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Retail Trade Business Glossary
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Gift Basket Business and Retail business
Terminology
'Lingo'
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When operating your Gift Basket business, you'll want to
become familiar with general retail business and
giftware terms. Use the list below as a reference. |
Advance Dating
A future date at which payment terms will commence. Also
known as "Season dating".
Advertising Allowance
A discount given to the retailer to compensate for the
expense of advertising a product line or item. The
amount can be between 2 to 10 percent off the invoice.
Anticipation
If a store anticipates that their yearly sales of a line
will reach a certain amount, they can negotiate to
receive a vendor "Anticipation" discount.
Approval Sale
When a customer is offered unlimited return privileges;
the sale is subject to later approval or selection.
Automatic Cancellation Date
The store can specify a date that goods must be shipped
by vendor; or the sale is cancelled.
Automatic Reorder
Automatic ordering of a specified quantity of
merchandise, typically when low stock levels are
reached.
A/O
At once. Goods must be shipped and received by the
retailer immediately.
A.R.O.
After Receipt of Order. Applies generically.
A.S.A.P.
As soon as possible. Shipment of merchandise as soon as
goods are ready. Also, "As Ready" (AR).
Backup Order
An additional quantity of vendor goods reserved by the
buyer to ensure that future orders can be shipped
promptly by vendor.
Basic Stock
The minimum "bread and butter" amount of goods kept for
sale by the retailer through the lowest sales period of
the season.
B.C. (Best Cheapest or Best Way)
Alternative shipping methods if UPS cannot ship
merchandise: a rare occurrence indeed.
Beginning Inventory
The amount of inventory on hand when a particular time
period begins.
Billing Address (Bill To)
The address where you are to send or receive payment -
if different from your shipping address.
Bill of Lading
A document that verifies the carrier has received, and
is responsible for the shipment - also known as an
"airway bill" for air shipments.
B.O. (Back Order Merchandise)
When the vendor can't ship to you right now, "B.O" is
ordered, referenced with the available ship date.
B.O.M.
Beginning of month.
Breakeven Point
The point at which your operating costs, advertising
costs, and inventory costs are even with your store's
income.
Cancellation Date
Incentivizes the vendor to ship before a buyer-specified
date, or else the order will cancel automatically.
Cash Discount
A vendor-provided discount for payment of the invoice
within a certain period of time. COD discounts are
common.
Chain Discount
A type of trade discount given to retailers, when the
vendor provides pricing at the suggested retail price
only. In such a case, a typical chain discount would be
"Keystone", or 50% off.
Charge Backs
When the retailer bills the vendor for returned or
damaged merchandise, cooperative advertising or other
adjustments.
Cost Complement (CC)
Cost of goods plus cost of freight. Usually seen as a
percentage of the retail price. (CC%).
Close-out
Slow-moving or discontinued stock that is offered at a
low price for quick sale.
C.O.D.
Cash on delivery. Retailer must present a cash payment
to delivery driver at time of receipt. UPS drivers will
accept checks unless the packing slip states COD CASH
ONLY. UPS also adds a COD charge on to the shipping
charges. However, this is often compensated for by
vendor discounts for COD payment.
Cumulative Mark-on
The total amount of profit possible for you to make on a
given amount of merchandise in a specified period of
time.
Customer Returns
Merchandise purchased by a customer who returns it to
the store for credit or refund. The total value of
returns must be deducted from gross sales to determine
net sales. All returns must be re-entered into
inventory, re-marked and returned to stock for sale.
Dating
The length of time a vendor extends to a retailer for
the payment of invoices. For example, "Net30" (30 days);
"Net120"(120 days).
Delivery
The period of time between shipping of merchandise by
the vendor, to receipt of merchandise by the retailer.
Depreciation
Mark-downs, theft, or damage are examples of
depreciation of value of an inventory.
D.F.I.
Deduct from invoice.
Discount Earned
When cash discounts are earned, by COD payment to
vendor, for example, the Discount Earned is $ amount of
profits resulting.
Drayage, Local
Local transportation of merchandise.
Due Date
The date by which a bill, or invoice, must be paid in
order to receive a cash discount. Due date is a measured
period from the original date of the invoice.
E.O.M.
End of month.
E.O.M. Dating
A payment term that stipulates that an invoice is to be
paid with a given number of days after the end of the
month in which the goods were shipped.
Ending Inventory
The amount of inventory on hand when a particular time
period ends.
Freight on Board (FOB)
The place where the retailer takes legal possession of
(receives) the merchandise, and pays additional costs
for shipping. For example, if you live in Florida and
order goods that are FOB Los Angeles, you are
responsible for the freight charge from Los Angeles to
Florida.
