Glossary of Wholesale Terminology
A compendium of useful terms for salespeople representing Small Wholesale Producers. This glossary is broken down into six major categories. Search using your browser’s search function. Italicized words have their own entries.
Bulk Discount: Many wholesale producers offer bulk discounts to individuals and companies that order in volume, but not with the intention of reselling the product. For example, a corporate buyer purchases your product to gift to their clients (aka corporate gifting), in which case they won’t be collecting sales tax, and therefore you must collect sales tax. Since wholesale pricing is reserved for retailers, you might offer them pricing that is discounted from your full retail price, but not as low as your wholesale price.
Buyer (aka Purchaser): The employee of a retail store who is in charge of purchasing product at wholesale to resell in the store. Can be a part of a team.
Catalog (aka Brand Book): A sales tool that offers an in-depth look at your brand. Catalogs are generally designed for print, with a companion PDF. They’re heavy on stylized or lifestyle photos, demonstrating your products in their natural environment. Brand books are your chance to share all the things that set your brand apart: press, reviews, and awards you’ve received, glowing testimonials from a few of your more influential retailers, your innovations and synergistic collaborations, your certifications, your community involvement, charity partners, etc. While your catalog might detail your product line and your policies, pricing is generally left off and consigned to your line sheet. See this post.
Consumer Packaged Goods (CPG): Consumable goods that get used up relatively quickly and need to be replaced relatively often, such as as food, beverages, cosmetics, clothing, and household products. Compare this with “durable goods” such as appliances and automobiles, which are designed to be used over an extended period of time. CPGs are generally packaged for display on retail shelves. Shelf Life is geared toward small wholesale brands, a subcategory of CPG.
Consignment (aka Sale or Return): An alternative to wholesale in which the retailer doesn’t buy product outright from a seller, but rather places the product on their shelf and takes a cut if and when the product sells. If the product doesn’t sell, it is returned to the seller. The seller’s margin is usually higher than in a wholesale arrangement since the risk is lower for the retailer, but the retailer is less committed, and additional workload for the seller makes this an unsustainable model of business for most sellers.
Delivery Window: When placing their orders, some retailers require that you guarantee that you can land the order at their store within a certain timeframe (not before x date and not after y date), so that they can coordinate their inventory. This is especially common when larger retailers are placing their holiday orders. Compare with lead time.
Direct Sales: see self-distribution.
Drop Shipping: a supply chain management method in which the retailer does not keep products in stock, but rather transfers customer orders to the producer to fulfill and ship directly to the customer. Many online retailers function this way, serving more as a marketing platform for your brand than as an actual retailer.
Exclusivity: An agreement between retailer and producer where the producer agrees to refrain from wholesaling some or all of their products to any other retailers in the area.
Gatekeeper: Any retail employee who blocks your access to the buyer or decision maker. Your job as a salesperson is to get in good with them, or find a way around them.
Lead Time (aka Turnaround Time): The amount of time between when you receive an order from a retailer and when you deliver the order to that retailer. Lead time includes any production time, fulfillment time, and transit time, and it can vary depending on any of those variables. Compare with delivery window. Note that in more complex manufacturing there is a difference between lead time and turnaround time, but for our purposes they’re the same, and retailers tend to use the terms interchangeably.
Line Pricing: The term for when you price all the products in your product line the same. If your wholesale price is $4 and your MSRP is $8 for all the products in your line, then you are line pricing your products. Even if you don’t use line pricing, many retailers will line price your products for you by averaging your prices, for their customers’ convenience.
Line Sheet (aka Sell Sheet or Price Sheet): A PDF and/or sheet of paper that conveys the ordering details of your current product line to buyers, both prospective and returning. Generally includes item descriptions, case sizes, SKU numbers, descriptions, wholesale prices, MSRP, etc, along with your wholesale terms, such as your order minimum, payment terms, shipping arrangements, and how to buy. It should function as a quick reference guide for a buyer who is putting together a purchase order. See this post.
MSRP or SRP (Manufacturer’s Suggested Retail Price) (aka Price Point): The price that you, the manufacturer, would like retailers to sell your product for. Many retailers will choose to sell above this price, but the idea is that you don’t want any of your retailers to sell below this price. Known as RRP, or Recommended Retail Price, in the UK, Australia, and Canada. See this post.
Minimum Order Quantity (MOQ): The dollar amount or case quantity that you require orders to meet/exceed in order to qualify for wholesale pricing. This is up to you, the vendor, to determine, and there’s no rule that says you have to set one at all. See this post.
Net Terms (NET): The number of days that a retailer has to pay you in full for an order, beginning the day that the product is shipped. “Net 15” or “Net 30” means that the retailer has 15 or 30 days to pay you, respectively. You can offer them a discount for paying early. For example, “2/10 Net-30” means that the retailer can take a 2% discount if they pay within the first 10 days, otherwise they have 30 days to pay in full.
Out of Stock (OOS): When you (as a supplier) don’t have a certain product available for whatever reason, you would list it as OOS.
Point of Purchase (POP): Any in-store marketing collateral that you create and provide your retailers with to improve your product’s visibility and sell through. This can include displays (see next entry), posters, shelf talkers … your imagination is the limit, so long as the retailer will allow it in their store. See this post.
