Vocabulary for retailers

Common retail vocabulary and abbreviations

This document provides an overview of key specialized terms and abbreviations frequently used in the retail industry.

These terms are essential for understanding and navigating the retail sector and not least this documentation efficiently.

Average Inventory The mean value of your stock over a period. Helps gauge how much capital sits in inventory.
Average Transaction Value (ATV) Total sales divided by number of transactions. Shows how much a customer spends on average.
Backorder An order you can’t immediately fulfill due to lack of stock; you ship it later when replenished.
Basket Size The average number of distinct items per sale. Helps measure how many product types each customer buys.
Break‑even Point The sales volume at which total revenue equals total costs—no profit, no loss.
Cash Flow The net amount of cash coming in and out of your business over a period—critical for day‑to‑day operations.
Category Management The practice of grouping products into logical categories and managing them as individual business units.
COGS (Cost of Goods Sold) Direct cost to purchase or produce the items you sold during a period.
Contribution Margin 1 (CM1) Sales minus COGS. Also called gross profit; it’s what’s available to cover overhead.
Contribution Margin 2 (CM2) CM1 minus variable store‑level expenses (e.g. credit‑card fees), showing what’s left for fixed costs.
Conversion Rate % of store visitors who make a purchase. = Transactions ÷ Visitors × 100.
Cross‑sell Offering related products at point of purchase (e.g. batteries with electronics).
End Cap A display at the end of an aisle used for high‑visibility promotions.
Foot Traffic Number of customers entering your store over a period—basis for conversion analysis.
Gross Margin % (GM %) (Sales – COGS) ÷ Sales × 100. Indicates what portion of each sales dollar you keep before other expenses.
Gross Profit Sales minus COGS. Total “money made” before subtracting operating expenses.
Gross Sales Total unadjusted sales before returns, allowances or discounts.
Inventory Turnover How often you sell and replace your stock in a period. = COGS ÷ Average Inventory.
Lead Time Days between ordering new stock and its arrival in your store.
Layaway A payment plan where customers reserve items with deposits and pay off the balance before pickup.
Loyalty Penetration % of customers or sales coming from loyalty‑programme members.
Loss Leader A product sold at a loss to attract customers into the store.
Loss Prevention Measures and processes to minimize theft, fraud and errors in a physical store.
Markup % (Selling Price – Cost) ÷ Cost × 100. How much you add to cost to set your price.
Mystery Shopping Unannounced visits by evaluators to measure sales staff performance and store standards.
Net Profit What remains after subtracting all expenses (COGS, rent, salaries, utilities, marketing…) from sales.
Net Sales Gross sales minus returns, allowances and discounts.
On‑shelf Availability (OSA) The percentage of time products are in stock and correctly displayed on shelves.
Open‑to‑Buy (OTB) Budget remaining to purchase new inventory, based on planned sales and current stock.
Operating Expenses (OPEX) Ongoing costs to run the store (rent, utilities, payroll), excluding COGS.
Planogram A diagram showing product placement on shelves to maximize sales and traffic flow.
Planogram Compliance The degree to which store displays match the approved planogram.
Point of Sale (POS) The system (hardware + software) where sales are completed and recorded.
Purchase Order (PO) Document sent to suppliers listing items, quantities and agreed prices.
Reorder Point Inventory level that triggers a new purchase order to avoid stock‑outs.
Retail Store Layout The floor‑plan design—aisle locations, fixture placement and checkout positioning—to optimize flow and sales.
Replenishment Cycle The process and frequency of restocking shelves from back‑stock or warehouse.
Safety Stock Extra items kept in reserve to protect against demand spikes or delivery delays.
Sell‑Through Rate Units sold ÷ Units received × 100 over a given period.
Shelf‑to‑Sales Ratio The value of inventory on shelves divided by average daily sales, indicating stocking efficiency.
Shrinkage Loss of inventory due to theft, damage, administrative error or supplier fraud, expressed as a percentage.
SKU (Stock Keeping Unit) Unique identifier for each product variant (size, color) used to track inventory.
Stock‑to‑Sales Ratio Inventory value ÷ Average daily sales. Shows if you’re over‑ or under‑stocked.
Store Traffic Flow Analysis Study of customer movement patterns in‑store (often via heat maps) to optimize layout.
Units Per Transaction (UPT) Total units sold ÷ Number of transactions. Measures how many items customers buy per visit.
Up‑Selling Encouraging customers to purchase a higher‑priced item or add‑on.
Visual Merchandising The art of presenting products on‑shelf with attractive displays, lighting and signage to drive sales.

