Glossary: Retail

1. Customer: A customer (also known as a client, buyer, or purchaser) is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services. However, in certain contexts, the term customer also includes by extension any entity that uses or experiences the services of another. A customer may also be a viewer of the product or service that is being sold despite deciding not to buy them. The general distinction between a customer and a client is that a customer purchases products, whereas a client purchases services. Three metrics are used to count customers and track customer activity irrespective of the number of transactions (or monetary value of those transactions) made by each customer: 1 Customer counts: These are the number of customers of a firm for a specified time period. 2 Recency: This refers to the length of time since a customers last purchase. A six-month customer is someone who purchased from the firm at least once within the last six months. 3 Retention rate: This is the ratio of the number of retained customers to the number at risk. 2. Vendor: A vendor, or a supplier, is a supply chain management term meaning anyone who provides goods or services to a company. A vendor often manufactures inventoriable items, and sells those items to a customer. 3. Product: In general, the product is defined as a "thing/s produced by labor or effort" or the "result of an act or a process", and stems from the verb produce. In marketing, a product is anything that can be offered to a market that might satisfy a want or need. In retailing, products are called merchandise. In manufacturing, products are purchased as raw materials and sold as finished goods. Commodities are usually raw materials such as metals and agricultural products, but a commodity can also be anything widely available in the open market. In project management, products are the formal definition of the project deliverables that make up or contribute to delivering the objectives of the project. In insurance, the policies are considered products offered for sale by the insurance company that created the contract. A related concept is subproduct, a secondary but useful result of a production process. 4. Purchase Order: A purchase order (PO) is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a purchase order to a supplier constitutes a legal offer to buy products or services. Acceptance of a purchase order by a seller usually forms a one-off contract between the buyer and seller, so no contract exists until the purchase order is accepted. 5. Blanket Order: A blanket order is defined as an order the customer makes with its supplier which contains multiple delivery dates scheduled over a period of time, sometimes at predetermined prices. It is normally used when there is a recurring need for expendable goods. Hence, items are purchased under a single purchase order (P.O) rather than processing a separate P.O. each time supplies are needed. Having a blanket order dispenses the customer from holding large inventories and avoids the administrative expense of processing frequent purchase orders, while favoring discount pricing through volume commitments. Practically, a blanket order is a

fixed price contract for a period of time. Buyer requests suppliers to give the best price for price competition. After the best one chosen, the prices of goods are fixed, and also quantities of each product are given to the supplier to prepare stock for on requested delivery.

6. Sales Order: The sales order, sometimes abbreviated as SO, is an order issued by a business to
a customer. A sales order may be for products and/or services. Given the wide variety of businesses, this means that the orders can be fulfilled in several ways. Broadly, the fulfillment modes, based on the relationship between the order receipt and production, are as follows:

Digital Copy - Where products are digital and inventory is maintained with a single digital master. Copies are made on demand in real time and instantly delivered to customers. Build to Stock - Where products are built and stocked in anticipation of demand. Most products for the consumer would fall into this category. Build to Order - Where products are built based on orders received. This is most prevalent for custom parts where the designs are known beforehand. Configure to Order - Where products are configured or assembled to meet unique customer requirements e.g. Computers. Engineer to Order - Where some amount of product design work is done after receiving the order.

A sales order is an internal document of the company, meaning it is generated by the company itself. A sales order should record the customer's originating purchase order which is an external document. Rather than using the customer's purchase order document, an internal sales order form allows the internal audit control of completeness to be monitored as a sequential sales order number can be used by the company for its sales order documents. The customer's PO is the originating document which triggers the creation of the sales order. A sales order, being an internal document, can therefore contain many customer purchase orders under it. In a manufacturing environment, a sales order can be converted into a work order to show that work is about to begin to manufacture, build or engineer the products the customer wants.

7. Product Assortment/Deep Assortment/Product Depth/Merchandise Depth: A retail

merchandising strategy in which the retailer stocks a number of varieties of a particular product line. Carrying a deep assortment of a particular product can lead a company to becoming a "super specialist". It also limits the space for other products that would allow it to reduce its risk exposure. Some types of businesses are able to offer a deep assortment of a product while at the same time offering a wide variety of products. Deep assortment is the opposite of shallow assortment. A deep assortment of a particular product line may involve the company carrying a wide-array of colors and add-ons. A retailer using a deep assortment strategy may be known as a category killer if it focuses on a limited number of products, as it dominates a category of merchandise to such a degree that other businesses are unable to compete. 8. Replenishment: Retail Replenishment can be defined as acquiring product on a recurring basis to support anticipated need. Replenishment is best served as an automated process given the huge number of combinations of items and store locations. Systematic creation and updates to demand forecasts and automatic creation of purchase orders are common functions supported by most leading solutions.