Point of Purchase (POP) Display: A standalone display unit that you provide your retailers with to enhance your product’s appeal and visibility, while also keeping it organized on the shelf. POP displays may also help you gain additional placement within the store, e.g. at the checkout area. A “shipper” is a specific type of POP display in which the case pack itself transforms into a fully stocked display, e.g. by a couple quick tears along perforated lines. “Shipper” can also refer to a floor-standing tower display. See this post.
Prepay: In a wholesale arrangement, prepay terms means that the retailer must pay for your product in advance of delivery, rather than upon delivery (aka Cash On Delivery) or after a certain period of time (aka net terms).
Price Point: see MSRP.
Producer (aka Manufacturer, Seller, Vendor, or Supplier): In the context of this website, these terms are used interchangeably to refer to a company that sells its products to wholesale buyers at wholesale prices. We prefer the term “producer” over “manufacturer” because manufacturing has connotations of industrial scale, whereas producer has a smaller feel. A company may refer to itself as a producer even though it outsources its manufacturing to a co-packer. “Seller” or “vendor” are terms that are used by retailers to refer to their suppliers. Brand is a another term that can mean the same thing in certain conversations, but it gets its own definition in this glossary because of its additional meanings.
Purchase Order (aka PO): A document that a retailer submits to a wholesaler, detailing the products and quantities that they’d like to buy, along with the prices they expect to pay and their desired delivery window. The wholesaler responds to the PO with an order confirmation, indicating any out of stock products or price changes, and whether or not the delivery window is achievable. Like invoices, PO’s have a unique number for internal bookkeeping purposes, which the wholesaler should include on the invoice when the order ships.
Purchaser: see Buyer.
Recommended Retail Price (RRP): see MSRP.
Sale or Return: see Consignment.
Sell Sheet: see Line Sheet.
Self-Distribute: When a wholesale producer ships or delivers directly to a retailer, rather than through a distributor. This is often referred to as “direct sales,” “selling direct,” or “direct distribution,” which is not to be confused with direct to consumer. Note that selling your products on a third party online marketplace via drop-shipping is considered self-distribution.
Shipper: see POP Display.
Shelf Talker: Point of Purchase signage that calls out your brand on the shelf, while going into a bit more detail about your company profile or your product descriptions than you have the space or desire to put on your packaging. See this post.
Specialty: In the food and beverage arenas, the term refers to the category of products that are usually made in relatively small batches with higher quality ingredients than mainstream competitors, and thus command a premium price. Consumers often perceive these products as being original, authentic, stylish, culturally significant, or the like. “Craft,” “small batch,” and “artisanal” are related terms that highlight different characteristics of what is meant by “specialty.”
Suggested Retail Price (SRP): see MSRP.
Terms (aka Payment Terms): The policies regarding payment that you, the seller, expect buyers to adhere to when ordering from you. Your terms should address when you expect to be paid (net 15, net 30, prepay, etc), forms of payment you accept, which party pays for shipping, whether or not you accept returns or offer credits, and anything else related to payment. Make sure you’re clear about your terms when setting up a new account, and include them on your line sheet and website. See this post.
Terms & Conditions (T&Cs): The set of rules that retailers must agree to in order to purchase your product wholesale. Your fine print, in other words. See this post.
Turnaround Time: see Lead Time.
Wholesale: A B2B relationship in which a vendor sells goods to a retailer at a price that is roughly half of the vendor’s MSRP, so that the retailer can mark it up to the full retail price and sell it off of their shelf to the end consumer. Sales tax is collected from the end consumer by the retailer, and thus there is no need for the wholesaler to collect taxes when selling to a retailer (so long as the retailer provides the wholesaler with a copy of their resale certificate).
Backstock: Product that a retailer has on-hand to replenish their shelves from, but that is being stored off of the retail floor.
Category: Retailers manage their inventory according to product groups, known as categories, which they tailor to the wants and needs of their customer base. Larger stores might have category buyers who place purchase orders for specific product categories. Knowing which category your product belongs to helps you home in on the correct buyer. Departments consist of a multitude of categories. If you represent a chocolate company, you might belong to the chocolate category in the grocery department. See cross-merchandising.
Cross-merchandising: A retail technique of displaying products from different categories together in order to trigger increased customer spending and link those products in the customer’s mind for future purchases. The benefit for you as a wholesaler is increased exposure within the store.
Department: A division of a retail store that is responsible for managing specific product categories, which are usually shelved in the same general area for the shopper’s convenience.
Disco: Retail shorthand for discontinuing a SKU or product line, generally for reasons of slow movement. Retailers, distributors, brokers, and producers all use the term.
Endcap: A merchandising term referring to the product display at the end of an aisle in a retail store. This spot is considered highly visible, so is highly prized by producers.
Facings: The number of products you have facing outward on a store shelf. For example, you might have four SKUs at a store, but they’ve given you two facings per SKU, for a total of eight facings. By expanding your facings, you effectively expand the your billboard in that shop, catching more customers’ eyes. This is known as your “brand block.”
