Retail Terms Every Modern Retailer Should Know

Table of Contents

When the only thing that’s constant in this industry is change, we know how hard it can be to keep up with all the latest retail lingo. That’s why we’ve broken it down into this list that includes the most important retail terms to know. Whether you’re a newbie or just looking to refresh your knowledge, these terms are key in the industry. 

Product Related Terms and Identifiers

Retailers use a slew of different identifiers to describe products and variants.

Color Choice (CC)

  • A customer's unique style-color choice (e.g., Blue Crew Neck vs. Red Crew Neck) independent of sizing.

Continuity Product (same as Key Item, Never Out-of-Stock, Basics)

  • Basic products that are sold year after year with little variation.
  • These are often managed automatically, with little intervention from the buyer. T-shirts, socks, etc. are good example of these. Many buying platforms will have a key item management capability to manage these.

Seasonal Products (same as Fashion, Newness)

  • Products that are more appropriate for a limited time-frame or season. Fashion items are most often seasonal products.

Style Number (Style #)

  • A unique identifier describing the style of the product. Many retailers use Smart Style Numbers, that are composed of the concatenation of various attributes of the product.
  • An example style # from a multi-brand retailer is gucci-poolsliders-ss-21, which indicates that the products are Gucci products, of type pool slider, that are in the spring / summer collection for 2021.

Stock Keeping Unit (SKU)

  • SKUs are unique identifiers for the different variants of the product. Since these describe the most specific sellable unit, both inventory and sales should be tracked in terms of SKUs, hence the name stock keeping unit.

Variant

  • Different color / size combinations of a product. For example, the "Oxford Shirts" could be a product, and the variants would be the different color (say White, Navy and Black) and size combinations. In this example, some example variants would be: Oxford Shirt-White-Small or Oxford Shirt-Black-Large

Product Flow Related Terms

Delivery Window

  • Start / end dates for each delivery.
  • This should be captured along with the assortment plan, so that the relevant parties know when the products will be hitting the store.

Drop

  • Some brands deliver all the SKUs in one go but other brands can deliver 10 SKUs in with drop 1, 10 SKUs with drop 2, etc.

End Date

  • The last day a product is available for ordering (or for sale).
  • This is particularly relevant for continuity products that are sold year after year. If you want to terminate that product, you place an end date so that the system stops ordering it.

Launch Date

  • When a particular product will be hitting the stores.

Market Week / Buy Week

  • It is the time-frame during which brands (or suppliers) open up their showrooms for retailers to visit and place orders.

Special Make Up (SMU)

Special make-up is when a Brand (i.e. supplier) manufactures an item that is special for a retailer. SMU orders typically have Minimum Order Quantity (MOQ) restrictions associated with them.

Inventory Terminology

Available To Promise (ATP)

Number of units that can be promised to the customer. Let's say that you have 0 units available on stock currently, but you will be receiving 10 more units later today. Assuming that you can fulfill incoming orders tomorrow, your Available to Promise (ATP) inventory would be 10, since you can fulfill new orders with the incoming order. Along with Available to Sell (ATS), Available to Promise (ATP) are better measures to use while determining which products to mark as in-stock on their website.

Available To Sell (ATS)

Number of units available on hand to sell. This is especially important when there is a big time period between when a Sale Order (SO), i.e. customer order happens, and when it gets shipped. During this period, the physical inventory will not be reflecting these SOs, since they haven't been shipped yet, but it is best for the retailer to stop taking new orders on this inventory, since that would run the risk of running out of stock on these items. Therefore, it is best practice for a retailer to use either Available to Sell (ATS) inventory or Available to Promise (ATP) inventory when determining which products to mark as in-stock on their website.

Available To Ship (ATS)

  • When brands have products in their warehouses that are available to ship to retailers immediately.
  • This is more important within in-season planning, where retailers could request more products if they are selling out.

Cover Level

  • This tells you the number of weeks of sales you would be able to support with the inventory at hand. Typically measured in weeks, but can also be measured in days or months.
  • Ideally cover level should be low enough to reduce your inventory cost and high enough to protect you from disruptions in your suppliers.

Lead Time

  • The time it takes to receive a SKU after ordering it from the supplier. Lead times in fashion are typically measured in weeks, but they could also be referred to in days or months, depending the type of product.
  • Lead times will vary depending on the supplier (whether it is a manufacturer or distributor) and the complexity of the product.
  • Nearshore manufacturers or distributors could supply a product in as little as 2-3 weeks, but manufacturing a product in Asia and getting it delivered could take as long as 6-9 months.

Minimum Order Quantity (MOQ)

  • The minimum number of units that the supplier requires to manufacture or supply a particular product. An example might be, a supplier not supplying orders of a white T-shirt if the order is less than 100. Suppliers set a MOQ, because there is a fixed overhead of fulfilling each order.
  • MOQs could be for a particular style, a particular color or for an overall order.

Order Cycle

  • The time period between two replenishment cycles at a retailer. This is typically measured in weeks, but could also be measured in days or months depending on the category of the retailer.
  • For example, if a fashion retailer replenishes their core products once a month, then the order cycle would be 1 month.

Out-of-Stock Rate

  • This gives the percentage of missed sales opportunities on a product or category for the retailer. There are different ways to measure this. Given the challenge of capturing every sales opportunity, retailers use other proxy metrics to measure this metric. A typical approach is to look at the percentage of days that a particular SKU had no stock available at the point of sale.
  • For example, if a product is meant to be selling for 365 days, and in the trailing year, it was out of stock for 10 days, then the out-of-stock rate would be 10 / 365 = 2.7%
  • Another typically used metric is called in-stock rate, and that is equal to 1 - Out-of-Stock-Rate.

Safety Stock

  • Additional inventory to maintain to shield the business from supply and demand fluctuations. Best way to think about Safety Stock is in forward weeks of supply. If a retailer is maintaining 3 weeks of safety stock, it means that, that retailer is aiming to never dip below 3 weeks of inventory, and that safety stock makes sure that they don't run out of stock if customer demand turns out higher than expected, or if there are delays (or out of stocks) from suppliers.
  • Setting a safety stock target that takes into account deviations on sales forecasts and lead times is critical to ensure a low out-of-stock rate for a retailer.

Curves

Retails and planners rely on curves or ratios to determine optimal levels of inventory to hold or purchase. Below are typical curves that are used in retail.

Color Curve

Color curve gives the ideal breakdown between different color variants of a style. This is calculated using historical demand ratios. A sample color curve can look like:

  • Black: 40%
  • White: 30%
  • Navy: 20%
  • Gray: 10%

Sale Curve (same as Seasonality Curve)

Sale curve describes the week-over-week change in demand on a particular item (or a collection of items like class or department). This is calculated by studying historical sales rates. A sale curve would look like:

  • Week 1: 2%
  • Week 2: 3%
  • ....
  • Week 52: 5%

Size Curve

Size curve gives the ideal breakdown between different size variants of a color-choice. This is calculated using historical demand ratios. A sample size curve can look like:

  • XS: 10%
  • S: 15%
  • M: 25%
  • L: 25%
  • XL: 15%
  • XXL: 10%

Activities

Receipt Activity

  • Anything that impacts the future inventory position.
  • Examples are, placing a buy, cancelling a purchase order (PO) or moving the delivery date for a PO.

Sales Activity

  • Any retailer activity that will increase or decrease sales, hence change inventory position (e.g. markdowns, marketing, reallocation, etc.).

Ready for the next step?

Check out how to apply these terms in our list of basic retail math formulas to know.

Eytan Daniyalzade
CEO & Co Founder