Information For Retailers
Part 1 - Frequently Asked Questions About POS And Inventory Control
Part 2 - Frequently Asked Questions About Retail Plus Software
Part 3 - A Few Management Tips From The Pros
Buying Strategies And Dealing With Suppliers
Secrets Of Niche Market Domination
Staying On Top In An Economic Downturn
Glossary - A Complete Guide To Retail Business Jargon
Part 1 - About Automated Sales And Inventory Control
Exactly what is a point-of-sale system?
A Retail Point of Sales system typically includes a computer, monitor, cash drawer, receipt printer, customer display and a barcode scanner, and the majority of retail POS systems also include a debit/credit card reader. It can also include a weight scale, an integrated credit card processing connection and a customer pin pad device. More and more POS monitors use touch-screen technology for ease of use and a computer is built in to the monitor chassis for what is referred to as an all-in-one unit. All-in-one POS units save valuable counter space for the retailer. The POS system software can typically handle a myriad of customer based functions such as sales, returns, exchanges, layaways, gift cards, customer reward programs, BOGO (buy one get one), quantity discounts and much more. POS software can also allow for functions such as date sensitive promotional sales, foreign currency handling and multiple payment types.
The POS unit handles the sales to the consumer but it is only one part of the entire POS system used in a retail business. Other functions of the POS system include inventory control, purchasing, receiving and transferring of products to and from other locations. Other functions of a POS system are to maintain sales information for reporting purposes as well as customer information for receivables management, marketing and specific buying analysis. Many retail POS systems include an accounting interface that “feeds” cash flow and cost of goods information to an accounting package.
What are the benefits of computerizing a store?
The number one job in retail, of course, is serving the customer. A point of sale system is a tool which makes that job faster, easier and more profitable, but there has to be a cost benefit to computerizing. With today's technology the benefit is there as long as the retailer commits to using a system's full potential. Computerizing your business does not necessarily give you an advantage over your competitors - you may have to do it simply to stay competitive. Three areas where immediate benefits can be seen are:
- Increased margins due to better inventory management and reduced shrinkage.
- Increased sales due to prompted suggestion selling, staff performance tracking and targeted marketing.
- Speed and accuracy in the chores surrounding reports, invoicing, purchase orders and inventory control.
Is it best to start with the accounting system and tackle inventory control later?
Computerizing the accounting functions will have a very small impact on your profitability but inventory is your number one asset. Managing it well is a key factor to business success. Good inventory control means balancing the expectations of your customers and your bankers, so you have to avoid being either under or over stocked. Some systems offer both inventory control and accounting modules but most successful retailers use completely different systems for each one. This is because software that tries to do it all usually ends up doing some of it badly, and the few that don't are extremely expensive. If you computerize your inventory control first you will get a much better return on your systems investment. Timely details about sales, inventory, invoicing, margins, orders and customers will help you earn more money than a new accounting system will save.
Is taking inventory more complicated once a POS system is installed?
No, it can be done much faster and more accurately if the POS system can read data from a hand-held barcode reader. These units are carried to where the stock is and the counts are scanned or punched in. The information is later transferred to the computer by cable. The computer then pops up a table showing where the shelf counts do not match the computer data and gives you a chance to correct it quickly and easily.
What are the advantages of having bar codes on the stock?
Barcodes greatly increase the integrity of the point-of-sale transactions. If cash personnel have to enter a stock code for each POS transaction the chances of making mistakes are higher. Good retail management software should print barcode labels in two sizes and can automatically print a label for every item in the last shipment. Since the UPC barcode is industry assigned, you should use another barcode scheme for your own stock such as Code39. There is no problem associated with having UPC and Code39 labels in the same store because barcode scanners can auto-recognise which type of label they are reading.
What reports should we look for in a good system?
There should be a dozen to choose from, though most retailers use only three of four on a regular basis. Which ones you use will depend on the nature and style of your business. Better systems can limit the scope of a report to a given department, supplier, stock code range, etc.
Does entering a customer name and address take too long and annoy the customer?
It might, and it is important to be very sensitive to a customer's reluctance. However, this information is so valuable that not trying to gather it may be a mistake. Experience shows that it costs a lot more to get a new customer into your store than getting an old one back. This kind of marketing has proven to be the most cost-effective way to drive up sales. Better software systems allow for a variety of customer data and mailing capabilities which can identify customers by last purchase date, birthday, purchase history, customer type and salesperson. This is powerful information for the retailer because it gives us the ability to target promotions where they count, measure advertising results, purge inactive names from mailing lists and do follow-up phone calls. Once people are in the system they do not have to be re-entered, but can be called up by name, phone number, company or customer number. A good system will also give you the option to avoid re-typing the city, state and zip code for every new customer.
