Every business sector has it own vocabulary…
That collection of terms or definitions which sounds like gobbledygook, if you’re not an insider.
And retail is no different.
What make retail terms special is that understanding the key ones and applying them to your small business can mean big profits.
But I know that small business owners like you, often don’t have the time to go in search of the very resources you need to grow your business.
So, I have selected 20 retail terms which I think you should know and I went ahead and unpacked them so you can understand them quickly.
But why stop there? I asked myself…
No reason really…so, once you understand the concepts, I discuss how you can apply them to improve some aspect of your business.
Here they are, your 20 retail terms, in alphabetical order…But if you like, you can go directly to the ones that interest you by using the “Search Headings” below…
If you’re in a mall, this is the largest store in the location. It’s usually a well-known department store or retail chain. People also refer to them as “key tenant” or “anchor tenant”. These stores are great neighbors to have since they usually attract loads of foot traffic to the area. Now you have more opportunities to be discovered.
When you’re near such a store, don’t stand idly by and hope that some of that traffic finds its way into your store! Approach the store and discuss how you can partner with them for a more focused and positive spin-off from their traffic for your store.
Perhaps you know this definition by its more common name “check out”. It’s that point in a retail store that shoppers head to when they’re ready to pay for their items. Most cashwraps or check-outs will have some items for sale in that area.
The secret here, is for you to place small, emotional or impulse items in this area. When you do this, people add them in as they are checking out, guaranteeing you a steady stream of easy cash.
Click and Collect
This is a service in which retailers allow shoppers to buy items online and then pick them up in store. Savvy consumers love stores that offer click-and-collect because it makes life a lot easier for them. And they can also collect items at their convenience without paying for shipping.
Here’s how your revenue opportunity arises. Once the customer is in-store, have your trained customer service reps (CSRs) encourage them to browse the physical store. They should be sure to guide them to areas which are different from those of their online purchase. Your CSRs can them “sell” them related products which complement their original purchases.
As retail terms go, this one refers to the practice of bundling products from different categories to drive add-on sales. For example, recently in the meat section of my supermarket, there were a selection of seasonings tacked on to the display rack of the meat. This is cross merchandising in action.
If you can become creative (not outlandish!) with how you group your categories of products, you can delight your customers and increase your sales in the process. To me, the most effective bundling is when you bundle dead stock (see#5 below) with fast-moving stock.
Dead stock is another one of those retail terms which I hope you never have to use in your business. Sometimes called “dead inventory”, it refers to products which have been in stock for a while or worse, have never been sold.
If you can get past you ego, you can get rid of dead or unmoving stock. You can hold sales or you can donate it to worthy causes. But the best thing is not to have it in the first place. Therefore, you must consistently analyze what your customers are asking for as a guide to what you purchase. In addition, manage your stock sensibly and ensure that your sales and purchasing departments work closely together.
Follow this process. A customer orders a product from a retailer. But the retailer does not stock the item. So, s/he contacts their manufacturer or distributor and have them ship the order directly to the customer. The retail term “drop shipping” is used to describe this process.
As long as you have reliable distributors, this arrangement saves you money. You don’t have to carry a large inventory therefore, you save money not only on the level of the inventory but on the storage cost as well.
Green retailing is one of the new retail terms brought about by the environmentally friendly practices which retailers get into. These can include switching a product’s packaging to a recyclable one or giving customers reusable shopping bags instead of plastic one. Other practices, such adding solar panels or replacing store lighting with energy-saving alternatives can also be considered as green retailing.
At first this may require you to spend money that you would prefer to spend on stock. But consumers are becoming very socially and environmentally conscious. The extra effort and money you put out to make the switch will be well worth the additional sales.
High Speed Retail
High speed retail is the type of retailing that satisfies consumers’ need for faster services and less wait time. In other words, it’s how you make the customer’s shopping a quick and easy experience. Examples of High Speed Retail can include drive-thru grocery stores, pop-up stores (see #13 below) and mobile businesses such as food trucks.
If you can combine your brick and mortar store with some kind of complementary high-speed operation, you can significantly increase your revenue. For example, a mobile store which sells carefully selected products, at different locations on specific days, can be a great way to increase your revenue and be well worth the cost of setting it up.
Loss leader is one of those retail terms which belongs to the marketing group. It describes a popular marketing practice in which an item is sold at a loss in order to attract more customers into your store. Once inside, the retailer expects the customer to buy other items along with the loss leader.
This practice is intended to generate profits for the business, but this does not happen automatically. You have to match the loss leader with complementary high profit items which the customers are also likely to buy. In addition, your CSRs must be highly trained to guide them towards these items and encourage them to make the sale.