To enable replenishment solutions to perform these automated adjustments and decisions, several item/location specific variables are required and considered in the process. Examples include presentation minimum, seasonal selling profile, buying multiple, shipping multiple, order cycle, safety stock or service level goal, leadtimes, vendor ordering requirements and daily updates to shipment and/or sales history and current inventory. While most of the user-defined variables do not change frequently once established, the initial setup effort for an item on replenishment can be time consuming. The primary focus of a replenishment solution is profit improvement through management of item / location level demand forecasts and inventory levels. While exception reporting and higher level data summaries are available for many of the solutions on the market, the primary goal of a replenishment system is to maximize sales and optimize service levels, while minimizing inventory investment. 9. Planning and allocation: Merchandise Planning is defined as the process of setting and maintaining future performance goals for sales, inventory and other financial metrics and tracking actual results and variances to those goals. Planning decisions are based on historical trends and management insight into expected future changes such as number of stores, calendar shifts, business shifts, and promotional events. All retail organizations tend to perform merchandise planning at high levels such as department / chain / month for key variables such as inventory dollars, sales dollars and gross margin. This level of merchandise planning drives company decision making and provides a basis of success measurement internally and with external parties such as stock analysts. Allocation is the process of assigning individual item quantities to specific stores based on analytical approaches that recognize the performance of those items and their history or potential at different stores. Using multiple sets of rules and logic allows allocation to handle a wide variety of product types when planning the buy or executing the distribution. The objectives of allocation solutions are to minimize time required to allocate product and maximize profit by reducing costs and aligning product placement with store opportunity to sell. Initially establishing allocation models can be a time-consuming process. However, once established these models can be reused for the allocations of successive purchase orders for product with similar or identical characteristics. 10. Compare and Contrast: How do these two methods compare to one another: Generally, replenishment solutions require more data and effort for initial item setup than do P&A solutions. This is not to say that setup for P&A solutions is easy, but the number of variables required for demand forecasting and ordering tend to outnumber those required for a P&A solution at these lower levels of detail. P&A solutions tend to require greater effort weekly to maintain accurate plans and place purchase orders than would a replenishment solution. Demand planning management and purchase order creation are efforts requiring user intervention with P&A systems. Replenishment systems do not require user efforts for these functions, although exception management and user fine tuning is customary to deliver the best results. Management of exiting items is a challenging and time consuming effort with both systems. Both types of solutions need user attention to decrease forecasts or plans, stop ordering, manage remaining inventory and optimize markdowns and disposition. 11. Sales Tax: A sales tax is a tax, usually paid by the consumer at the point of purchase,

itemized separately from the base price, for certain goods and services. The tax amount is

usually calculated by applying a percentage rate to the taxable price of a sale. A portion of the sale may be exempt from the calculation of tax, because sales tax laws usually contain a list of exemptions. Laws governing the tax may require it to be included in the price (tax-inclusive) or added to the price at the point of sale. Most sales taxes are collected from the buyer by the seller, who remits the tax to a government agency. Sales taxes are commonly charged on sales of goods, but many sales taxes are also charged on sales of services. Advantages that a sales tax generally has over other forms of taxation are that it is difficult to avoid, and simple to calculate and collect. 12. Point-of-sale: Point of sale (POS) (also sometimes referred to as Point of purchase (POP)) or checkout is the location where a transaction occurs. A "checkout" refers to a POS terminal or more generally to the hardware and software used for checkouts, the equivalent of an electronic cash register. A POS terminal manages the selling process by a salesperson accessible interface. The same system allows the creation and printing of the receipt. 13. Invoice: An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms. The buyer has a maximum amount of days to pay for these goods and is sometimes offered a discount if paid before the due date. In the rental industry, an invoice must include a specific reference to the duration of the time being billed, so rather than quantity, price and discount the invoicing amount is based on quantity, price, discount and duration. Generally speaking each line of a rental invoice will refer to the actual hours, days, weeks, months, etc. being billed. From the point of view of a seller, an invoice is a sales invoice. From the point of view of a buyer, an invoice is a purchase invoice. The document indicates the buyer and seller, but the term invoice indicates money is owed or owing. In English, the context of the term invoice is usually used to clarify its meaning, such as "We sent them an invoice" (they owe us money) or "We received an invoice from them" (we owe them money). 14. Product Information Management: Product information management or PIM refers to processes and technologies focused on centrally managing information about products, with a focus on the data required to market and sell the products through one or more distribution channels. A central set of product data can be used to feed consistent, accurate and up-to-date information to multiple output media such as web sites, print catalogs, ERP systems, and electronic data feeds to trading partners. PIM systems generally need to support multiple geographic locations, multi-lingual data, and maintenance and modification of product information within a centralized catalog to provide consistently accurate information to multiple channels in a cost-effective manner. The increasing number of channels for product data (e.g., web sites, print catalogs, electronic data feeds) emphasized the need for product information management, as information kept by businesses is frequently scattered throughout disparate departments and held by certain employees or systems instead of being available centrally. Product data often exists in ERP systems, R&D PLM systems, spreadsheets and personal databases. Data are saved in various formats or are only available in hard copy form. Information is utilized in varying environments and contexts such as for detailed product