How long does it take to get a point of sale system up and running?
The setup phase can be a headache if it is not properly planned and then rushed through. Don't decide on Saturday that the system has to be installed and fully integrated into the business by Monday. Allow lots of time for you and your staff to get used to a new routine. It would be ideal to run the new system in tandem with the old one for a week or more, but this is a luxury that many stores cannot indulge in. The POS system should start providing useful information about inventory control and customers after a month of full-time use.
Part 2 - Frequently Asked Questions About Retail Plus POS Software
How can I try out your software?
Just download the Retail Plus installer onto your hard drive and double-click on it. Your browser will pop up a window asking if you want to Run or Save RETAIL30.EXE. Please select Save if you have a slow internet connection, after which you can indicate where to put the installer (usually in the Program Files folder). Installation is very fast. In 5 minutes or less you will have a fully functioning point of sale system with sample inventory that you can try without any long setups.
Are there any instructions in the download?
Yes - the manual is in an Acrobat Reader file called Retail30.pdf. The software also has an extensive on-line help system. Most windows also have a small button with a question mark that will pop up a window explaining what is going on and what your options are.
If I try the Retail Plus download will I have to start all over again after buying it?
No - Any inventory or client data you create while evaluating the system will be preserved.
What hardware works with Retail Plus?
Most POS hardware will work fine but there are a few guidelines to follow. For more information see our Do It Yourself page.
Do you supply the hardware?
No - point of sale hardware has become a commodity which means you can buy it for the same price we can. You can order it from your local computer store or use your web browser to search on "pos hardware". You will find many options and opportunities to get great deals. If you want to be sure something will work call us before you buy. For best results follow the guidelines on our Do It Yourself page.
Will the download run on my network?
Yes - it is multi-user network ready and the setup is easy. Put Retail Plus on one machine only (the host) and, using the Windows built-in networking, share the on the host. Go to each workstation and use Windows Explorer to map the host drive as Drive Z:. Now use Windows Explorer to create a Shortcut pointing to PLUS30.EXE on the host. Thats all!
How many network workstations can use Retail Plus?
There is no limit. With just one multi-user license you can have as many users as you wish.
Why is QuickBooks Canada recommending Retail Plus?
The Canadian branch of Intuit (the developer of QuickBooks) discontinued their POS module and looked for a replacement they could recommend to their customers. They chose Retail Plus because it is the easiest and most effective alternative for QuickBooks users.
Do I need QuickBooks to use Retail Plus?
Absolutely not. Retail Plus has all the features you need to do sales, inventory control, client database, invoicing and purchase orders. We offer links to QuickBooks as a convenience to those who want to use it for general ledger, accounts payable and payroll.
If I order your software how long will it take to get it?
The shipping options are 7 day ground or 2nd day air. If you need a license key right away you can order online. This will allow you to keep working with the downloaded software and save you 10% as well.
Part 3 - A Few Management Tips From The Pros
1 - Buying Strategies And Dealing With Suppliers
To be successful in retail, it is essential to stock the right products, at the right time and at the right price. To do this, you must be able to source your products from the best and most reliable supplier that you can. This is not always an easy thing to do. Obviously you need to establish the product lines you are going to sell from a supplier that will be consistent and reliable.
Identifying your Niche
Before you begin the process of sourcing your stock, it is always a good idea to visit a competitors store to see what they are stocking and what price levels they are retailing at. Try to gain some idea of the brand names that are being sold and decide which seem to be the highest selling lines. It is always a good idea to have a look in their reduction sections to get an idea of which items are not selling quite as well and are being sold off cheaply.
It may be possible that the retailer will talk with you. This is more easily achieved if they are some distance from your location and therefore not a retailer you will be in direct competition with. If they will talk to you, attempt to get an idea from them of which items sell best and at which times of the year. What sort of pricing strategy do they have? Do they offer multiple price deals on new products to introduce them etc? What items don’t sell too well? Remember, just because items don’t sell too well for them, it doesn’t mean they won’t for you.
Once you have established your product range, or at least a broad knowledge of a product range, it is time to search for the products. It may be a good idea at this stage to visit some trade exhibitions or shows to broaden your own knowledge of the particular product range you have chosen. You may find that newer versions of products are about to be released onto the market. Having this knowledge can help in two ways. Firstly, it gives you an opportunity to source a new product range other retailers may not have discovered yet and secondly, you could use this information to your advantage and reduce your prices down for the stock that will be replaced with newer versions. This can be done more gradually and with greater effect if it is carried out in advance of the new products arrival.
