So you want to get involved in the retail business? That’s great. The only problem is that as you’ve done your research, you’ve come across some terms you haven’t seen before. Here’s a rundown of some of the most technical jargon used by the sector.
Brick And Click
Some retailers don’t want to leave the high street. And some customers don’t want them to either. However, what customers do want is the convenience of shopping online when they get to the store. The term brick and click, therefore, refers to businesses that want the best of both worlds. These are stores, like Macy’s, that integrate their web services with their physical stores. Think click and collect.
Many retailers buy and sell stock based on weight. Think greengrocers. If you are buying or selling based on the weight displayed on the scale, then it’s important to know about weight tolerance. Weight tolerance is essentially the error in your measurements. Retailers need to be careful and make sure that the errors in their weight measurements are small. Significant errors can mean that retailers are breaking the law.
Keystone pricing is just a fancy name for when a retailer sells an item at double the price they paid for it. Doubling the price is a useful formula for retailers. For a start, it’s simple. But it also turns out that doubling the wholesale price is usually what’s required to cover retail costs.
As a new retail business, you’re going to want to attract people to your business. But how? Well, one thing you could do to entice people to your store is by selling a couple of products at a loss. That might sound like a bad idea. But these products, called loss leaders, are only there to entice customers to buy other things. So even though you make a loss on the loss leader, you should make a profit overall.
We’ve gotten used to the idea of things like tailored suits and gum shields. That is consumer products designed to fit an individual customer. But now this level of customization is going more mainstream. This so called, mass customization has recently come to the footwear industry. Nike now allows customers to build shoes to their preferences. Expect to hear a lot more about mass customization in the years to come.
Once you’ve been in business for a while, you’ll likely have a few stores. But how will you monitor all these stores and make sure they’re following customer service protocol? You can’t do it all.
The trick is to use a mystery shopper. This is a random person who goes into one of your shops and observes the customer experience. They ask questions, make complaints, or just go through the process of buying a product. Then they feed back to you about their experience, so you know whether improvements are needed.
Prestige Pricing is something that you see all the time in high-end fashion shops. Designers, like Versace, put up the prices on their clothes because they want them to be more exclusive. And though it may sound strange, this is what their customers want too. Part of the appeal of wearing Versace clothing is the fact that few people can afford it. Thus, the high price is all part of the appeal.
The term shrinkage refers to the difference between the stock that you have on paper, and the stock you have in reality. Reductions in stock can happen for all sorts of reasons. Stock can be damaged between arriving in your store and going through the checkouts. It can also be lost, stolen or never arrive in the first place.
Dead stock is stock held in your inventory that just won’t shift. Often it’s seasonal stock, like Christmas decorations. But sometimes it can be a product line that didn’t fly with consumers.
Retailers tend to differ from most businesses. They don’t have a particular customer base. They often try to appeal as widely as possible. But because of this, it’s hard for them to know what stock to buy and what products to sell. After all, they have to appeal to a very broad group of customers.
This is where dynamic clustering comes in. Big chains that operate all over the country know how the tastes of their clients change by region. What people want in upstate New York might differ from what they want in the deep South. Dynamic clustering is when retailers cluster stores based on the characteristics of shoppers. By doing this, retailers in the know can make better decisions on marketing, purchasing and sales.