Freight Allowance
Discount given by the vendor equal to the cost of
shipping of the merchandise.
Freight Costs
The cost of shipping the goods from vendor to retailer.
Gross Margin
Net sales minus the total cost of merchandise sold.
Gross margin is the cumulative mark-on adjusted by the
cost of mark-downs and shortages, plus cash discounts.
Gross Sales
The total of all transactions in the cash register or on
sales tickets. Express in retail dollars.
Guaranteed Sale
A signed agreement whereby buyer can return unsold goods
after they have been exposed for sale for a given
period.
H.F.C. (Hold for Confirmation)
Asking a Rep/Manufacturer to hold order for a few days
before placing. Initial Mark-on. The mark-on (retail $
minus cost $) based on the original retail price of the
merchandise. Over the course of time, the initial
mark-on is usually modified by factors such as
mark-downs, mark-ups or discounts.
In Store
Date you expect merchandise to arrive to your store.
This would be a date later than a ship date.
Inventory, Book
The original retail value of all the merchandise charged
to a store, or a department, adjusted to reflect
increases or decreases in the value of that stock. These
adjustments are made every time merchandise is added to
stock, goes out of stock, or a price is changed. This
figure is always expressed in dollars and is an integral
part of the retail method of accounting.
Inventory Shortage
If the physical inventory is less than the book
inventory, the difference is called "shortage."
Invoice
Is a legal document. Submitted by a vendor to the store,
the invoice is the bill for merchandise shipped. The
invoice will state the terms of payment, show any
discounts, and will itemize the merchandise shipped with
prices and, usually, freight charges.
Keystone
Doubling the wholesale cost in order to determine the
retail price of the merchandise.
Keystone Discount
A trade discount of 50 percent off the suggested retail
price established by the vendor.
Keystone Retail
A method of establishing a retail price by doubling the
vendor's cost price.
Inventory Closing
See beginning inventory.
Inventory, Costs
Under the retail method of inventory, this relates to
the calculated cost of inventory (cost compliment x
retail value of the inventory) and not the original
vendor invoice cost.
Inventory Opening
See ending inventory.
Inventory Overage
If the physical inventory is greater than the book
inventory, the difference is called "overage."
Inventory Physical
A physical count of all the merchandise in the total
store. Usually taken twice a year. May be taken at cost
or at retail, depending on the accounting method used.
Lead Time
Length of time that elapses until ordered merchandise is
available for sale.
Maintained Mark-on (MMO)
Net sales less the gross cost of the merchandise sold.
Expressed in dollars (MMO$) or, more frequently, as a
percentage (MMO%).
Margin/Mark-up
How much you determine to charge for an item. For
example, keystone equals 50 percent margin.
Mark-down (MD)
A reduction of a retail price representing a decline of
the value of merchandise. mark-downs frequently occur
because merchandise is slow moving or inactive, special
sales, price adjustments on damaged or discontinued
merchandise and changing customer wants. mark-downs are
most frequently expressed as a percentage of sales.
Mark-down Cancellation
Any restoration of a mark-down price to or toward the
original retail price. For example, mark-down
cancellations occur after a special sales event has
ended and the remaining merchandise is to be repriced.
Mark-down Money
Money given by vendor to retailer to enable retailer to
reduce selling price of a slow seller.
Mark-on (MO)
A fundamental principle of retailing which denotes the
excess of retail price over cost price for a particular
item of merchandise. Also usually expressed as a
percentage of the total retail price for the item.
Mark-up Cancellation
A correction necessary to reduce or eliminate a previous
mark-up resulting in a retail price at or above the
original retail price. mark-up cancellations result only
if they are taken in the same season (as the original
mark-up).
Mark-up Percentage
The percentage obtained by dividing the excess of retail
price over cost by the total retail price (also called
Mark
on percent).
Minimum
Minimum dollar quantity per line, minimum pieces per
line, minimum units per item.
Net Purchases
Cost of purchases, including freight, but excluding
returns, allowances and cash discounts earned.
Net Profit
Gross margin minus all direct and indirect expenses
(operating costs).
Net Sales
Gross sales minus customer returns.
New Store Opening
If you're opening a new store, make sure you write "New
Store Opening" on all purchase orders. Make sure to
highlight and request merchandise early. Also make sure
to follow up on all deliveries to insure timely
delivery.
Net 30
Account has filled out credit application and been
granted 30 days to pay the bill.
Open to Buy (OTB)
Total planned purchases of merchandise for a given
period minus receipts and merchandise on order for the
same period.