Careful consideration of your supplier is important to any retail business. You need to be able to make sure you have a supplier that will not let you down. You simply will not be satisfied with a supplier who will raise prices with little or no reason just as soon as you have become reliant on them. Check out reviews for their service where you can.
Sourcing Your Goods
Suppliers come in many different types. Briefly, you can purchase from Manufacturers, Importers, Distributors, Wholesalers and even from Auctions. Each of these sources have plusses and minuses.
Manufacturers - It can sometimes be beneficial to approach manufacturers directly. Often they will sell directly to the retailer, but to do so the manufacturer will usually expect large bulk orders. In some rare instances exclusivity can also be obtained which will ensure an extra possibility of success in your business. If a manufacturer will not sell to you directly, then you should ask them for a list of their distributors.
Importers - Buying direct from importers can hold serious advantages, but also serious disadvantages. You can get the best prices, buying foreign goods directly from an importer, but you should take into account shipping timeframes, product life cycles, tax and duties and other associated problems.
Distributors - They sell large varieties of products at slightly higher prices than the manufacturers. It is possible to buy smaller quantities with little or no minimum quantities. Often items will be shipped for free.
Wholesalers - This type of supplier most often gives the best price for you to pass on to the customer. They usually have a large range of products and you will find a large amount of merchandise at the best possible prices. Wholesalers will often sell pallet loads of items and even truck loads. There are often terms and conditions attached to certain sales, as with any purchase.
Auctions - You can buy items from Auction sites such as Ebay or from Auction companies where stock is being sold off in bulk. Often you will find large bankrupt stocks available at low prices. This is not a consistent supply of stock items though and should be considered as a one off supply.
Identifying Potential Suppliers
When you have identified the products you want to stock, you need to identify the best possible vendor for your retail business. You need to be able to find a vendor that will supply products to you at the best possible price. These products need to be of the best quality and the vendor must be able to guarantee delivery times and be reliable when they commit to delivery. Problems normally do occur and the company must be able to back you up that eventuality with the best possible Customer Service.
Ask The Supplier Some Questions
What is their minimum order quantity? - If they insist on a large order quantity, you could end up with a better price overall, but if the products don’t sell well, this could result in large items of stock and future sales at a significant loss. Will the supplier negotiate over order quantities? It is always worth asking.
Who else sells their products? - Try to discover if there are other local retailers being supplied with goods by the same company. It won’t be progressive to be in direct competition with other local suppliers.
Question them about promotional items or off price products - The vendors will often mark down their products, just as the retailer will. It is always worth asking the supplier if they are willing to sell items to you in this way.
Are the items you are ordering re-orderable? - Sometimes vendors’ stock items that are simply bulked up in their warehouses and when the stock is exhausted they won’t be selling any more of this stock.
If items don’t sell, will the supplier exchange products for other more saleable ones? - Its worth asking the vendor if this is a possibility. Always make sure though that if they do agree that this is written down clearly in the Terms and Conditions.
What is the delivery timeframe? How long will goods take to arrive? Do you have to order in advance and book delivery dates significantly ahead?
What are the terms of payment? Do products have to be paid for upfront or is it possible to create an account with the vendor and be billed on a specific date each month.
You can find out about the supplier’s reputation through references or simply by questioning sales reps and other clients.
Pricing Your Products
Finding the correct price point is of paramount importance for your retail business. Pricing a product too high will deter your customers, pricing an item too low and you will lose profits or even money along with in certain instances the customer’s ‘perceived value’ of the goods.
Take a look at local retail outlets and see what sort of price point’s that similar goods are set at. Always attempt to fix your prices as close to these as possible. Think about employing promotions which allow items to be reduced by a certain percentage or where products can be given away for free with the purchase of other products. Your supplier may run promotions now and then which you could take advantage of, selling products on a similar cost level to your customers. This could attract both new and existing consumers.
Have you considered a customer loyalty card? Customers that spend a specified amount of money can receive a discount amount off their next purchase. Incentive shopping is often seen as a good way of ensuring return custom.
Primary importance should be given to your sales history. Learning from the products you have already bought for your retail business, which have been successful or unsuccessful is a very valuable aspect of buying stock. The next time you go to purchase more, go to the supplier with the knowledge gathered and you will be in a much stronger and more confident position.
2 - Secrets of Niche Market Domination
The 20-Percent Rule
The saying goes that 20-percent of buyers consume 80-percent of your product volume. If we are to prove the saying true, we need to find out who the 20-percenters are and target our products directly at them. The 20-percenters are the niche market and as a small retailer, you need to dominate these markets in order to make a healthy profit. Let’s take a look at how you can do this.