Keystone: 50% is the most common margin/discount that a retailer will take. It is so common, in fact, that it has its own name in retail: “keystone pricing.” A retailer utilizing keystone pricing will take your wholesale price (plus any shipping or delivery fees) and double it to arrive at their retail price. This is a quick and easy rule of thumb for retailers that more or less guarantees they’re achieving an ample margin to cover their overhead and turn a profit. No one says a retailer has to keystone, but since it’s fairly standard, you should discount your MSRP by about 50% to arrive at your wholesale price.
Movement: see Sell-Through Rate.
Open-to-Buy (OTB): A term that retailers use to refer to the merchandise that they’ve figured into their purchasing budget but haven’t yet ordered. It also refer to the process of planning out future purchases. OTB is a data-driven process that is aimed at hitting the sweet spot between under-buying and over-buying, so as to optimize cash flow and maximize profits.
Placement: Where your product is displayed within in a store, or within a section of the store. A big part of account management is working with buyers to improve your product’s shelf placement, since better visibility can mean much better sales. Of course, when you land better placement within a store, your product has to perform well enough for the retailer to justify keeping it there, versus some higher-performing product.
Planogram: A detailed visual diagram that retailers use to lay out every square foot of their store(s), showing where specific products should be placed, down to the fixture and number of skus. Planograms identify prime selling areas, and by tracking the sales of specific products within those areas, retailers can make sure they are always maximizing customer purchases. The sophistication of planograms can range from a simple pen-and-paper sketch to software-generated. Small independent retailers often opt for the former, while large retail chains might have very regimented planogram systems in place.
Point of Sale (POS): The place in a store where there retailer receives payment from the customer and issues them a receipt. The term “POS” may be applied to anything associated with this process, such as the hardware and software that a cashier uses to ring you up. POS terminals are a huge and growing market in and of themselves. As the software becomes more sophisticated, the retailer gains more and more insight into their customers, their sales, and their inventory.
Resale Numbers and Tax IDs: Resale Numbers are issued to retailers by their state’s tax agency, and Tax IDs by the IRS. These identify the retailer as being exempt from paying tax on purchases intended for resale. States only collect sales tax once, so there’s no need for retailers to pay sales tax at the time of purchase from a wholesaler. The upshot for wholesalers is that you don’t need to charge sales tax on your wholesale transactions, but you must have Tax IDs on file for every retailer you do business with to prove this if and when the tax man comes a-knockin’. Having these on file also gives you the confidence that you are working with established retailers, not some fly-by night outfit that’s going to take your product and run.
Retail Price: the shelf price that end consumers pay for a product of yours. This may be higher than your MSRP, depending on the retailer’s target margin. See this post.
Retailer (aka Stockist): Person or business that sells products to the end consumer, as opposed to another business or wholesaler. A “stockist” is slightly more specific term that refers to a retailer who stocks a particular type of product, in contrast with a general store. For our purposes, the terms “retailer” and “stockist” are interchangeable.
Sell Through Rate (aka Movement): A retailer’s measure of how fast a product sells in their store, based on the amount of inventory received from a vendor versus how much of it sells during a given period of time (generally a month). This is useful for the retailer when comparing different products with each other, and also the movement of a single product one month versus the next. By monitoring sell-through rates, retailers are better equipped to keep their shelves fresh and engaging for the customer. Compare this with Turn Rate, which is a longer term measurement.
Set: A cohesive display of similar products within a particular category at a retail store. For instance, a store might have a “bar soap” set within the larger category “soap,” within the larger “bath and body” department.
Shrinkage: The loss of inventory in a retail environment that can be attributed to factors such as theft (both by employees and shoplifters), administrative error, cashier error, damage on the shelf, damage in transit, vendor fraud, and so on.
Stockist: see Retailer.
Supply Chain: The reverse-perspective on a distribution channel, which is the chain of intermediaries that a producer works with to get their product to the end consumer. This same chain of intermediaries is called the supply chain when looked at from a retailer’s perspective on how they sourced the products that they sell to their customers. A producer can also refer to their supply chain to describe how they source the ingredients used to manufacture their products.
Turn Rate (aka Turnover or Turn): A retailer’s measure of a given product’s movement over the course of a year, which is an important tool for assessing whether too much or too little backstock is being kept. Retailers don’t like to tie up too much cash in inventory, nor do they like to miss sales because they don’t have enough backstock to keep their shelves looking full, so your product’s turn rate influences the frequency at which they buy your product when they are open to buy. See also Sell-Through Rate.
Vendor: A company that supplies a retailer with products at wholesale prices. See also Producer.
Billback: see Chargeback.
BOGO: A Buy One, Get One Free discount that a vendor can use to incentivize buyers to stock up on their products, try out new SKUs, and, if amenable to both parties, pass some of those savings on to the retail consumer, which can stimulate sell-through. BOGO can also be used as a counter offer when a big retailer is demanding a free fill.
Broker: A freelance sales rep who sells a variety of product lines from multiple brands to a portfolio of retailers, usually in exchange for straight commission. Brokers generally take 5–8% of your sales price, and sometimes a monthly fee, in exchange for working their connections to sell your product to hard-to-reach accounts. They tend to focus on specific regions and specialize in certain channel segments — in the food realm, for instance, a broker might focus on New England, and specialize in natural food stores, convenience stores, or food service.
