The Ultimate Wholesale Business Glossary

This is The Folklore’s comprehensive glossary of wholesale terminology, designed to be your go-to resource for understanding the intricate language of the wholesale retail industry. Whether you’re a seasoned professional or just starting in the business, having a firm grasp of these terms is essential for navigating the complex world of wholesale retail. Here, we’ll demystify key terms that all industry players need to know.

Assortment

This is the term for a seller’s line and the variety of products they offer to retailers, which gives buyers a wide range of product types, sizes, colors, or prices. This term can also mean a retailer’s assortment, which refers to all the types of products they offer.

Back order

These are products that have been ordered but have yet to ship. Back-orders typically happen when a B2B business lacks stock or receives product orders before production starts.

Brick and mortar

Traditional retail stores with a physical presence, where customers can browse and purchase products in person, providing a tangible shopping experience.

Buy-back

Also known as “guaranteed orders”, this is the practice of retailers negotiating for a seller to accept back any unsold inventory and provide a refund. This could occur when a retailer wants to try out a new product without the risk of being left with unsold stock if the item doesn’t sell.

Business-to-business (B2B)

These are transactions and interactions that occur between businesses, such as a manufacturer selling products to a retailer.

Buyer

An individual responsible for selecting and purchasing products or merchandise on behalf of a retail business. Buyers play a vital role in determining the products offered to customers and managing inventory.

Cancel date

This is the deadline until a retailer can cancel their purchase order; it is usually one month before the delivery date.

Case pack

This is bundled quantities of the same product offered to retailers to simplify the ordering process.

Cash on delivery (COD)

Also known as “collect on delivery”, a COD arrangement involves a retailer paying for goods upon delivery rather than in advance.

Catalog

This is a printed or digital list of a business‘s products or offerings, providing detailed information about each item, including descriptions and prices.

Chargeback

A chargeback is a payment amount that is returned to the bank account or credit card of a buyer from a seller. It’s a form of consumer protection, where a customer can dispute charges for damaged goods or products not received.

Collection

This is a line of products created for a specific season or time of year. It could also be a grouping of items that fit together thematically or could be sold as a set.

Consignment

An arrangement between a retailer and seller under which the seller agrees to place their goods in a store and only receive money once the retailer actually sells them. Under a consignment agreement, the retailer typically charges a fee to house and sell the goods, usually a percentage of the sale price.

Cost of goods sold (COGS)

This is the calculation of the costs that goes into selling a product, including the raw materials and other expenses used to produce it.

Delivery window

This is the length of time it takes for a supplier to ship goods to a buyer. Some retailers may want a guarantee that goods can be produced and shipped for arrival within a certain time frame.

Direct-to-consumer (D2C)

This is when a business sells its products directly to end consumers through its own digital or physical store without any middle distribution channels.

Distribution agreement

A legally binding contract specifying the terms and conditions of selling a brand’s products within a particular region or market.

Distribution center

A centralized facility or warehouse used for receiving, storing, and distributing products to retail locations or directly to customers. It plays a crucial role in the supply chain. Major retailers with multiple locations often have a distribution center, which then passes specific quantities to each designated retail store.

Drop-shipping

This practice involves a retailer using suppliers or manufacturers to directly ship products sold to customers upon confirming an order.

EDI

This stands for Electronic Data Interchange, which is a system of communication between a company and another business it works with. It uses an electronic format that replaces emails or paper-based documents such as purchase orders and invoices for a more secure means of communication.

Exclusivity

Wholesale sellers can choose to be “exclusive” with one retailer. This usually happens within a specific geographic location or whenever a retailer would like to exclusively sell a particular product line without any immediate competition.

Exporter

A business or individual involved in selling products or goods to international markets, often navigating complex regulations and customs procedures.

GS1

Standing for “global system of standards”, GS1 is a framework that allows products, services, and information about them to be uniquely and securely identified as they move around various locations. A GS1 is usually captured in a barcode that can then be applied to products.

