Wholesale Education Terminology A-Z

A

Accounts Receivable (AR)

Money owed to a business by its clients (debtors) for goods or services delivered but not yet paid for.

Agent

An individual or firm that acts on behalf of another party (the principal) to make contracts. In wholesale, an agent might connect buyers with sellers without taking ownership of the goods.

Allocation

The process of distributing available inventory among different customers, channels, or stores, especially when demand exceeds supply.

Appraisal

An expert assessment of the value of something. In wholesale, this might apply to valuing inventory or business assets.

Arbitrage

The simultaneous purchase and sale of an asset in different markets to profit from a tiny difference in the asset's listed price.

Asset

A resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide future benefit. Inventory is a key asset for wholesalers.

Audit

An official inspection of an organization's accounts, typically by an independent body.

Authorized Dealer

A retailer or distributor that has been officially authorized by a manufacturer to sell its products.

Average Order Value (AOV)

The average dollar amount spent each time a customer places an order. Calculated by dividing total revenue by the number of orders.

B

Backorder

An order for a good or service that cannot be filled currently due to a lack of available supply. The order is held until the item is back in stock.

Bill of Lading (BOL)

A legal document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried. It serves as a receipt of shipment.

Bonded Warehouse

A warehouse authorized by customs authorities for storage of goods on which payment of duties is deferred until the goods are removed.

Brand Equity

The commercial value that derives from consumer perception of the brand name of a particular product or service, rather than from the product or service itself.

Break-Even Point

The point at which total cost and total revenue are equal, meaning there is no net loss or gain.

Bulk Pricing

A pricing strategy where a lower price per unit is offered for larger quantity purchases, encouraging bigger orders.

Business to Business (B2B)

Commercial transactions conducted between one business and another, such as a wholesaler selling to a retailer.

Buyback

An agreement where a seller agrees to repurchase an item from a buyer at a predetermined price after a certain period. Sometimes used for unsold inventory.

Buyer

An individual or organization that makes a purchase. In wholesale, a buyer is often a retailer or another business purchasing for resale or business use.

C

Carrying Cost (Holding Cost)

The total cost of holding inventory, including storage fees, insurance, spoilage, obsolescence, and the opportunity cost of the capital tied up in inventory.

Cash Flow

The total amount of money being transferred into and out of a business. Positive cash flow indicates more money coming in than going out.

Catalog

A publication, either print or digital, listing products for sale with descriptions, prices, and ordering information, often used by wholesalers to showcase their offerings to retailers.

Clearance

The process of selling off inventory, often at reduced prices, to make space for new items or to dispose of discontinued stock.

Commission

A fee paid to an agent or sales representative for their services in facilitating or making a sale, usually a percentage of the sale value.

Compliance

Adherence to laws, regulations, standards, and ethical practices relevant to a business or industry.

Consignment

An arrangement where goods are left in the possession of an authorized third party (the consignee) to sell. The consignee pays the consignor (owner) only when the goods are sold.

Cost of Goods Sold (COGS)

The direct costs attributable to the production of the goods sold by a company. This includes material costs and direct labor costs but excludes indirect expenses like distribution costs and sales force costs.

Credit Memo

A document issued by a seller to a buyer, reducing the amount owed by the buyer to the seller. Often issued for returns, allowances, or corrections to an invoice.

Currency Exchange Rate

The value of one currency for the purpose of conversion to another. Crucial for international wholesale.

Customs Broker

A professional who assists importers and exporters in meeting federal requirements governing imports and exports.

Cycle Count

An inventory auditing procedure where a small subset of inventory, in a specific location, is counted on a specified day or at specified intervals.

D

Dead Stock

Inventory that has never been sold or has been in stock for an extended period and is not expected to sell. It often needs to be sold at a discount or written off.

Demurrage

A charge payable to the owner of a chartered ship or freight carrier on failure to load or discharge the ship or remove goods within the time allowed.

Direct Sourcing

The process of a company buying directly from a manufacturer or producer rather than through an intermediary like a distributor or wholesaler.

Discount Rate

A percentage reduction from the list price of a product, often offered for bulk purchases, early payment, or to specific customer groups.

Distributor

An intermediary entity between the producer of a product and another entity in the distribution channel or supply chain, such as a retailer or a value-added reseller (VAR). Distributors often hold inventory and provide sales and support services.

Drop Shipping

A retail fulfillment method where a store doesn't keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party (often a wholesaler or manufacturer) and has it shipped directly to the customer.

Due Diligence

An investigation, audit, or review performed to confirm facts or details of a matter under consideration. Important when selecting new suppliers or partners.