OH
On hand.
OO
On order.
Overbought
A condition whereby a buyer has become committed to
purchases in excess of the planned purchases. Also can
be said to occur when purchases of merchandise are in
excess of customer demands.
Period
A specified length of time, usually an arbitrary
financial decision may be a week, a season (usually 6
months), a month or a year, etc.
P.O.
Purchase Order. A written order generated by the store
which is either executed at time of purchase or mailed
subsequently. Usually bears a specific P.O. number. Many
large stores use P.O.s for all purchases.
Pre-Pay
Buyer pays at time of order. Many manufacturers will pay
the freight if order is prepaid. (Be prepared to have
your check cashed immediately even though you specify a
future shipping date.)
Price Correction, Retail
Revising a price up or down. Price corrections occur
only in the case of marking errors.
Profit
The dollars remaining after the subtraction of all
direct and indirect operating expenses from the Gross
Margin dollars.
Pro Forma
Manufacturer bills buyer order amount plus shipping
charges. Buyer sends a check; then manufacturer ships
goods. Similar to pre
pay.
Purchases
Merchandise acquired by means of purchase orders place
with vendors (also called receipts).
Retail Method of Inventory
A method of merchandising accounting whereby the ending
inventory is calculated at retail value (Book Inventory)
and converted to cost by applying the cost compliment.
Receipts
See Purchases.
Retail Price
The selling price to the customer. A retail price has
four components: cost (vendor's cost plus freight cost),
the store's cost of doing business, inventory shrinkage
(theft, damage, mark-down), and profit.
Returns to Vendor
Returns of merchandise to the vendor who shipped it. May
occur as the result of item substitution, violation of
the store's shipping instructions, or by special
agreement with a vendor to remove discounted merchandise
from inventory.
R.O.G.
Receipt of goods. For example, Payment of invoice on or
after R.O.G.
R.T.V.
Return to Vendor
Rush
Obviously a rush order. A reason for the rush might
expedite the order (new store opening, special promotion
planned, etc).
Season
Usually a six month period for purposes of merchandising
and budgeting. The start of the "spring" season is
frequently February 1, since a large percentage of
retailers end their fiscal year on January 31.
Ship Date
Date you request merchandise to be shipped.
Ship To
Shipping address; where you receive merchandise.
Showroom
A location where a manufacturer or sales rep has product
on permanent display.
S.K.U.
Stock Keeping Unit. The number of items a manufacturer
has in his line.
S/M
Side Mark. A Side Mark instructs the shipper to direct
the order to a specific person or department. It might
involve an individual package or packages wrapped
separately and included in one large box, possibly
directed to several different people.
Specific Date
Is used for future ship dates. Manufacturer will assume
this is the date goods leave his dock unless you specify
to arrive by a certain date.
Start Date
Used for purposes of payment of invoices, the start date
is the date of the invoice.
Stock to Sales Ratio
The ratio of retail stock, at either the beginning or
the end of a month, to the sales made during the month.
Can be figured the same way for a season or a year. The
advantage of figuring the stock-to-sales ratio is that
it gives a valid basis for planning stock levels and
assortments.
Stock Turnover
The number of items that the average stock has sold and
replaced during a given period of time: usually a year.
Expressed based on retail dollars.
Supplier (Resource, Source, Vendor)
Words used to refer to both sales reps and/or factories
where stores buy merchandise.
Terms
Pay schedule. Different terms can save you money. Net 30
equals payment due in full 30 days from date of invoice.
Sometimes discounts are arranged if paid early.
Total Merchandise Cost
Gross cost of merchandise adjusted by the effect of any
cash discounts or alteration costs.
Trade Discount
The discount off suggested retail (set by the vendor)
which determines the vendor's cost price for any item(s).
Transportation Costs
See freight charges.
Transportation, Local
The cost of moving goods from the vendor's factory, or
warehouse, to the shipping point (specified by the
buyer) in the nearest city.
Unit Control
A control system capable of tracking individual pieces
of merchandise from the time they are ordered until they
are sold.
Vendor
A supplier from whom goods for resale may be purchased.
Vendor Analysis
A report, by vendor, typically showing sales,
merchandise purchased mark
on, mark-down and gross margin.
Workroom Expense
Charges to the store or the department for the
maintenance (cleaning, pressing, repairs) of stock in
saleable condition. These expenses are charged against
profit.
Workroom Income
Expenses incurred in getting merchandise ready to
deliver to a customer after the sale. Called
alterations, these expenses are charged to the customer
and set high enough to cover costs and leave a profit.
Any such income is added to the department's or the
store's profit. |
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