House accounts

Significant or long-term customers that wholesale businesses’ home-office executives handle directly rather than assigning them a sales rep. Practically, this means that sales reps don’t receive a commission for house accounts.

Importer

An importer typically brings products from abroad into the country they do business in. They then proceed to sell those imported products to wholesale customers.

Initial Markup (IMU)

The amount (or percentage difference) that is added to the wholesale price to set the retail price.

Inventory

The complete list of a business’s available products, including their quantities and locations, which is crucial for stock management and order fulfillment.

Invoice

This is a detailed document provided by the seller to the buyer, specifying the products or services purchased, their prices, and the terms of payment. It serves as a formal record of the transaction.

Keystone

A pricing strategy commonly to help retailers determine the retail price where products are marked up by 100%, essentially doubling the wholesale cost. For example, if a product’s wholesale price is $100, its keystone pricing will be $200.

Lead time

The period between placing an order and receiving the products from the supplier, often influenced by manufacturing and shipping times.

Line

A line is the entire list of products a wholesale seller carries. This can also be referred to as a “range” of products, or a “product line”.

Line sheet

A document that provides an overview of a wholesale business’s product line. Customers can use the line sheet to create a purchase order by listing the quantity of each item they want.

Manufacturer

A company or individual who manufactures products to then sell them to wholesale buyers (at wholesale prices).

Manufacturer’s suggested retail price (MSRP)

The price wholesale businesses recommend retailers charge for their goods. The term is used interchangeably with “recommended retail price (RRP)”.

Margin

The difference between the wholesale price and the actual cost of producing an item, which determines the profits. Retailer margin is the profit percentage a retailer earns when selling a product at the retail price.

Market appointment

A scheduled meeting or appointment at a trade show, market, or showroom where retailers, buyers, or suppliers can explore and discuss new products and business opportunities.

Marketplace

An online platform or physical space where multiple sellers offer their products to a wide range of buyers, creating a diverse and competitive marketplace.

Minimum advertised price (MAP)

MAP pricing is all about the lowest price a retailer can show for a product online or in an ad. Not to be confused with the lowest price they can sell the product for in their store.

Minimum order quantity (MOQ)

This is the lowest quantity of products that a supplier is willing to sell to a retailer in a single order. In wholesale retail, MOQ represents the minimum number of units, items, or products that a retailer must purchase from a brand.

Net payment terms

A type of payment plan involving retailers paying for items after a specific time frame since the delivery of ordered goods. For instance, a retailer may request invoice payment terms of 30, 60, or 90 days. This is usually referred to as net 30, net 60, or net 90.

Open-to-buy

This is the budget a retailer has to place orders. Most retailers try to strike a balance where they don’t order so much inventory that they’ll need to offer discounts, but their shelves are fully stocked.

Pick list

A document that indicates which items should be taken from a B2B business’s inventory to fulfill orders. The pick list usually includes each item’s quantity and product code (SKU).

Point of sale (POS)

The location or system where a retail transaction is completed, including the payment processing and recording of the sale.

Pre-order

An arrangement where buyers place orders for products that are not yet available or in stock. This allows businesses to gauge demand and produce accordingly. This is similar to a “back order”.

Private label

Also known as “white label” or “private brand”, these are products that are manufactured by one company but sold under the brand name or label of another company, often a retailer.

Pro forma invoice

A preliminary or “draft” invoice sent to buyers before the shipment or delivery of ordered goods. Typically, a pro forma invoice includes a description of the goods and the total payable amount, but buyers are not legally required to pay the amount on it.

Purchase order (PO)

A document that details the products, currency, and quantity a retailer has bought from a wholesale seller. Once a retailer places an order, the PO is usually the document the final invoice is based on (together with the wholesale payment terms).

Range

The complete list of a seller’s product offering. The term is used interchangeably with “line”.