A markdown is when you permanently reduce the price of a product because you could not sell it at the intended price. It is a common practice to confuse this definition with other retail terms such as “limited-time sales” or “promotional discounts”.
A markdown moves inventory and therefore allows you to make room for new, correctly priced products. So, you make money twice – on the products that were not moving before and on the correctly priced products.
This is one of my favorite retail terms. I’m a big fan of niche marketing for small businesses. Niche retailing describes the practice of selling only to a specific market segment or niche. This means you sell only to a particular type of customer or specialize in a particular product.
Many small retailers are afraid to do this because they believe they are missing out on sales, when they do not carry a little of a lot. But when you specialize, you can be more flexible with your strategies. You can identify market segments more easily and deploy unique and targeted strategies to address their needs. This results in more revenue and faster.
A planogram is a detailed floor plan of a store. You can use it to visually represents where you can place products and product categories throughout your store, in a way that best drives sales and how to use your space effectively.
If you set up your store without the help of a planogram, you have the opportunity to use one if you are ever redesigning. The way you layout your store is critical to how much your customers will buy. I once use this planogram software to layout a small store. It was fun and extremely beneficial for my then lack of experience with laying out a store.
There are several other retail terms used to describe Pop-up Retail. These include “pop-up store” or “flash retailing”. However it is defined, it is a fast-growing trend in retailing that excites me. A pop-up shop is a temporary, physical version of some aspect of your brick and mortar shop. They’re set up anywhere from 3 days to 3 months, usually in high traffic areas like malls, busy streets, etc.
They excite me because you can use them to move slow-moving products; test a new market, product or location; build awareness for your brand and so much more…all for a fraction of the price. Something for my Caribbean retailers to think about…
Product Life Cycle
This term is used to describe the series of stages that each commercial product goes through when it reaches the market. These stages include introduction, growth in sales revenue, maturity, and decline.
Your cost savings and your revenue growth will be determined by how much attention you pay 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, the retail term describes the hardware and software that allows a retailer to check out customers, record sales, accept payments, and route those funds to the bank.
But the right retail point-of-sales can do more than record sales. If you choose the best POS system it can provide you with the information you need to help you make the decisions that will determine your long-term growth.
Private label is a retail term that collectively describes the brands which a retailer owns. in other words, they are not owned by a manufacturer or supplier. Retailers purchase the goods, then label and market them under their name.
“Private Label” is one of those retail terms you need to know. It a form of personal branding in which you create your own unique image, which gives you a strong marketing identity. This in turn promotes stronger customer recognition and loyalty. Private labeling also gives you more control over pricing, sales and distribution.
This retail term is a euphemism which describes the difference between the amount of stock you have on record and the physical stock you have available. The common causes of shrinkage include employee theft, shoplifting, administrative errors, and supplier fraud.
No doubt you understand that shrinkage increases cost and reduces revenue and must therefore be prevented. 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 and also, do inventory counts regularly especially of high-theft items.
Visual merchandising is a very important member of my 20 retail terms. It refers to anything that can be seen by the customer, starting first from outside, and then moving to the inside of a store. These can include displays, decorations, signs and layout of space. Visual merchandising is extremely important because its overall purpose is to get people to come into the store and spend money.
Therefore, you can determine and use in-store traffic flow patterns to calculate the best places to put displays, so the greatest number of people will see them. This is important because studies have shown that visual merchandising can influence the way a customer perceives the quality of an item. If a customer believes you items are high quality, they will buy more.
Driven by social media, webrooming describes the practice of looking at products online before you go to buy them in a physical store. It’s the opposite of showrooming, where customers look at products in physical stores with every intention of buying them online.
You need to exploit this practice by placing great images of your products on image-based websites and social networks such as Pinterest or Instagram. Please do not use enhanced images which will lead to disappointment when customers show up in store to buy.
Wearable technology is a comprehensive term for electronics that can be worn on the body. Smartwatches, smart glasses, and fitness devices like FitBit all fall under wearable technology. One of the major features of wearable technology is its ability to connect to the internet, enabling data to be exchanged between a network and the device.
This ability to both send and receive data mean wearable tech can have some interesting applications in retail. For example, on the backend, wearable tech can allow retail employees to do tasks such inventory counts hands-free. This could improve and save time. on the front end, the uses for improving CRM are endless.
Your next step with these retail terms…
These retail terms are by no way the only ones you should know. But I want you to know them for two reasons:
- They are important to you as Small Business Owners and
- I want you to implement the advice which I gave after each definition as it applies to you.
When you do, you will help your business grow and you will remain in business far longer than statistics say you will.