Free Gift Basket Business Online Learning Guide

Gift Industry Trade Glossary

Gift industry trade glossary that illustrates terminology used in Gift Basket Businesses and Retail businesses.


When operating your Gift Basket business, you’ll want to become familiar with general retail business and giftware terms, so when you start ordering wholesale inventory- you’ll understand the retail trade lingo.


Use the list below as a reference:


Advance Dating
A future date at which payment terms will commence. Also known as “Season dating”.

Advertising Allowance
A discount given to the retailer to compensate for the expense of advertising a product line or item. The amount can be between 2 to 10 percent off the invoice.

If a store anticipates that their yearly sales of a line will reach a certain amount, they can negotiate to receive a vendor “Anticipation” discount.

Approval Sale
When a customer is offered unlimited return privileges; the sale is subject to later approval or selection.

Automatic Cancellation Date
The store can specify a date that goods must be shipped by vendor; or the sale is cancelled.

Automatic Reorder
Automatic ordering of a specified quantity of merchandise, typically when low stock levels are reached.

At once. Goods must be shipped and received by the retailer immediately.

After Receipt of Order. Applies generically.

As soon as possible. Shipment of merchandise as soon as goods are ready. Also, “As Ready” (AR).

Backup Order
An additional quantity of vendor goods reserved by the buyer to ensure that future orders can be shipped promptly by vendor.

Basic Stock
The minimum “bread and butter” amount of goods kept for sale by the retailer through the lowest sales period of the season.

B.C. (Best Cheapest or Best Way)
Alternative shipping methods if UPS cannot ship merchandise: a rare occurrence indeed.

Beginning Inventory
The amount of inventory on hand when a particular time period begins.

Billing Address (Bill To)
The address where you are to send or receive payment – if different from your shipping address.

Bill of Lading
A document that verifies the carrier has received, and is responsible for the shipment – also known as an “airway bill” for air shipments.

Gift industry trade glossary that illustrates terminology used in Gift Basket Businesses and Retail businesses.B.O. (Back Order Merchandise)
When the vendor can’t ship to you right now, “B.O” is ordered, referenced with the available ship date.

Beginning of month.

Breakeven Point
The point at which your operating costs, advertising costs, and inventory costs are even with your store’s income.

Cancellation Date
Incentivizes the vendor to ship before a buyer-specified date, or else the order will cancel automatically.

Cash Discount
A vendor-provided discount for payment of the invoice within a certain period of time. COD discounts are common.

Chain Discount
A type of trade discount given to retailers, when the vendor provides pricing at the suggested retail price only. In such a case, a typical chain discount would be “Keystone”, or 50% off.

Charge Backs
When the retailer bills the vendor for returned or damaged merchandise, cooperative advertising or other adjustments.

Cost Complement (CC)
Cost of goods plus cost of freight. Usually seen as a percentage of the retail price. (CC%).

Slow-moving or discontinued stock that is offered at a low price for quick sale.

Cash on delivery. Retailer must present a cash payment to delivery driver at time of receipt. UPS drivers will accept checks unless the packing slip states COD CASH ONLY. UPS also adds a COD charge on to the shipping charges. However, this is often compensated for by vendor discounts for COD payment.

Cumulative Mark-on
The total amount of profit possible for you to make on a given amount of merchandise in a specified period of time.

Customer Returns
Merchandise purchased by a customer who returns it to the store for credit or refund. The total value of returns must be deducted from gross sales to determine net sales. All returns must be re-entered into inventory, re-marked and returned to stock for sale.

The length of time a vendor extends to a retailer for the payment of invoices. For example, “Net30” (30 days); “Net120″(120 days).

The period of time between shipping of merchandise by the vendor, to receipt of merchandise by the retailer.

Mark-downs, theft, or damage are examples of depreciation of value of an inventory.

Deduct from invoice.

Discount Earned
When cash discounts are earned, by COD payment to vendor, for example, the Discount Earned is $ amount of profits resulting.

Drayage, Local
Local transportation of merchandise.

Due Date
The date by which a bill, or invoice, must be paid in order to receive a cash discount. Due date is a measured period from the original date of the invoice.

End of month.

E.O.M. Dating
A payment term that stipulates that an invoice is to be paid with a given number of days after the end of the month in which the goods were shipped.

Ending Inventory
The amount of inventory on hand when a particular time period ends.