Recommended retail price (RRP)

The price wholesalers recommend buyers charge for their products. The term is used interchangeably with “manufacturer’s suggested retail price (MSRP)”.

Resale Tax ID number

A valid resale Tax ID Number in the US exempts retailers from paying sales taxes for purchased items. In this respect, wholesalers request buyers to share their Resale Tax ID Numbers, if applicable, and keep them on file.

Retailer

A business that sells products directly to consumers through physical stores, online platforms, or other retail channels. Retailers are responsible for marketing, merchandising, and customer service.

Return merchandise authorization (RMA)

The process a retailer has to follow in order to return a product. Most companies have a questionnaire set up on their website for this very purpose, and to make the process more efficient and less time-consuming.

Sales representative

An employee whose goal is to increase your wholesale company’s sales. In general, the sales rep pitches your products and business to potential customers. Typically, the sales rep will take a commission.

Sales tax

A sales tax is a consumption tax applied to the retail cost of purchased goods or services. Sales taxes are common in the US and less common in countries outside the US (eg the EU), where many countries use a value-added tax instead.

Sample

A small quantity or prototype of a product used for testing, demonstration, or showcasing to potential buyers or customers, to help them become familiar with your work before placing an order.

Sell-through

The speed with which a product sells in a specific store or location or through a particular channel (e.g., B2B portal).

Shipping policy

A document that covers the rules concerning the delivery of purchased goods to customers and their return, if applicable. The document usually includes information regarding the costs, delivery times, shipping options, and areas or locations covered.

Shipping window

The time frame between which an order can be shipped or canceled. Two weeks is a typical shipping window. Wholesale businesses can send an order anytime within this period.

Showroom

The place where wholesalers display their products to sellers. Showrooms can be a physical space or a digital site.

Source (or sourcing)

This is the process of finding and selecting suppliers, manufacturers, or materials to fulfil a business’s production or inventory needs. It includes activities such as negotiating contracts and managing relationships with suppliers.

Stock-keeping unit (SKU)

A unique code (or series of numbers) assigned to each product in your line. SKUs are most often used when a seller has a large inventory to manage. The code usually appears on purchase orders and pick lists.

Stocklist

A list of retailers or businesses that carry and sell a particular brand or product, serving as distribution points for customers.

Supplier

A company or individual that provides products, goods, or services to another business. Suppliers are essential for maintaining a consistent source of inventory.

Terms and conditions

The contractual agreement outlining payment terms, delivery details, and other conditions of a wholesale transaction.

Ticket

A label with relevant information attached to a product. Also known as a “hang-tag”.

Ticketing

The process of labeling products with price tags, barcodes, or other identifiers, often used to manage and track inventory.

Trade show

An event or exhibition where businesses in the same industry showcase their products to potential buyers, and learn about business trends.

Unit

This is a single item or product, often used as a standard measure for pricing, ordering, and selling products.

Universal product code (UPC) labeling

A system used to track inventory and sales by assigning a unique barcode with a string of digits to each product.

Value added tax (VAT)

A consumption tax imposed on the value added to goods or services at each stage of production or distribution. It’s collected from the end consumer and remitted to the government.

Vendor

A party (typically a seller, designer or manufacturer) that supplies goods to a retailer.

Vendor compliance

A set of rules that allows retailers to know how a wholesale business complies with its industry’s laws and regulations, typically covering liability insurance, shipping to distribution centers, product testing, ticketing, labeling, payment setup, and invoicing, and is part of a business’s terms and conditions.

Wholesale

The sale of products in large quantities at a lower price, typically to retailers or other businesses for resale or use in their operations. A wholesaler is a business or person that sells products in bulk to retailers or other businesses, acting as an intermediary between manufacturers and retailers.

Year-to-date (YTD)

A way to track sales from the beginning of the fiscal year until a specific date. Similarly, the concept can be used for weeks (WTD), months (MTD), and seasons (STD).