descriptions with pricing info in product catalogs or for size and weight data for calculating freight costs in a logistics department. PIM in this example represents a solution for centralized, media-independent data maintenance for providing purchasing, production and communications data for repeated use on/in multiple IT systems, languages, output media and publications. It also provides a solution for efficient data collection, management, refinement and output. 15. Transaction: A financial transaction is an agreement, communication, or movement carried out between separate entities or objects, often involving the exchange of items of value, such as information, goods, services, and money. It is still a transaction if you exchange the goods at one time, and the money at another. This is known as a two part transaction, part one is giving the money; part two is receiving the goods. 16. Asset: Any item of economic valueespecially that which could be converted to cash. 17. Liability: Anything that takes money out of your pocket. 18. Debit/Credit: Debit and credit are the two aspects of every financial transaction. Their use and implication is the fundamental concept in the double-entry bookkeeping system, in which every debit transaction must have a corresponding credit transaction(s) and vice versa. Debits and credits are a system of notation used in bookkeeping to determine how to record any financial transaction. In financial accounting or bookkeeping, "Dr" (Debit) means left side of a ledger account and "Cr" (Credit) is the right side of a ledger account. an increase (+) to an asset account is a debit. An increase (+) to a liability account is a credit. 19. Accounts Payable: Accounts payable is a file or account sub-ledger that records amounts that a person or company owes to suppliers, but has not paid yet (a form of debt), sometimes referred as trade payables. 20. Accounts Receivable: Accounts receivable also known as Debtors, is money owed to a business by its clients (customers) and shown on its Balance Sheet as an asset. 21. Journal: A journal is book-keeping document (digital/paper) in which monetary transactions are recorded in chronological sequence by date. 22. Ledger: A ledger is the principal book or computer file for recording and totaling monetary transactions by account, with debits and credits in separate columns and a beginning balance and ending balance for each account. 23. Settlement: The process in which a buyer makes payment and receives the agreed-upon good or service. This term is used on exchanges to indicate when a security actually changes hands, which often occurs several days after a trade is made. 24. Clearance: The process of settling transactions. Most exchanges have one or more clearing houses, which are charged with matching orders together, ensuring that deliveries are made to the correct parties, and collecting margin money. Because so many trades take place on an exchange in a given day, clearing houses exist to process what

each party owes or is owed in a central location so the fewest securities actually change hands. For example, suppose that a broker-dealer buys 1000 shares of a security and then, in a completely separate transaction, sells 700 of the same shares. At the end of the trading day, the clearing house would determine that the broker-dealer must only buy 300 shares as the other 700 belong to another party. Clearing houses receive a clearing fee in exchange for clearance services. 25. Work-Order: A work order or job order is an order received by an organization from a customer or client, or an order created internally within the organization. A work order may be for products or services. In a manufacturing environment, a work order is converted from a sales order to show that work is about to be begin on the manufacture, building or engineering of the products requested by the customer. In a service environment, a work order can be equivalent to a service order where the WO records the location, date and time the service is carried out and the nature of work that is done. The type of personnel (e.g. job position) may also be listed on the WO. A rate (e.g. $/hr, $/week) and also the total amount of hours worked and total value is also shown on the work order. 26. Special-Order: Customer special orders (CSO) are orders that you make when a customer requires an item currently not available or not usually sold in your shop. The process of tracking a CSO involves several transactions to be recorded in a specific order. Should one of the tasks in the sequence of the CSO process be missed or not followed on from the previous, the CSO will not follow through to its completion. 27. Layaway: Layaway (lay-by in Australia, New Zealand and South Africa) is a way to purchase an item without paying the entire cost at once. However, rather than taking the item home and then repaying the debt on a regular schedule, as in most installment plans or hire purchases, the layaway customer does not receive the item until it is completely paid for. There is sometimes a fee associated, since the seller must "lay" the item "away" in storage until the payments are completed. If the transaction is not completed, the item is returned to stock and the customer's money is returned minus a fee.