Freight on Board (FOB)
The place where the retailer takes legal possession of (receives) the merchandise, and pays additional costs for shipping. For example, if you live in Florida and order goods that are FOB Los Angeles, you are responsible for the freight charge from Los Angeles to Florida.

Freight Allowance
Discount given by the vendor equal to the cost of shipping of the merchandise.

Freight Costs
The cost of shipping the goods from vendor to retailer.

Gross Margin
Net sales minus the total cost of merchandise sold. Gross margin is the cumulative mark-on adjusted by the cost of mark-downs and shortages, plus cash discounts.

Gross Sales
The total of all transactions in the cash register or on sales tickets. Express in retail dollars.

Guaranteed Sale
A signed agreement whereby buyer can return unsold goods after they have been exposed for sale for a given period.

H.F.C. (Hold for Confirmation)
Asking a Rep/Manufacturer to hold order for a few days before placing. Initial Mark-on. The mark-on (retail $ minus cost $) based on the original retail price of the merchandise. Over the course of time, the initial mark-on is usually modified by factors such as mark-downs, mark-ups or discounts.

In Store
Date you expect merchandise to arrive to your store. This would be a date later than a ship date.

Inventory, Book
The original retail value of all the merchandise charged to a store, or a department, adjusted to reflect increases or decreases in the value of that stock. These adjustments are made every time merchandise is added to stock, goes out of stock, or a price is changed. This figure is always expressed in dollars and is an integral part of the retail method of accounting.

Inventory Shortage
If the physical inventory is less than the book inventory, the difference is called “shortage.”

Is a legal document. Submitted by a vendor to the store, the invoice is the bill for merchandise shipped. The invoice will state the terms of payment, show any discounts, and will itemize the merchandise shipped with prices and, usually, freight charges.

Doubling the wholesale cost in order to determine the retail price of the merchandise.

Keystone Discount
A trade discount of 50 percent off the suggested retail price established by the vendor.

Keystone Retail
A method of establishing a retail price by doubling the vendor’s cost price.

Inventory Closing
See beginning inventory.

Inventory, Costs
Under the retail method of inventory, this relates to the calculated cost of inventory (cost compliment x retail value of the inventory) and not the original vendor invoice cost.

Inventory Opening
See ending inventory.

Inventory Overage
If the physical inventory is greater than the book inventory, the difference is called “overage.”

Inventory Physical
A physical count of all the merchandise in the total store. Usually taken twice a year. May be taken at cost or at retail, depending on the accounting method used.

Lead Time
Length of time that elapses until ordered merchandise is available for sale.

Maintained Mark-on (MMO)
Net sales less the gross cost of the merchandise sold. Expressed in dollars (MMO$) or, more frequently, as a percentage (MMO%).

How much you determine to charge for an item. For example, keystone equals 50 percent margin.

Mark-down (MD)
A reduction of a retail price representing a decline of the value of merchandise. mark-downs frequently occur because merchandise is slow moving or inactive, special sales, price adjustments on damaged or discontinued merchandise and changing customer wants. mark-downs are most frequently expressed as a percentage of sales.

Mark-down Cancellation
Any restoration of a mark-down price to or toward the original retail price. For example, mark-down cancellations occur after a special sales event has ended and the remaining merchandise is to be repriced.

Mark-down Money
Money given by vendor to retailer to enable retailer to reduce selling price of a slow seller.

Mark-on (MO)
A fundamental principle of retailing which denotes the excess of retail price over cost price for a particular item of merchandise. Also usually expressed as a percentage of the total retail price for the item.

Mark-up Cancellation
A correction necessary to reduce or eliminate a previous mark-up resulting in a retail price at or above the original retail price. mark-up cancellations result only if they are taken in the same season (as the original mark-up).

Mark-up Percentage
The percentage obtained by dividing the excess of retail price over cost by the total retail price (also called Mark
on percent).

Minimum dollar quantity per line, minimum pieces per line, minimum units per item.

Net Purchases
Cost of purchases, including freight, but excluding returns, allowances and cash discounts earned.

Net Profit
Gross margin minus all direct and indirect expenses (operating costs).

Net Sales
Gross sales minus customer returns.

New Store Opening
If you’re opening a new store, make sure you write “New Store Opening” on all purchase orders. Make sure to highlight and request merchandise early. Also make sure to follow up on all deliveries to insure timely delivery.

Net 30
Account has filled out credit application and been granted 30 days to pay the bill.