Pay Attention to Secondary Data Sources
Most large companies already segment their customers into niche markets, so it stands to reason that as a small retailer, you should be doing the same thing. Rather than spend huge amounts of cash to figure out what niche markets you should be catering to, it might be a more prudent idea to check secondary data sources. These secondary sources could be industry experts, trade associations or even data that you gather on your own for things other than market research. An example of this type of data might be a sales report that is sub-ivided by each product line.
Copy the Competition
Another strategy that you can incorporate involves watching your key competitors. Remember the old saying “Keep your friends close and your enemies closer?” This is exactly what you should be doing. Keep an eye on what your competitors are doing when it comes to marketing and if it looks like it’s working, then copy them.
Create a Buzz
If you’re interested in creating buzz about a particular product that you’ll be introducing, be sure to talk with key trade buyers. Word of mouth will help sell your product to those 20-percenters we were talking about. It doesn’t hurt to do a needs analysis based on research that you conduct in-store with individuals or groups of customers. People who enjoy buying stuff are always happy to talk about the things that they want.
Do What the Big Companies Do
Search for secondary data in the same places that the large companies do. In most cases, you can get direct access to the same databases that huge corporations do. This data can be used to estimate the size of different market segments and how important they might be. Check in trade publications and association publications as well as with experts involved in these particular areas. You can also gain access to larger market research information through companies like Burk, Information Resources, Inc. and ACNielsen.
Segment, Segment, Segment
One final thing to keep in mind while you’re doing your research is that you can segment markets by geography, product life, distribution, packaging, price, sizes and other tangible elements that you know about your products.
Dominate the Competition
Okay, so you’ve figured out which market segments you’re going to attack and you have all the data you can handle. The next step is to figure out who’s trying to take your customers away from you. It’s important to identify who will be in direct competition with you before you make a final decision about which niche market to jump into. If you do this, you’ll be reducing risk, resources and expenses.
For example, you may have a new and unique shoe that you want to sell. Unfortunately, competing with every shoe retailer in a multi-billion dollar product category is monumentally difficult. Secondarily, if you narrow the market down to a single style of shoe, you may still be dealing with a billion dollar product category. However, if you target a specific niche, for instance one particular style of orthopedic men’s dress shoes, the market segment becomes smaller and much easier to break into with a new product.
Undercut the Competition
Once you’ve identified your competitors, it’s time to undercut them. Niche markets can be finicky and they may only be able to support one company in that niche. When pricing your product lower than your competitor, it’s important to be the first company that settles into this low-price area. It’s also important to have secondary sources of service and product differences with your competitors.
Position Your Product
A final way to dominate your niche is to provide a clear and targeted positioning message. You must position your product as unique and different from your competitor’s product. Examine what you offer against other products that your 20-percenters are buying. If there are no differences, create some. Secondly, position your product correctly with your target audience by solving the equation of product + advertising + price + distribution. If you get this mix right based on your research and how you differentiate your business and your product from your competition, you’ll dominate the niche market that you’ve chosen.
3 - Staying On Top In An Economic Downturn
Small retailers, whether online or on Main Street, are often the first businesses to feel the effects of an economic downturn. In many cases, a smaller retail business is unable to compete with the pricing that the larger big box department stores get, and customers are forced to buy at the lower prices of the big stores. But there are things that a smaller retailer can do to survive in a bad economy. With some imagination and a grass roots effort that includes your best customers spreading the word, a small business can even grow in a bad economy.
The first thing a small retail business needs to do is get its customers involved in referring new clients in a bad economy. Start giving out business cards to all of your customers with spaces on the back to write their name and contact information. Have your customers hand those cards out to anyone they know to encourage those people to visit your store. The card offers a 10 percent discount to your new customers, and it pays your referring customer $10. Word of mouth is one of the strongest forms of advertising, and a small cash reward can inspire your clients to start sending a slew of new customers your way. Make sure that the card states that the 10 percent discount is only for the first order, and the $10 reward is only paid once for each new client.
Add More Value
When clients are given a better value, then they tend to shop at a smaller store more often. One of the problems that people often encounter when shopping at a larger retail store is the lack of knowledgeable personnel available to assist customers with buying decisions. A smaller retail store should take the time to educate the staff so that customers can be assisted immediately with accurate answers to product questions.
Set up a small table at a central location in the store where customers can stop and ask questions about any of the products that you offer. If necessary, your customer service people should go into the store and find the product rather than making the customer bring the product to them. Customer service changes that may seem small to the store owner, but make the shopping experience smoother and more pleasant for the client, can make a difference during bad economic times. It allows the smaller retail store to make the customer feel appreciated, which can get lost with larger retail stores.