Buybacks (aka Guaranteed Sales): A condition of purchase by a retailer or distributor requiring that you provide a refund for any product that does not sell by a specific date. This is a common requirement for dated products with a limited shelf life. If your product has a short shelf life, you will probably want to factor this potential cost into your pricing.
Case Cube: A measurement that is commonly required by larger retailers who will be warehousing backstock of your product. It refers the volume that one case of your product takes up, and is calculated by multiplying the length, width, and height (in inches) of your case pack, and then dividing the result by 1728, which gives you the case cube in feet cubed.
Chargeback (aka Billback): a common condition of working with a large buyer or distributor, in which they are allowed to short pay your invoices based on whatever amount you owe them for spoilage, buybacks, or any of the various fees that they might assess for not complying with their guidelines as detailed in their supplier manuals. The latter might include incorrect price tag placement, incorrect label placement, incorrect UPC layout, late delivery, short shipments, incorrect carton dimensions, etc. These fees are designed to help standardize their receiving process. They can add up quickly, and are a big reason why working with large retailers can be a serious headache if you don’t enjoy reading and complying with lengthy guidelines. See also Vendor Compliance.
Co-op: Funds that big vendors set aside for promoting their products at a specific retail store, usually figured as a percentage of the retailer’s purchases from the vendor. For example, if a retailer purchases $100k in product from vendor and that vendor has a 2% co-op policy, that means that the vendor will offer to spend $2k to help the retailer sell that product, usually in the form of public advertisements promoting both the vendor and the retailer. This is generally not expected of small specialty producers, but it’s good to have a response prepared should one of your retailers ask for it.
Delivered Price: Distributors and/or larger chain stores may require that your pricing include any shipping and handling fees. In these cases, you’ll want to build a little wiggle room into your pricing to allow for fluctuations in your carrier’s rates. A big reason why wholesalers generally exclude shipping from their quotes is because fluctuations in shipping costs would cause pricing to change too frequently for anyone’s comfort. See also Landed Cost.
Direct Store Delivery (DSD): See Distribution Center. Not to be confused with Direct Sales or Self-Distribution.
Distribution Center (DC): Major multi-door retailers often have a DC where they receive orders and redistribute them to individual stores. Sellers ship all orders to these facilities rather than to individual stores, except in the case of Direct Store Delivery (DSD), where the seller is allowed to bypass DCs due to limited shelf life.
Distributor: An intermediary or “middleman” that buys goods from producers at a steeper discount than wholesale price, and then sells the goods to retailers. Distributors can expand a producer’s reach while also assisting with certain logistical aspects of doing business, such as order management, fulfillment, delivery, invoicing, and accounts receivable. Having a distributor can also pave the way into higher volume chains and department stores, which often won’t accept deliveries directly from the producer.
Free Fill: A common condition of selling into large, multi-door retailers, in which new vendors are required to provide a free opening order of one case per sku per store. For example, if you have six skus and the store has 20 locations, you would need to provide 120 cases of product, no charge. The reasoning is that a free fill offsets their administrative costs in setting up your products in their system, and in making space for you on their shelves. This is a significant cost for a small producer to bear, and it’s always worth negotiating. One option is to push for a BOGO rather than a straight up free fill. Producers with sales strategies that target large chain stores often design smaller case packs in order to minimize the cost of free fills. See also Slotting Fee.
Freight on Board (FOB) Destination: The seller of goods is responsible for shipping costs and remains liable for the product until it is delivered to the store. Compare with landed cost.
Freight on Board (FOB) Origin: The buyer of goods is responsible for shipping costs and liability. Sometimes you’ll see FOB as shorthand for “Freight on Buyer,” which means that the buyer is expected to arrange for pickup at the seller’s warehouse, or at least reimburse you for freight, or provide their own FedEx/UPS account info.
Guaranteed Sales: see Buybacks.
Landed Cost: For a buyer, this is the total cost of a product once it has arrived and all fees have been tabulated. It can be estimated at the time of purchase, but it can only be calculated with 100% accuracy once it has arrived at the buyer’s door, especially when importation is involved (since customs, duties, taxes, currency conversion, and insurance will be assessed at various points in transit).
LTL (Less Than Truckload): A category of freight that is larger than what a parcel carrier like UPS or FedEx would handle, but smaller than a semi-trailer load. A single pallet of product is considered LTL.
Mindshare: when working with a distributor, their sales reps are effectively your sales reps, so it is critical that they are enthusiastic and knowledgeable about your products. Distributor reps represent hundreds of products, many of which are very similar to your own, so in order for your products to come to mind when they’re pitching to retailers, you must spend a lot of time and effort cultivating mindshare. This can be accomplished through product presentations, ride-alongs, and SPIFFs or other giveaways. It also involves spending a lot of time in the market yourself to support their efforts, as well as frequent phone calls and meetings with managers to discuss inventory levels, projections, progress in key accounts, etc. If your product only accounts for 2% of a distributor’s total sales, it’s quite difficult (though not impossible) to gain more than 2% mindshare with their reps. At the same time, it’s very easy to fall below that 2% mindshare by neglecting to make the aforementioned efforts, and down go your sales.