Open to Buy (OTB)
Total planned purchases of merchandise for a given period minus receipts and merchandise on order for the same period.

On hand.

On order.

A condition whereby a buyer has become committed to purchases in excess of the planned purchases. Also can be said to occur when purchases of merchandise are in excess of customer demands.

A specified length of time, usually an arbitrary financial decision may be a week, a season (usually 6 months), a month or a year, etc.

Purchase Order. A written order generated by the store which is either executed at time of purchase or mailed subsequently. Usually bears a specific P.O. number. Many large stores use P.O.s for all purchases.

Buyer pays at time of order. Many manufacturers will pay the freight if order is prepaid. (Be prepared to have your check cashed immediately even though you specify a future shipping date.)

Price Correction, Retail
Revising a price up or down. Price corrections occur only in the case of marking errors.

The dollars remaining after the subtraction of all direct and indirect operating expenses from the Gross Margin dollars.

Pro Forma
Manufacturer bills buyer order amount plus shipping charges. Buyer sends a check; then manufacturer ships goods. Similar to pre

Merchandise acquired by means of purchase orders place with vendors (also called receipts).

Retail Method of Inventory
A method of merchandising accounting whereby the ending inventory is calculated at retail value (Book Inventory) and converted to cost by applying the cost compliment.

See Purchases.

Retail Price
The selling price to the customer. A retail price has four components: cost (vendor’s cost plus freight cost), the store’s cost of doing business, inventory shrinkage (theft, damage, mark-down), and profit.

Returns to Vendor
Returns of merchandise to the vendor who shipped it. May occur as the result of item substitution, violation of the store’s shipping instructions, or by special agreement with a vendor to remove discounted merchandise from inventory.

Receipt of goods. For example, Payment of invoice on or after R.O.G.

Return to Vendor

Obviously a rush order. A reason for the rush might expedite the order (new store opening, special promotion planned, etc).

Usually a six month period for purposes of merchandising and budgeting. The start of the “spring” season is frequently February 1, since a large percentage of retailers end their fiscal year on January 31.

Ship Date
Date you request merchandise to be shipped.

Ship To
Shipping address; where you receive merchandise.

A location where a manufacturer or sales rep has product on permanent display.

Stock Keeping Unit. The number of items a manufacturer has in his line.

Side Mark. A Side Mark instructs the shipper to direct the order to a specific person or department. It might involve an individual package or packages wrapped separately and included in one large box, possibly directed to several different people.

Specific Date
Is used for future ship dates. Manufacturer will assume this is the date goods leave his dock unless you specify to arrive by a certain date.

Start Date
Used for purposes of payment of invoices, the start date is the date of the invoice.

Stock to Sales Ratio
The ratio of retail stock, at either the beginning or the end of a month, to the sales made during the month. Can be figured the same way for a season or a year. The advantage of figuring the stock-to-sales ratio is that it gives a valid basis for planning stock levels and assortments.

Stock Turnover
The number of items that the average stock has sold and replaced during a given period of time: usually a year. Expressed based on retail dollars.

Supplier (Resource, Source, Vendor)
Words used to refer to both sales reps and/or factories where stores buy merchandise.

Pay schedule. Different terms can save you money. Net 30 equals payment due in full 30 days from date of invoice. Sometimes discounts are arranged if paid early.

Total Merchandise Cost
Gross cost of merchandise adjusted by the effect of any cash discounts or alteration costs.

Trade Discount
The discount off suggested retail (set by the vendor) which determines the vendor’s cost price for any item(s).

Transportation Costs
See freight charges.

Transportation, Local
The cost of moving goods from the vendor’s factory, or warehouse, to the shipping point (specified by the buyer) in the nearest city.

Unit Control
A control system capable of tracking individual pieces of merchandise from the time they are ordered until they are sold.

A supplier from whom goods for resale may be purchased.

Vendor Analysis
A report, by vendor, typically showing sales, merchandise purchased mark
on, mark-down and gross margin.

Workroom Expense
Charges to the store or the department for the maintenance (cleaning, pressing, repairs) of stock in saleable condition. These expenses are charged against profit.

Workroom Income
Expenses incurred in getting merchandise ready to deliver to a customer after the sale. Called alterations, these expenses are charged to the customer and set high enough to cover costs and leave a profit. Any such income is added to the department’s or the store’s profit.


Share this webpage: