength of a company at a specific point in time. Assets less Liabilities equal Net Financial Value.
Brokers: Similar to manufacturers’ representatives, but work almost exclusively in higher volume food markets such as grocery and food service, import-export, etc. Commission rates are generally much lower than for “reps”, due to the larger volumes.
Cash Flow: The amount of net cash receipts over and above expenses paid over the course of an accounting period.
Central Buying Office or Organization: Main office or individual who makes inventory (and/or other) purchasing decisions for a group or chain of retail outlets.
Chain Store: Multiple retail outlets under common ownership or management that engage in centralized purchasing and other duties, including marketing.
Channels of Distribution: Includes all of the business entities involved in the paperwork and physical movement of goods and services from producer to consumer. The simplest channel would be a manufacturer selling direct to a consumer, but channels may include sales reps, brokers, wholesalers, distributors, rack jobbers, trade shows, and/or retail outlets.
Competitive Pricing: A pricing strategy whereby a retailer sets prices to compare favorably with – usually lower than – prices charged by competitors.
Consignment: Items stocked in a retail outlet, normally by the producers, which are not paid for by the retailer, until after the items are sold. The retailer may return – or the producer may claim – unsold merchandise, usually at any time. Legal ownership of items is not taken by the retailer until the item is sold, even though they maintain physical custody.
Convenience or C-Store: A gasoline-oriented retailer that is often located along major arterials, and open long hours, while carrying a limited offering of high-turnover items such as deli and snack foods, beverages, and household foods and necessities.
Cooperative Advertising: When a manufacturer shares advertising costs with or wholesaler or distributor or retailer, or the wholesaler or distributor shares advertising costs, with a retailer.
Cost of Goods Sold: The amount paid for wholesale merchandise sold during a given accounting period, including delivery costs. Basic equation is Beginning Inventory PLUS Wholesale Purchases MINUS Ending Inventory, for the time frame in question.
Customer Service: The attitude, service level, policies, and other intangible activities put forth toward prospects and customers by a business – including front line employees – in conjunction with the basic goods and services it sells.
Data-Base Management: The system used to gather, integrate, store and USE data for assistance in the management of a company.
Demographics: Identifiable and measurable ata on population for purposes of defining and marketing to a potential customer base.
Direct Marketing: A form of retailing where a producer/manufacturer, importer, or distributor markets directly to an end consumer without the use of a retailer.
Distributors: An intermediary between producers and retailers, with large warehousing capacity and a sales and delivery force servicing stores and/or other businesses in their area or region. They purchase from manufacturers or importers in quantity, and take both ownership and possession of the products, for delivery. Distributors sell (often with the use of in-house or independent reps or brokers) and collect payments directly from the stores. This is the dominant method of food distribution in grocery and food service.
Equipment Suppliers: Companies that manufacture or import specialized equipment for processing, packaging, labeling, or preparation of products and/or raw materials. Typically sold through a national network of manufacturer’s representatives.
Exclusivity: When a manufacturer, sales rep, distributor or other supplier enters into an agreements that limits the number of retailers or other suppliers that may carry a certain product, or product line, within a specified geographic area or types of stores.
FOB (Free on Board): Physical point in the transfer of goods from seller to buyer, where the buyer takes responsibility for shipping charges, and usually ownership.
Gross Profit: The difference between GROSS sales and the cost of goods sold (CGS) before operating expenses are taken out to determine net profit.
House Accounts: An account that a producer – for whatever reason – reserves for selling direct, rather than allowing a rep, broker, or distributor to take on that account, and receive the margins or commissions on sales to that account.
Impulse Purchases: When a consumer purchases products they had not planned on buying before entering a store.
Independent Sales Rep: One person or couple working as a commission-only sales rep without the benefit of a larger organizational umbrella.
Keystone Pricing or Keystoning: Doubling the wholesale cost by the retailer, which may or may not include shipping fees, depending on the retailer. This is standard markup in some industries, such as gifts. However, in areas with high real estate values, such as large cities in New York, California, or Hawaii retailers often triple the wholesale cost or more.
Knock-off Products: Term used to describe imitations of a product design or concept. This imitated product (often imported) is manufactured and sold at a lower price than the original, often ‘knocking off’ the original product from retail shelves.
Manufacturers Representatives: Independent sales representatives, or “reps” who call on retailers to sell products for one or more, usually non-competing manufacturers or distributors, on a commission basis, and paid monthly. The producer ships, invoices, and collects from the retailers, who are the mutual customers of both the manufacturer and the importer. A dominant force in MANY industries.
Margin, gross margin, or product margin: The percentage of the SELLING PRICE, which is above and beyond the cost of purchasing.
Mark-up: The amount or percentage that a product is “marked up” from DELIVERED COST, to create a wholesale or retail price.