Off-Invoice Promotion: A promotion where you provide a discount off of your regular wholesale price to a retailer, who then extends a discount to their customers in the form of a Temporary Price Reduction (TRP). This discount is taken off of an invoice at the time of issue, as opposed to a chargeback arrangement, and hence the name. If selling to the retailer through a distributor, then you would discount the price to your distributor, who would then pass the discount on to the retailer. This involves working with the retail buyer to determine the target shelf price, then working backwards to determine the necessary discounts along the distribution channel. Read the fine print carefully in these agreements. Distributors have been known to use these promotions to stock up at a discount so that they have cheap product to sell well beyond the end date of your promotion.
Plus Out (aka Centralized Buying): When a centralized corporate buyer places orders for some or all of the stores in a chain. In a plus out situation, you don’t need to gather orders from store-level buyers. Sometimes a chain will do plus out for an opening order, then turn ordering over to store-level buyers for future orders.
Scan-Down Promotion: A promotion that you run for an agreed upon length of time, after which you reimburse the retailer a per-unit discount for every unit sold during the promotion. Compared with an off-invoice promotion, this is usually a much preferred arrangement for the vendor, since there is no risk that the retailer will stock up on your product at a discount.
Slotting Fee: Some large retailers will require that you pay for space on their shelves when they first bring you in, and any time you introduce a new product. This can either take the form of a free fill, or, in the case of a slotting fee, cold hard cash. There’s no way around it: you have to pay to play in the world of big retail.
SPIFF: A monetary incentive that you offer distributor reps to sell more of your product to retailers. A bribe, in other words. Usually money, but it could be anything that they want and that incentivizes them to give your product more mindshare than they otherwise would. It almost seems unethical when you think about it, but it’s very common practice. For instance, you might set up a friendly competition with your distributors reps, in which the rep that sells the most of your product during a given period wins the prize. The problem is, reps have different territories, and not are territories are equal, so SPIFFs don’t incentivize reps with lousy territories because they already know they can’t win.
Spoilage Allowance: A discount (around 2–3%) that you may need to apply to your invoices if your product has a shelf life under a year or so, to account for any product that might go out of code. You may need to pay an additional fee on top of this for retailer to dispose of spoiled product (or return it to you).
Temporary Price Reduction (TPR): A marketing tool used to increase sales for the short-term by providing a discount to the buyer. It can be used in both B2C and B2B transactions. As a wholesaler, you can use a TPR as a means of boosting your sell through rate at the store level, or as a way to encourage your distributors/retail buyers to increase their order volume and try out new products from your line. In the same way, a retailer can use a TPR to encourage their customers to buy larger quantities and varieties. TPRs can be limited time offers or seasonal offers. You have to be careful when extending TPR’s to distributors — they have been known to use them to stock up at a discount so that they have cheap product to sell well beyond the end date of your promotion.
Vendor Compliance: Rules that major retailers expect their vendors to follow carefully as a condition of doing business with them. These rules relate to everything from liability insurance and invoice formatting, to shipping, packaging, and labeling standards. Failure to comply can result in hefty chargebacks, outright refusal of deliveries, or the discontinuation of your products
Assortment: see Product Line.
Case Pack: A carton containing multiple units of one specific product, offered to retailers at a wholesale price. Case packs simplify the ordering process for both buyer and seller.
Case Pack, Mixed: A carton containing multiple units of a variety of products. While extra work for the order packer, this offering can encourage buyers to offer a wider selection of your product line.
Case Pack Quantity (CPQ): The number of individual units per case pack (often 8, 12, or 24). CPQ varies depending on the value and physical size of the product, as retailers generally expect one case to fit on their shelf at a time, while not breaking the bank. Therefore, smaller and/or lower price products can have larger CPQs. Some wholesaler producers choose to set their CPQ to one unit (aka an “individual pack”), thus enabling retailers to order any quantity that they want.
Code: The expiration date printed on the packaging of perishable products. The term “code” refers to the fact that some manufacturers will use a code rather than terms like “expires on” or “best by.” If something is “out of code,” it is expired and no longer sellable. “Short-coded” means a product is nearing expiration. If you build up an inventory, make sure your order fulfillment team is exercising FIFO to help prevent short-coded product from shipping — little makes you look less trustworthy in the eyes of a retailer.
Collection: A grouping of products within your wider product line that go together in some way. Examples might include your best sellers bundled together for ease of ordering, or a group of thematically connected items from your existing product line, or a limited release of new items. Items within a collection might be offered individually, as a set, or both.
Co-packer (aka Contract Packer or Contract Manufacturer): A company that manufactures and packages products for a client to that client’s specifications. This is common practice in the specialty food industry, where the licensing and equipment overheads of in-house production can be too cost prohibitive. Instead, a company can choose to outsource its manufacturing and packaging to a co-packer, freeing the company up to focus their resources on sales and marketing. Some co-packers provide order fulfillment services as well. Co-packers charge by the unit, hour, or day.
Dimensional (DIM) Weight: UPS and FedEx bill according to DIM weight, meaning that they multiply the box’s dimensions together and divide that by a certain constant. The resulting number is compared with the box’s actual weight, and the larger of the two is the box’s billable weight. Therefore, you should make sure that your shipping carton makes sense for the products that you’re shipping, so that you’re not shipping small quantities in a large box.