Share Advertising Costs
A smaller retail store should not stop advertising during difficult economic times. When the economy is bad, that is when consumers start combing the retail advertising in the newspaper even closer to try and find deals. One way a small retail store can help its own cause is by teaming up with other retail stores and splitting advertising costs. Stores that offer complimentary products can pool their resources and lower their individual advertising costs while maintaining their advertising presence. For example, a record store can team up with a stereo store to work on advertising to help drive traffic to both locations.
There will always be economic downturns that small retail businesses will need to address. But with some creative thinking, and some hard work and customer dedication, a small retail store can make the customer feel important and work to take some of that business from the big box retailers that can do not have the resources to make the customer feel special.
Add on sale: Additional items customers buy due to in store suggestions or promotions.
Ad slicks: Camera-ready ad, usually on glossy paper. Many vendors supply these for newspaper ads.
Advertising: Paid message communicated through various forms of media and designed to influence the purchase behavior and thought patterns of the audience.
Allocation: Suppliers determination of how much of (usually) scarce merchandise to assign to their customers.
Allowance: Any price reduction given by suppliers to retailers for various reasons (late delivery, damaged merchandise, below standard quality, overstock, etc.).
Anchor tenants: Major stores that serve as the primary draw of customers to a shopping center.
As is: Merchandise sold in its current, often slightly flawed, condition.
Assets: Those items of value the company owns such as cash in the checking account, accounts receivable, inventory, equipment, and property.
Assignment: The transfer of title, right, or interest in certain real property. For example, if you sell your business and turn over your lease agreement to the new owner, that is an assignment.
Authorized shares: The total number of shares the corporation is permitted to issue.
Automatic ordering: A feature in certain software systems of stores to automatically create suggested orders based on preset criteria for minimum and maximum stocking levels.
Average margin: The difference between what you pay for all the goods you sell during a specific period, and what you buy them for, calculated as a percentage of the selling price of the goods.
Average markup: The difference between what you pay for all the goods you sell during a specific period, and what you buy them for, calculated as a percentage of the cost of the goods.
Back haul: Trucks that have delivered merchandise to a buyer and are now empty are available to back haul material to their home base.
Back order: When an order cannot be filled because the products are not in stock, the order is left open until the goods arrive.
Bad debt ratio: The amount of money you believe the customers will never pay, also called uncollectible funds, divided by the total sales, expressed as a percent.
Balanced tenancy: The mix of stores in a planned shopping center chosen to meet the full range of consumers’ shopping needs.
Balance sheet: Financial statement that shows the company’s assets, liabilities, and owner’s equity. The value of the assets must equal the value of the liabilities plus equity.
Base rent: Minimum monthly rent payments excluding pass-through, percentage rents, and all other charges.
Basics: Merchandise that customers need all the time.
Beginning of the month (BOM) inventory: The inventory in the store at the beginning of the month.
Big box store: A large store focused on a broad selection and low prices of a specific category of goods. Big box stores typically have few frills.
Billed cost: Manufacturer’s price for goods.
Book value: Net value of a company as shown on the balance sheets. In successful companies book value is often much less than actual value.
Bottom feeders: Customers who buy clearance merchandise at rock bottom prices.
Boutique: Upscale shop designed to present usually expensive merchandise tailored to a specific customer mix.
Breadth: The extent of the selection of merchandise in a department such as, for instance, the number of different styles, colors, sizes, etc.
Breakpack: Process of pulling inner packs from a master carton in order to ship smaller quantities to stores.
Brick and mortar: Traditional retailing in a physical business location as opposed to virtual retailing conducted online.
Business plan: Detailed road map of where a business is going and how it is going to get there.
Buying groups: Organizations that coordinate or pool the buying needs of many small retailers into a larger order with manufacturers or suppliers in order to negotiate better pricing, delivery, and payment terms.
Call tag: A freight carrier’s written authorization for customers to return merchandise to the retailer at no cost.
Cash discount: Deductions taken from the cost of goods for performance of prearranged terms of payments. For example, 2/10 means payments within ten days can deduct 2% off the invoice.
Cash flow analysis: Financial statement showing how much money the company had at the beginning of the month, how much money came in through sales and payments, and how much went out as payments to create what was left over at the end of the month.
The cash flow statement may differ greatly from the profit and loss (P & L) statement. For example, a major capital purchase may deplete cash but not impact profit because it has merely converted one form of asset (cash) into another form (the capital good).
Cash on delivery (COD): Goods that are delivered to the store only upon immediate payment for them to the deliverer.
Cash wrap: Shelving and stands surrounding the cash registers.
C Corporation: Standard corporation structure that establishes the company as an independent legal entity.
Charge back: Deductions on an invoice taken by the retailer for shortages, damages, freight allowances, etc.