Markdown: A reduced selling price on selected items to meet the price of another retailer, clear out shopworn, slow moving, overstocked, or discontinued merchandise, or to increase customer traffic. Basically, another name for a “sale”.
Mass Market Retail Outlet: A retail store or chain of retail stores that sell goods and services to a broad spectrum of consumers, usually at very competitive price points. Usually larger chain stores with simple displays and limited customer service.
Merchandising: The activities involved in displaying products and making them easily available and visually attractive to a prospective buyer.
Multiple-Unit Pricing: A policy whereby a retailer, wholesaler, distributor or producer offers discounts to customers who buy in quantity. Often called a tiered or quantity-based pricing schedule.
Net Profit: Gross profit minus operating expenses.
Niche or Target Market: Distinct and definable segments of a larger market that a business seeks to attract and satisfy with targeted goods and/or services suitable for the niche market.
Open-to-Buy: The period of time during which a retailers is “open” to buying inventory, if the inventory budget still has funds remaining.
Operating Expenses: The expenses of running a business not including the cost of inventory (cost of goods sold).
Order Lead or Turn Around Time: The period from the date an order is placed to the date merchandise is received, priced, and put on the sales floor.
Point-of-Purchase (POP) Display: A display which includes product inventory, plus promotional inventory about that inventory, to assist in persuading browsers to buy. Often used for “impulse” product categories.
Positioning: A business and marketing strategy to “position” a product in the minds of consumers… thereby appealing to the prospect segment for which the positioning has value, and hopefully eliciting a buying response.
Producers: Another name for manufacturers who choose to produce a product for a target market or markets.
Profit-and-Loss (Income) Statement: A financial document which provides summary of business operations, primarily revenues and expenses, over a particular period of time.
Psychological Pricing: The practice of pricing slightly below whole numbers or “jumps” to give the perception of a lower price. E.g. 99cents instead of $1; or $49.95 instead of $50.
Rack Jobber: A type of wholesale middleman (distributor) who maintains stock of convenience type merchandise and fills allocated display racks or shelves in retail stores, periodically checking the stock, and replenishing inventory. Also called a “service merchandiser” because of the added “keep full” service.
Retailers: Companies that – usually from a physical structure, but increasingly over the internet – sell products directly to end consumers and collect sales tax (where applicable) on the transactions. Some direct sales companies and other organizations might also fit in this category. Note the confusion of terms, since retailers buy at wholesale and sell at retail, which what makes them “retailers”.
Retail Price: The price a retail store places on a product to sell to the ultimate consumer. Typically, in the gift industry, this price is approximately double the price paid for the item, including or not including the delivery costs, depending on retailer policy.
Robinson-Patman Act: Bars manufacturers and wholesalers from discrimination in price or sales terms in selling to individual retailers as long as these retailers are purchasing products of “like quality”.
Sales Promotion: Paid marketing activities which seeks to accelerate the rate of consumer purchasing.
Sales Rep Organization of Rep Group: An organization of several sales reps working under one business umbrella, covering a specific territory of several states or regions.
Specialty Store: A retailer that concentrates on selling one category of goods E.g. gourmet foods.
Suppliers: Companies that produce and market a line of raw materials or ingredients used by manufacturers.
Terms of Credit or Sale: The conditions or requirements set forth in a sales contract, purchase order, or agreement, such shipping costs, minimums, payment options, or extension of credit.
Unit Pricing: A practice, whereby retailers expresses price in terms of both the total price of an item and the price per unit of measure (e.g. per ounce). Common in larger grocery stores and chains.
Universal Product Code (UPC): A classification for coding data onto products by a series of thick and thin vertical lines. It allows retailers to record pertinent data such as the model number, size, color, etc. when an item is sold, and to store or transmit the data to a computerized data system to monitoring unit sales, inventory levels, and other factors.
Wholesalers: Similar to a distributor, EXCEPT they generally do not have a sales force or offer on-site delivery, instead shipping to retailers by common carrier from one or more central warehouses.
Wholesale Price: The price a producer or distributor places on a product to be sold to a retailer, who will then mark up the product for their customers.
Wholesale Showrooms: Large facilities in major metropolitan areas where manufacturers’ representatives, importers, distributors, co-ops, and manufacturers, showcase and sell lines to retail buyers. A typical facility will offer hundreds of showrooms on multiple floors.
Wholesale Trade Shows: Large temporary marketplaces, offering hundreds or thousands of exhibitor booths by producers, reps, importers, and distributors. Only buyers from that trade or industry (e.g. retailers and distributors) may register as an attendee and obtain access.
Vendors: An organization or manufacturer that supplies specific goods or services to businesses in a certain category, or range of categories, in a particular industry.