First In, First Out (FIFO): Inventory management protocol for your production and fulfillment teams that ensures that oldest product is always shipping first. This goes a long way in preventing short-coded product from shipping (see Code).
Line: See Product Line.
Master Case (aka Master Pack, Master Carton): If your case pack is the carton that contains a set number of individual units of your product, then your master case is the larger carton that contains a set number of case packs of your product. Large volume buyers such as distributors that order by the pallet will commonly place their orders in terms of master cases, rather than case packs. Your master case will therefore have its own UPC.
Pallet (aka Skid): A wooden or plastic platform that is loaded with master cases and then shrink wrapped, for easy maneuvering onto and off of semi-trailer trucks via forklift or pallet jack.
Private Label: An arrangement whereby a wholesale producer manufactures a product for a retailer using the retailer’s packaging and branding, which the retailer then has the exclusive right to market and sell as its own. This is different than co-packing in the sense that co-packers manufacture products for wholesale brands, while private labelers are wholesale brands that manufacture products for retailers (whether exclusively or as a sideline). “White Label” is another arrangement in the same vein that refers to companies that manufacture generic brands that can be branded and sold by any retailer.
Product: An item that is manufactured for sale. To the average consumer, your product would be identical to any number of other products on the shelf were it not for your brand.
Product Line (aka Line, Assortment, or Range): The variety of products that a producer has available for purchase, with respect to product types, price points, sizes, flavors, colors, etc. In the UK, Australia, and Canada, the term for product line is “range.”
Pull Manufacturer: Style of production where the producer shows their product line, takes orders, and then manufactures enough to fulfill the orders they took. This is common in the fashion industry, where brands produce and sell up to six months ahead of when their products land on the shelf.
Push Manufacturer: Style of production where the producer sells from an inventory made in advance of taking orders (unless you’re playing catch-up with production). This is the case for most manufacturers reading this blog, whose product lines remain relatively consistent over time. Compare with pull manufacturers.
QR Code: Short for “Quick Response Code.” A square, pixilated-looking barcode thingy that can be printed on your packaging and read by smartphones, linking the viewer to more information about your product.
Range: see Product Line.
Shelf Life: If your product is perishable, shelf life is how long it is good for from the day it is manufactured. This should be indicated on your packaging in the form of an expiration date. See also code.
Short Ship: To inadvertently send the buyer less product than you invoiced them for. Conversely, to overship is to send the buyer more product than you invoiced them for.
Stock Keeping Unit (SKU): A unique code that wholesalers assign to each different product in their collection, as a means of managing inventory as they add and remove products. Unlike UPC, there is no prescribed format for this, so it is entirely up to you to develop your own system. For example, your SKUs might involve a six digit string of numbers where the first pair of digits indicates product line, the second pair indicates variety (flavor, scent, color, etc), and the third pair indicates size. SKUs are also a handy and surefire way for retailers to place orders and receive what they ordered, since they can simply refer to this number instead of having to communicate the specific variety, size, etc. that they want. Note that SKUs are not the same as UPCs. See also UPC.
TI-HI: When a retailer or distributor orders a pallet of your product, they’ll want to know the number of master cases per tier (TI) and the number of tiers high (HI) that will be layered onto a pallet. Hence, “TI-HI.” This helps them when arranging for transportation of your product, and allocating space for it in their warehouse.
Unit: The most basic format that your product is packaged in for retail purchase. For example, consider those little “fun size” candy bars that kids get when trick-or-treating. They are labeled with “Not labeled for individual retail” because they are not retail units, and it is not lawful for the retailer to sell them as such. Rather, the retail unit in this case is the larger bag that the fun size candy bars come in, which is labeled with nutritional info, UPC, etc. See also Case Pack and CPQ.
Universal Product Code (UPC): The barcode on a product’s packaging that most retailers scan when taking inventory or selling it at their POS. UPCs are purchased by the producer from a certified barcode vendor. While these barcodes have a corresponding string of digits attached to them for manual entry, they are lengthy and more or less randomly assigned at the time of purchase, so they are not useful in the same way that SKUs are as a shorthand means of referring to the different products in your collection. Both UPCs and SKUs are required by most large retailers, and it’s best practice to use one UPC per SKU, to avoid any mixups. Small retailers who don’t scan products at their POS may not require UPCs. Still, while UPCs are not a legal requirement of doing business as a wholesaler, they will certainly expand the number of stores that you can sell into.
Value Added Product: A product that can fetch a higher price at retail than the commodity products from which it was made, by virtue of its preparation, packaging, etc. A chocolate bar is a value added product relative to the cacao and sugar that went into making it. Value has been added through its preparation, and if it’s a luxury chocolate bar, then value is added via its branding as well, and the bar can command a premium price.
Note: For more Sales Terminology, see this post about how larger sales teams that represent more complex products subdivide their teams and processes. Much of that terminology does not reflect the experience of a salesperson representing a Small Wholesale Producer, so I am leaving it out of this glossary to avoid confusion.
Account (aka Customer or Wholesale Partner): In the context of wholesale, an account is any business, such as a retailer or distributor, that is purchasing product from you (the producer) at a wholesale price and reselling it. The terms “customer” and “wholesale partner” are considered more friendly ways of referring to your accounts, “account” being more of an internal term. Accounts can be thought of “active,” “inactive,” or “dead,” depending on how consistently they place orders. To “set up an account” means to collect (and input into your accounting software) any information or paperwork (resale certificate, credit references, terms agreement, etc.) that you need from a business before they can begin ordering from you.
