Glossary of Industry Terms

Back-Order: Products ordered but not shipped due to depleted manufacturer’s inventory.

Brokers: Similar to manufacturers’ representatives, but work almost exclusively in higher volume food markets such as grocery and food service. Commission rates generally much lower than for “reps”, due to larger volumes.

Cash Flow: The amount and timing of income and revenues received to the amount and timing of expenditures made during a specific time period.

Central Buying Office or Organization: Main office or person who makes all the 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 decision making.

Channel of Distribution: Includes all of the businesses and people involved in the physical movement and transfer of ownership of goods and services from producer to consumer. Simplest form includes producer and consumer, but can include sales reps, wholesalers or distributors, and retail outlets.

Competitive Pricing: A pricing strategy whereby a retailer sets its prices based on the prices charged by his competitors.

Consignment: Items placed in a retail outlet, normally by the producers, that are not paid for until they are sold. The retailer can return unsold merchandise and ownership is not taken by the retailer until the item is sold.

Convenience or C-Store: A food or gasoline-oriented retailer that is often open long hours, and carries a moderate number of items usually impulse items such as snack foods and small gifts or souvenirs.

Cooperative Advertising: When a manufacturer, wholesale or distributor and one or more retailer share advertising costs.

Cost of Goods Sold: The amount paid to inventory merchandise sold during a given time period. It equals the cost of merchandise available for sale minus the cost value of ending inventory plus purchases made during the given time period.

Customer Service: The attitude and intangible activities put forth for the customers by a retailer or service oriented company in conjunction with the basic goods and services it sells.

Data-Base Management: The system used to gather, integrate, and store select information related to specific subject areas.

Demographics: Data on population and potential customer base that can be identifiable and measurable.

Direct Marketing: A form of retailing where a customer is first exposed to a good or service through the producer or manufacturer.

Distributors: An intermediary between producers and retailers, with large warehousing capacity and a sales and delivery force servicing stores in their area or region. Different from reps, in that they purchase directly in quantity, and take both ownership and possession of the products, for delivery. Distributors sell (often with the use of 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 the processing, packaging, labeling, or preparation of products and/or raw materials. Typically sold through a national network of manufacturer’s representatives.

Exclusive Product: When a supplier, sales rep or distributor enter into agreements that allows one or a few retailers as the only locations within specified geographic areas to carry certain products and/or product lines.

FOB (Free or Freight on Board): Destination point where buyers take ownership and responsibility for shipping charges

Gross Profit: The difference between net sales and the total cost of goods sold before expenses are included into the profit margin.

House Accounts: A retailer buyer or store who has been working with a manufacturer without the servicing of an outside sales rep. House accounts often prefer to work directly with the producer.

Impulse Purchases: When a consumer purchases products they had not planned on buying before entering a store.

Independent or Individual Sales Rep: One person or couple working as a sales rep without the benefit of a larger organizational umbrella.

Keystone Pricing or Keystoning: Double the wholesale price (50% margin) which is the rate where most gift stores place their pricing.

Knock-off Products: Term used to describe the imitations of a design. This imitated product (often imported) is manufactured and sold at a lower price than the original. This copy often ‘knocks’ the original product off the shelves of a gift store.

Manufacturers: Another name for producers who choose to manufacture a product for a target market or markets

Manufacturers Representatives: Independent sales representatives, or “reps” who call on retailers in many categories to sell your products, and items from many other companies, on a commission basis, 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 the gift, and aspects of the specialty gourmet industry.

Margin, gross margin, or product margin: The percentage of the selling price, above the manufacturing costs that a processing company would sell a product for; or above the wholesale cost that a retailer would purchase the product for. Where the sales price is $6.50 and the cost is $5, the MARGIN would be 23% (rounded) compared to the 30% markup. Mark-up percentage is always higher than margin percentage, since for mark-up the base in the mathematical division is the cost, while for margin, the base in the division is the selling price, going out the door.

Markdown: A reduced selling price on selected items to meet the price of another retailer, clear out shopworn, overstocked, or discontinued merchandise, or to increase customer traffic.

Mark-up: The amount or percentage that a product is “marked up” from delivered or manufactured cost, to create a wholesale or retail price. For example, if a manufacturer uses a mark-up of 30%, their case lot selling price would be 1.3 times what the accounting department says is their manufactured cost. In other words, if a finished case cost is $5, then $6.50 ($5 x 1.3) would be the selling price point, that the grocery chain or distributor would pay for that case.

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 a reduced price. Retail outlets are usually larger chain stores with simple displays and limited customer services.

Merchandising: The activities involved in obtaining and displaying products and making them available at an attractive price and quantity to the consumer.

Multiple-Unit Pricing: A policy whereby a retailer, wholesaler, distributor or producer offers discounts to customers who buy in quantity. Often a tiered pricing system.

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.

Open-to-Buy: The money or moneys allocated to planned purchases for a determined period of time less the amount of purchases already made. Often, when a buyer says they are open-to-buy it will mean that there is money left in the budget to make purchases at the current time.

Operating Expenses: The cost of running a business.

Order Lead or Turn Around Time: The period from the date an order is placed to the date merchandise is received, price-marked, and put on the sales floor.

Point-of-Purchase (POP) Display: A display that can provides consumers with information about a product and assists in selling a particular product.

Positioning: A company plan that projects an image relative to its product category and its competitors, and elicits responses to that image.

Producers: Another name for manufacturers who choose to produce a product for a target market or markets.

Profit-and-Loss (Income) Statement: A summary of a businesses revenues and expenses over a particular period of time.

Psychological Pricing: Buyers perceptions of retail prices or what the retail pricing should be regardless of the actual pricing.

Rack Jobber: A wholesale middleman who maintains stock of convenience type merchandise handled by a distributor such as snack foods, postcards, etc. The rack jobber commonly inventories display racks in retail stores, periodically checks the stock, and replenishes inventories. Also called a service merchandiser.

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 placed on a product to sell to the ultimate consumer. Typically, in the gift industry, this price is approximately twice the price paid for the item by the retail outlet.

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”. Protection for the retailer to insure fair competition in the marketplace.

Sales Promotion: The paid marketing activities that encourages consumer purchases.

Sales Rep Organization of Rep Group: An organization of several sales reps working under one business umbrella, often assigned to a specific territory of several states or regions.

Specialty Store: A retailer that concentrates on selling one type of goods.

Suppliers: Companies that produce and market a line of raw materials used by manufactures

Target Margins: For importers and most types of “gift” manufacturers, the target margin is 50% (100% markup).

Terms of Credit or Sale: The conditions or requirements set forth in a sales contract, order or agreement, such shipping, 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 its price per unit of measure.

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 central warehouses.

Wholesale Price: The price a producer or distributor places on a product to be resold at a increased price to the ultimate consumer. In the gift industry, this price is commonly 50% of the retail price.

Wholesale Showrooms: Large facilities in major metropolitan areas where manufacturers’ representatives showcase and sell lines of producers and importers they represent. A typical facility will offer hundreds of showrooms on multiple floors. (Check out website for more information.)

Wholesale Trade Shows: Large trade shows, offering hundreds of booths from producers, reps, importers, and distributors, where only buyers from the trade (retailers and distributors) are registered and allowed access. Shows operated by independent companies in the gift and specialty food trade, and primarily by distributors in the grocery trade.

Vendors: An organization or manufacturer that supplies specific goods or services to the retailer.

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