Clearance: Selling inventory at reduced prices at the end of a season or life cycle to move excess stock.
Clipping service: Companies that are paid to read a broad selection of newspapers and magazines and cut out articles that reference specific subjects.
Closely held corporation: Company controlled by one or a small number of owners.
Closeouts: Merchandise that is no longer being manufactured that is sold at reduced prices to clear out remaining inventory.
Comp store: Comparison of this year’s business to last year’s in stores that have been open at least one year.
Consideration: For a contract to be valid, the requirement of one party to pay or do something must be countered by the other contracting party giving or doing something (the consideration).
Consignment merchandise: Merchandise that is placed in a store but remains the property of the supplier and is paid for by the retailer only when it is sold. Consignment merchandise usually may be returned to the supplier whenever the retailer wishes.
Cooperative Advertising: Retail advertising for which the supplier pays the retailer’s cost.
Cost per thousand (CPM): Term used in media buying that refers to the cost of reaching a thousand people in your target market. (The Roman numeral for one thousand is M.)
Cross merchandising: Using different lines of goods to help sell each other, for example by displaying them together.
Current assets: Company assets that are liquid or can be converted to cash in less than one year.
Customer base: The customers who shop in your store.
Debt financing: Financially, supporting a business with borrowed money that costs interest and, per its terms, has to be repaid. In contrast, equity financing supports a business with invested money that remains in the business, carries no interest expenses, but reduces the percentage of the owner’s share of the business.
Deep and narrow: Large quantities of a small selection of merchandise.
Defectives: Merchandise that is incomplete or faulty.
Demographics: Set of objective characteristics that describe a group of people. Includes characteristics such as age, home ownership, number of children, marital status, residence, location, job function, and many other criteria.
Depreciation: The amount an asset is assumed to fall in value each year. This amount may be an actual reduction in the asset’s value (such as when a car is expected to wear out in a certain number of years) or set by accounting standards for purposes of collecting profit or taxable profit, even though its value may increase (such as a house).
Depth: The number of pieces of merchandise of a specific item or category in stock.
Distribution: The system by which goods move to retailers from manufacturers via importers, wholesalers, etc.
Dividends: Money from corporate profits paid to shareholders in proportion to their investment.
Doing business as (DBA): The name the business uses for its operations, as distinct from the name under which it is registered.
EBITDA: Earnings before interests, taxes, depreciation, and amortization. This figure is of key importance when buying or selling a business in that it tells the buyer what he can expect his pre-tax profit to be, assuming he funds the business so it pays no interest.
Electronic Data Interchange (EDI): Method by which orders are transmitted from the buyer to the seller via e-mail.
Employee manual: Document prepared by the company and issued to employees indicating the company’s policies and procedures.
Endcap: Display at the end of an aisle.
End of month (EOM) inventory: The inventory in the store at the end of the month.
Event marketing: Promotional plans built around outside events (sporting, charitable, local, etc.).
Face out: Merchandise is presented on the shelf with its front showing on the shelf. The advantage is that the product is more visible; the disadvantage is it uses up more shelf space.
Factor: A bank or finance company that buys the receivables from a manufacturer at a discount from their face value. The amount of the discount depends on the percentage of the debt the factor expects to collect. If the receivable is from firms with a strong credit rating, the factor will pay more than if the receivable is shaky. Retailers then pay the factor, not the vendor, for the merchandise.
Finish out: Structural, mechanical, electrical, and decorating costs involved in transforming a new or previously occupied retail space into a new store.
First cost: The cost of goods before duties and transportation, the true cost of imported merchandise.
Fiscal year: An accounting period of twelve months. Can be the calendar year or a twelve-month period chosen by an organization.
Fixed costs: Costs that, at least in the short run, do not vary in relationship to sales.
FOB factory: (see Freight On Board) – the retailer pays all shipping and other charges for transportation, insurance, etc., from the seller’s factory onwards.
FOB warehouse: Seller pays all shipping and other charges for transportation, insurance, etc., to the buyer’s warehouse.
Franchisor: Business operation that sells the rights to its name, concept, and trade know-how for a limited geographic area to an independent buyer known as the franchisee.
Freelance: An independent individual or company that works, under their own auspices, for one or more companies that assign them specific tasks but provide only general supervision. Like a consultant, they are paid a set rate with no benefits.
Freight on board (FOB): The point where the shipping costs become the responsibility of the retailer rather than the vendor. Title of the merchandise passes from the seller to the buyer at the FOB point.
Freight out: Freight costs for merchandise sent out.
Frontage: Section of the store facing the street or pedestrian walkway.
Generic merchandise: Non-branded products, often copied from branded merchandise but selling for less.