Account Manager: A salesperson whose job is to work with existing customers to provide support, keep them happy, and keep them ordering on a consistent basis. It is also the account manager’s charge to work on increasing facings and improving placement within their stores, so that size and frequency of orders increase and overall revenues grow. The term “account management” refers to this kind of work. At a small business, a Sales Rep and Account Manager may be one and the same.
Channel Strategy: See Distribution Channel.
Churn Rate: A measure of the number of wholesale customers who stop placing reorders during a given period of time. This is an important metric for wholesale producers because most of your revenue comes from active accounts placing reorders, rather than new accounts placing first orders. Customer retention is generally cheaper and easier than going through the steps of acquiring new ones, and a higher than normal churn rate can point to issues with your product or customer service that, if addressed, will improve your customer retention. Accounts that have discontinued your products are said to have “churned.”
Customer: see Account.
Dead Lead (aka Disqualified Lead): A lead that, for any number of reasons, is no longer worth pursuing. Maybe they’re not a good brand fit, they’re not giving you the time of day, you get the sense that they would place one order and then go radio silent, they seem like they won’t pay their bills … you name it. They’re a dead end, in other words.
Distribution Channel (aka Sales Channel): The path that a product travels from the producer to the end consumer. A retailer or distributor is considered an intermediary in that path, and when one or more intermediaries is involved, the channel is said to be indirect. Your “channel strategy” involves the types of intermediaries you elect to work with, and how you optimize those partnerships to increase sales and maximize your product’s availability to the end consumer. As a wholesale brand, you might have a “channel strategy” that includes a mix of direct channels (selling direct to consumer through your website, farmer’s markets, and/or consumer shows) and indirect channels (selling B2B via self-distribution to retailers, and/or via a network of distributors to retailers). See also: Supply Chain.
Impressions: see Touches.
Inbound Lead: A lead that comes to you through your marketing efforts. The buyer may hear about you through some press you got, or through a Facebook ad you placed, or simply by seeing your product in another store. They find you and reach out to you, compared with an outbound lead, where the opposite it the case. These are often the best leads because they’ve made the effort to reach out to you, meaning that they’re probably quite interested in your product and open to buy. See this post.
Inside Sales: Sales outreach made via phone calls and emails, versus outside sales, which involves pounding the pavement.
Lead: In its most basic sense, a lead is any business that has the potential to buy your product, but you haven’t yet determined their level of interest, nor their viability as a customer. Leads can either be Inbound or Outbound, and can either become a Prospect or a Dead Lead. See this post.
Objection: see Sales Objection.
Outbound Lead: A lead that you go out and find the old fashioned way, through research and pavement-pounding. You find them and reach out to them, compared with an inbound lead, where the opposite it the case.
Outside Sales: Sales outreach made via pavement pounding, versus inside sales, which involves phone calls and emails. Outside salespeople are sometimes known as brand ambassadors, which are people that physically go around to businesses building brand awareness, and try to get the contact info of decision makers so that a sales representative can follow up and close the deal.
Pipeline: A Sales Pipeline is a visual representation of a sales cycle that consists of the sales steps that salespeople need to take in order to convert a lead into a prospect into a customer. See this post for a detailed explanation of why Pipeline Methodology does not apply to our industry, and why it should not be used as a revenue forecasting tool. One of the goals here at Shelf Life is to develop an alternative methodology that is more tailored to the needs of Small Wholesale Producers.
Prospect: A business that isn’t buying from you yet, but that has demonstrated an interest in your product, and that you believe exhibits the characteristics of a good account. Leads become prospects when they’re interested in you and you’re interested in them. A sales representative’s job is to “close” prospects by getting them to purchase, thereby converting them into customers/accounts.
Prospecting: The active pursuing of prospects (and the buyers representing them) by a sales rep, with the goal of converting them into customers.
Sales Channel: see Distribution Channel.
Sales Objection (aka Objection): When a prospect hesitates or otherwise expresses any kind of reservation about your product. Your job as a salesperson is to tease out these objections, and then overcome them through your powers of persuasion and the various sales tools you have at your disposal.
Sales Representative (aka Sales Rep): A salesperson whose job is to pitch a company and its products to leads and prospects. This person might be an employee of the company working on salary and/or commission, or this person could be an independent contractor, such as a broker. At a small business, a Sales Rep and Account Manager may be one and the same.
Target: a potential customer that you know you want to work with and are actively pursuing. Maybe they’re simply a great fit for your product, or perhaps they hold some greater symbolic relevance for your brand, or maybe you think they could open up a new channel for you. Regardless, targets bypass the lead stage and become prospects even if they haven’t expressed any interest in your products yet. Often a target is already carrying a different vendor from within your category, so you know they spend in your category — you just need to convince them that your product is better.