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Common retail vocabulary and abbreviations

This document provides an overview of key specialized terms and abbreviations frequently used in the retail industry.

These terms are essential for understanding and navigating the retail sector and not least this documentation efficiently.

Average Inventory The mean value of your stock over a period. Helps gauge how much capital sits in inventory.

Average Transaction Value (ATV) Total sales divided by number of transactions. Shows how much a customer spends on average.

Backorder An order you can’t immediately fulfill due to lack of stock; you ship it later when replenished.

Basket Size The average number of distinct items per sale. Helps measure how many product types each customer buys.

Break‑even Point The sales volume at which total revenue equals total costs—no profit, no loss.

Cash Flow The net amount of cash coming in and out of your business over a period—critical for day‑to‑day operations.

Category Management The practice of grouping products into logical categories and managing them as individual business units.

COGS (Cost of Goods Sold) Direct cost to purchase or produce the items you sold during a period.

Contribution Margin 1 (CM1) Sales minus COGS. Also called gross profit; it’s what’s available to cover overhead.

Contribution Margin 2 (CM2) CM1 minus variable store‑level expenses (e.g. credit‑card fees), showing what’s left for fixed costs.

Conversion Rate % of store visitors who make a purchase. = Transactions ÷ Visitors × 100.

Cross‑sell Offering related products at point of purchase (e.g. batteries with electronics).

End Cap A display at the end of an aisle used for high‑visibility promotions.

Foot Traffic Number of customers entering your store over a period—basis for conversion analysis.

Gross Margin % (GM %) (Sales – COGS) ÷ Sales × 100. Indicates what portion of each sales dollar you keep before other expenses.

Gross Profit Sales minus COGS. Total “money made” before subtracting operating expenses.

Gross Sales Total unadjusted sales before returns, allowances or discounts.

Inventory Turnover How often you sell and replace your stock in a period. = COGS ÷ Average Inventory.

Lead Time Days between ordering new stock and its arrival in your store.

Layaway A payment plan where customers reserve items with deposits and pay off the balance before pickup.

Loyalty Penetration % of customers or sales coming from loyalty‑programme members.

Loss Leader A product sold at a loss to attract customers into the store.

Loss Prevention Measures and processes to minimize theft, fraud and errors in a physical store.

Markup % (Selling Price – Cost) ÷ Cost × 100. How much you add to cost to set your price.

Mystery Shopping Unannounced visits by evaluators to measure sales staff performance and store standards.

Net Profit What remains after subtracting all expenses (COGS, rent, salaries, utilities, marketing…) from sales.

Net Sales Gross sales minus returns, allowances and discounts.

On‑shelf Availability (OSA) The percentage of time products are in stock and correctly displayed on shelves.

Open‑to‑Buy (OTB) Budget remaining to purchase new inventory, based on planned sales and current stock.

Operating Expenses (OPEX) Ongoing costs to run the store (rent, utilities, payroll), excluding COGS.

Planogram A diagram showing product placement on shelves to maximize sales and traffic flow.

Planogram Compliance The degree to which store displays match the approved planogram.

Point of Sale (POS) The system (hardware + software) where sales are completed and recorded.

Purchase Order (PO) Document sent to suppliers listing items, quantities and agreed prices.

Reorder Point Inventory level that triggers a new purchase order to avoid stock‑outs.

Retail Store Layout The floor‑plan design—aisle locations, fixture placement and checkout positioning—to optimize flow and sales.

Replenishment Cycle The process and frequency of restocking shelves from back‑stock or warehouse.

Safety Stock Extra items kept in reserve to protect against demand spikes or delivery delays.

Sell‑Through Rate Units sold ÷ Units received × 100 over a given period.

Shelf‑to‑Sales Ratio The value of inventory on shelves divided by average daily sales, indicating stocking efficiency.

Shrinkage Loss of inventory due to theft, damage, administrative error or supplier fraud, expressed as a percentage.

SKU (Stock Keeping Unit) Unique identifier for each product variant (size, color) used to track inventory.

Stock‑to‑Sales Ratio Inventory value ÷ Average daily sales. Shows if you’re over‑ or under‑stocked.

Store Traffic Flow Analysis Study of customer movement patterns in‑store (often via heat maps) to optimize layout.

Units Per Transaction (UPT) Total units sold ÷ Number of transactions. Measures how many items customers buy per visit.

Up‑Selling Encouraging customers to purchase a higher‑priced item or add‑on.

Visual Merchandising The art of presenting products on‑shelf with attractive displays, lighting and signage to drive sales.