Guaranteed sale: The vendor’s promise to take back unsold merchandise and issue a refund or credit.
Independent contractor: A supplier of services who is not an employee and from whose remuneration the employer does not withhold taxes. These are paid by the independent contractor. To qualify as an independent contractor, you have to work independently, use your own tools of the trade, be under only general supervision of the employer, and (usually, but not necessarily) work for several different employers.
Commission sales reps who work for several firms and workmen such as plumbers and carpenters who are retained for specific jobs are typical of independent contractors.
Independent retailer: Stores not associated with a chain.
Initial markup: Difference between cost of goods and the original retail price.
Inventory: The dollar value of the stock on hand at the store and at the warehouse. Taking inventory is the act of physically counting and recording the quantities of merchandise on hand.
Jobber: A distributor or middleman who buys merchandise to be resold to retailers.
Job description: Detailed listing of the duties to be performed by the person filling the job. This is an important benchmark against which to measure future performance, especially if lack of performance forces you to fire an employee.
Keystone: Retailing term that sets a selling price for merchandise at double its cost. If you buy an item at $10.00 and sell is at $20.00, you are marking it up at keystone. If you are selling at $30.00, that’s double keystone.
Kiosk: Booth or stall set up in a shopping center to sell goods. May be temporary or permanent.
Landed cost: The total cost of imported merchandise once it arrives in the country. Landed cost includes first cost from the manufacturer, duties, transportation, and insurance.
Layaway: Storing merchandise for a customer for a later purchase usually requiring a deposit and a time limit for complete payment to be made.
Letter of credit (L/C): An agreement from the bank assuring a vendor that it will be paid for the merchandise once it is delivered according to preset specifications regardless of the buyer’s financial condition, thus eliminating the seller’s risk. The buyer has to have adequate credit to satisfy the bank and pays the bank a small commission for this guarantee.
Liabilities: Amount owed including accounts payable, loans, credit card debt, taxes due, etc. Short-term liabilities are those that have to be paid within twelve months. Long-term liabilities are those due in more than twelve months.
Licensing: Fee paid to use a name, product, or know-how for a given period of time and in a specified geographical area.
Life cycle: Many products go through four phases between market introduction and eventual demise: introduction (birth); maturity (middle age); decline (old age); and death. Thus, like people, products have a lifecycle.
Limited Liability Company (LLC): Form of corporate structure that provides business owners with personal liability protection but taxes corporate profits or losses at the individual level.
Limited partner: A partner who invests money but does not participate in the daily operations of the business. This partner is liable only for the amount of money invested. The general partner runs the business and is paid for his services.
Liquid assets: Anything the company owns that can be quickly turned into cash, such as accounts receivable, current finished goods inventory, and financial instruments (e.g., stocks and bonds).
Logo: The stylized representation of the name of a business.
Loss leader: Product intentionally sold at a loss to attract customers.
Maintained markup: The average markup of an item sustained over a period of time, usually six months or longer.
Markdown: The difference between the original retail price and the reduced price.
Marketing: Process associated with the selling of goods or services to more people than you can approach personally. The art and science of marketing includes product development, package and logo design, pricing, market research (to determine the consumer acceptance of these aspects of the product), advertising, sales promotion, merchandising, and public relations to make people aware of the product.
Market niche: Defined segment of the market with a need for a particular product or service.
Market share: Sales of a company or product as a percentage of total sales of that category of products in a defined area (i.e., a single store, a town, state, country, etc.).
Market trip: Organized visit by a buyer to the place from whence they are buying their products.
Merchandising: Selecting, pricing, displaying, and advertising items for sale in a retail store.
Merchants’ association: Organization formed and controlled by a group of merchants (often the tenants of a single mall or other group location) to plan promotions and advertising to benefit all the businesses in the area.
Minimum: Smallest amount of goods a supplier will allow you to purchase, expressed either as a dollar amount or a physical quantity.
Mom-and-pop store: A store that is small and operated by people who appear to be members of a family.
Net income: Money left over after all expenses.
Net 30: Credit terms extended by a supplier where the retailer pays the full amount of the purchase within 30 days of shipment.
Non-compete clause: An agreement employees or suppliers sign indicating they won’t use your ideas or business methods on behalf of a competitor or start their own business in direct competition to you. Non-competes are tricky. If you try to tie an employee up too tightly, the courts may hold that you are depriving that employee of the ability to earn a livelihood, and will strike down the contract. Generally, the more you pay the employee for the non-compete and the more limited its scope, the more enforceable it will be.
Off price: Merchandise that is purchased for less than regular price.
Off-price retailing: Stores offering well-known brands of merchandise at substantially lower prices compared to conventional stores handling the same brands.