Touches (aka Impressions): In B2B prospecting, as in B2C marketing, it usually takes multiple contacts with the buyer before they’re familiar enough with your product to feel it is something they want on their shelves. These impressions or touches should come from multiple angles, rather than just a salesperson calling them over and over again, which has the danger of becoming a nuisance to the buyer. This is where your marketing and social media efforts can come into play, which are subtler means of building brand awareness in your buyer and priming them to finally pull the trigger. The “Rule of Seven” in the B2C world says that the average consumer needs to be hit with your advertisements seven times before they’ll take the action of buying your product. Who knows how many times it takes to convert the average B2B prospect, but probably at least as many.
B2B (Business-to-Business): In commerce, a type of transaction that occurs between two businesses, such as a wholesaler and a retailer. Contrast this with B2C (Business-to-Consumer) and B2G (Business-to-Government).
B2C (Business-to-Consumer): A transaction in which there is no middleman between the seller and the consumer, such as a retailer engages in with their customers, or a producer engages in with customers at a farmers’ market. Also known as direct-to-consumer.
Brand: The overarching identity of a company, which serves to unify its product line and distinguish it from the product lines of other companies. This identity is achieved through a combination of tangible attributes such as logo, trademark, and design, and intangible attributes such as the feelings and emotions that consumers come to associate with your products over time (see Brand Equity). See this post.
Brand Equity: A concept in marketing that refers to the value your company derives from consumer perception of your brand name, rather than from your products themselves. In other words, if your branding is strong, you can fetch a higher price for your products than your competitors with weak branding can. Coke has strong branding, so they can charge a lot more than the exact same product packaged behind a generic label. That’s brand equity at work: the product itself isn’t the only thing that is selling a can of Coke.
Cash on Delivery (COD): In a wholesale arrangement, COD terms means that the retailer must pay for your product upon delivery, rather than in advance (aka prepay) or after a certain period of time (aka net terms).
Cost of Goods Sold (COGS) (aka Direct Costs): Manufacturing and packaging expenses that a company can easily connect to a specific product or products (depending on whether you’re calculating COGS for an individual product or for the business overall). For most wholesale producers, labor and materials make up the majority of COGS. See this post.
Fixed Costs: Overhead expenses that don’t change from month to month, regardless of a business’s revenues. Compare with Variable Costs.
Gross: The terms “gross” and “net,” as applied to profit and margin, refer to which costs are taken into account. Gross only takes COGS into account, while Net takes both COGS and overhead expenses into account.
Invoice (aka The Bill): A document that the seller sends to the retailer detailing the transaction, usually included with the shipment of goods and/or emailed to the retailer’s accountant. An invoice generally itemizes products sold, shipping and handling fees, and sales tax, as well as payment terms, available methods of payment, and a unique ID number for record keeping purposes.
Margin (aka Gross Margin, Points): Your wholesale price minus your COGS, divided by your wholesale price, expressed as a percentage. As an equation, margin = (price - COGS) / price. Retailers use the same equation to calculate their margin, but for a retailer, your wholesale price is their COGS, and their price is the product’s shelf price. The term “margin” is short for “gross margin,” and thus does not include overhead expenses. Net Margin, or “profit margin,” is margin minus overhead costs. See also Points.
Markup: Rarely used by producers or retailers in our industry. However, the consequences of confusing markup with margin could be quite bad for your business, so let’s define markup. Markup is the amount above your COGS that you sell your product for. Let’s say your COGS is $6 and you wholesale your product for $10. Your markup is $4, or, stated as a percentage, $4 / $6 = 67%. Your margin, on the other hand, is 40%.
Net: see Gross.
Overhead Expenses: Operational expenses that can’t be tied directly to a given product, but that are necessary for the business to exist, and therefore contribute indirectly to the cost of producing that product. See also fixed costs and variable costs. See this post.
Perceived Value: The worth that your product has in the mind of your target customer, based on how thoroughly your product fulfills his or her needs and desires. Good branding and marketing can increase your product’s perceived value, which allows you to increase your MSRP (along with your profit margin).
Points: Another word for margin. The term is derived from the decimal “point” that you get when calculating a margin before you convert it into a percentage. If a retailer says they need “60 points,” that simply means they need a 60% margin. If you sell them your product for $10 wholesale, they’ll sell it for $25, since Price = COGS / (1 - Margin).
Statement: A list of overdue (aka “outstanding”) invoices that you, the vendor, should send to a retailer’s accounts payable department as soon as they start to run up a tab. Think of statements as being a polite way of saying, “Pay up!”
Trademark: Elements of a company’s brand identity, such as taglines and logos, that are registered with the USPTO and owned by the company.
Unique Selling Proposition (USP): The benefits that a consumer gains by choosing your product over another. Ask yourself, “What benefit am I trying to deliver to consumers?” Put that into a punchy statement that speaks to your target market and distinguishes your product from your competition, and you have your USP. In order to arrive at your USP, you have to first understand what your Unique Value Proposition is. See this post.
Unique Value Proposition (UVP): Used to articulate internally who you are as a company — your personality, identity, and strengths — so that all employees (especially the public-facing ones) are the same page. In other words, your UVP is your “raison d’etre.” It will inform and guide all of your sales efforts, keep you focused and cohesive as a brand, and help you articulate your Unique Selling Proposition. See this post.
Variable Costs: Overhead expenses that vary based on production and sales activity. Compare with Fixed Costs.
*Good Food, Great Business, Susie Wyshak, Chronicle Books