Open to Buy: Most retailers establish a maximum level of inventory they can afford to have on hand. The Open to Buy is the amount of merchandise the retailer can still buy before reaching that ceiling.
Opportunistic buy: Buying products at far below their original price because a vendor is overstocked.
Outsourcing: Contracting with outside people or companies to provide services that were previously performed in-house by employees.
Partnership: Formed when two or more people share ownership of a business.
Planogram: Structured plan for displaying a line of merchandise on the shelf so as to maximize their visibility and sale. For example, a store might have a planogram for its detergents that would specify that Tide (its bestseller) had, say, ten shelf facings while lesser brands had fewer. By following the planogram, restocking shelves remains orderly and as planned.
Point of Sale (POS): Computer register system used to record sales by item, department, etc. The information is used to help make merchandising decisions and capture financial information.
Power retailers: Merchants with sufficient financial strength, marketing skills, and desirable content to enter any market they want.
Pre-paid: Vendor pays freight to store.
Price point: Various price categories. For example, one price may be for good products, another for better products, and a third for best products.
Price sensitive: Tendency for the demand for an item to be strongly affected by its price.
Price war: When two or more competitors try to beat each other’s prices, possibly intending to drive the weaker competitor out of business or, at least, reduce their business substantially. They undercut each other’s prices systematically, sometimes to such an extent that they are losin substantial sums of money on the price war “footballed” items.
Private label: Brands owned by a retailer or retail group rather than by a manufacturer.
Profit and loss statement (P & L): An accounting report that shows revenues, costs of goods, gross profit, expenses by major category (including depreciation and amortization), pre-tax profits, taxes, and after-tax profit.
Purchase order: The form used to place an order and give written authorization to a vendor to deliver specified merchandise at a stipulated price. Once accepted by the vendor, the purchase order becomes a legally binding purchase contract.
Rate card: The price list used primarily in advertising that lists costs based on the size of the ad, the length of a commercial, the positions of the advertising within its medium, and how often it is repeated.
Reach: Number of persons exposed at least once to a message during an ad campaign.
Receiving: The physical process of taking possession of merchandise.
Resale number: State issued identification number that permits retailers to buy merchandise without the vendor having to pay sales tax. When the retailer then sells to a person or entity that has no resale number, the seller is required to collect the tax from the purchaser and pass it on to the state.
Returns: Products sent back to the vendor for refund or credit against future sales.
Run of paper (ROP): Newspaper advertising term that applies to advertisements that the publisher can place anywhere in the paper.
Sales rep: Person or company representing the manufacturer in the sale of its goods.
S corporation: A corporation whose profits and losses pass directly through its owner(s).
Seasonal merchandise: Goods designed to sell only during specified seasons. Seasonal may be literal (such as summer clothing) or figurative, such as the Christmas or Easter seasons.
Secured line of credit: Line of credit that is guaranteed with collateral.
Short-term loan: Loan due within one year.
Show special: A price incentive offered by manufacturers to induce buyers to place orders at a trade show.
Shrinkage: Loss of merchandise at retail caused by shoplifting, internal theft, or bookkeeping errors.
Slotting fee: The price retail chains demand to stock an item they do not carry. The amount of the slotting fee may vary with the space, display, and promotional support to be allotted to the new item.
Small Business Administration (SBA): The government office that provides counseling and business plan evaluation for small businesses. While it does not lend money, it guarantees bank loans for small business people who could not otherwise qualify for them.
Sole proprietorship: Business is transacted for which the single owner is personally responsible (as compared to a corporation, the debts of which are normally not the responsibility of its owners, even if there is only a single owner).
Special order: An order for products not in stock.
Stock keeping unit (SKU): An individual item of merchandise. Each item is normally recorded in the retailer’s books by manufacturer, style, number, size, color, and unit price.
Substitution: When a vendor substitutes one style for another on an order. This can happen with or without the retailer’s permission. However, retailers are not obligated to accept the substitute product if they have not approved it.
Suggested Retail Price (SRP): The retail price suggested by the manufacturer.
Terms: The payment schedule for goods received.
Trade area: Geographic area from which a store or shopping center will obtain most of its customers.
Traffic department: These vendor departments optimize cost of freight and keep track of shipments to their customers.
Triple net: Name applied to a payment for leased space that includes rent, taxes, insurance, and common-area maintenance charges.
Turnover: Number of times the average investment in merchandise is bought and sold during a given time.
Universal Product Code (UPC): The bar coding system for merchandise.
Unsecured line of credit: Line of credit that is not backed by a specific piece of collateral.
Volume: Dollar sales of goods sold during a given period of time.
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