Duty

A tax levied by a government on imported goods (also known as a tariff).

E

E-commerce

Commercial transactions conducted electronically on the Internet, including B2B and B2C wholesale and retail operations.

Economic Order Quantity (EOQ)

The ideal order quantity a company should purchase to minimize total inventory costs, which include holding costs, shortage costs, and order costs.

Embargo

An official ban on trade or other commercial activity with a particular country.

End Consumer

The final individual who purchases and uses a product or service, as opposed to a business or intermediary that resells it.

Exclusive Distribution

An agreement between a supplier and a retailer or distributor granting exclusive rights within a specific geographic area or market segment to carry the supplier's product.

Export

The process of sending goods or services to another country for sale.

F

Factoring

A financial transaction where a business sells its accounts receivable (invoices) to a third party (called a factor) at a discount to obtain immediate cash.

Fiscal Year

A one-year period that companies and governments use for financial reporting and budgeting. It may not coincide with the calendar year.

Fixed Costs

Business expenses that remain constant regardless of the level of goods or services produced, such as rent, salaries, and insurance.

FOB (Free on Board)

A trade term indicating the point at which the seller is no longer responsible for the goods. "FOB shipping point" means the buyer pays shipping costs and takes responsibility once goods leave the seller's premises. "FOB destination" means the seller pays shipping and remains responsible until goods reach the buyer.

Forecasting

The process of making predictions about future business conditions, sales, or inventory needs based on past data and market trends.

Freight Forwarder

A company that organizes shipments for individuals or corporations to get goods from the manufacturer or producer to a market, customer or final point of distribution. They do not move the goods themselves but act as an expert in the logistics network.

Fulfillment

The process of receiving, processing, packaging, and shipping orders for goods.

G

Globalization

The process by which businesses or other organizations develop international influence or start operating on an international scale.

Goods Received Note (GRN)

An official document that a customer (often a business) issues to acknowledge the receipt of goods from a supplier.

Gray Market

The trade of a commodity through distribution channels that are legal but unintended by the original manufacturer or trademark proprietor.

Gross Margin

The difference between revenue and the cost of goods sold (COGS), divided by revenue, expressed as a percentage. It represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold.

Guarantor

A person or entity that agrees to be responsible for another's debt or performance of an obligation if the other person fails to meet their commitments.

H

Handling Charge

A fee charged to a customer for costs associated with order processing, packing, and shipping, beyond the actual freight cost.

Harmonized System (HS) Code

An internationally standardized system of names and numbers to classify traded products. Used by customs authorities around the world.

Hedge

An investment or transaction made to reduce the risk of adverse price movements in an asset. For example, hedging against currency fluctuations.

Holding Cost

Also known as carrying cost, these are the expenses associated with storing unsold inventory. This includes storage space, insurance, taxes, spoilage, and obsolescence.

I

Import/Export

The processes of bringing goods into a country from abroad for sale (import) or sending goods to another country for sale (export).

Incoterms

A series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial law. They define the responsibilities of buyers and sellers in international transactions (e.g., FOB, CIF).

Indent

An order for goods, especially from abroad, placed through an agent.

Independents

Small, privately owned retailers, often single stores or small chains, as opposed to large national or international chains.

Insurance

A contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. Important for covering goods in transit or storage.

Intellectual Property (IP)

Creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce. Protected by patents, copyright, and trademarks.

Inventory

The raw materials, work-in-process goods, and completely finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.

Invoice

A commercial document issued by a seller to a buyer, relating to a sale transaction and indicating the products, quantities, and agreed prices for products or services the seller had provided the buyer.

J

Jobber

A type of wholesaler who buys goods from manufacturers and sells them to retailers. Often refers to a wholesaler who deals in smaller quantities or specialized goods.

Joint Venture (JV)

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task or project.

Just-In-Time (JIT) Inventory

An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process or to meet customer demand, thereby reducing inventory holding costs.

K

Kanban

A scheduling system for lean manufacturing and just-in-time manufacturing (JIT). Kanban is a visual system to control the logistical chain from a material and production control point of view.

Key Performance Indicator (KPI)

A measurable value that demonstrates how effectively a company is achieving key business objectives. Wholesalers might track KPIs like inventory turnover, order fulfillment rate, and customer retention.

Keystone Pricing

A retail pricing strategy where the selling price is double the wholesale cost. For example, if an item costs a retailer $50, the keystone price would be $100.

L

Landed Cost

The total cost of a shipped product including the purchase price, freight, insurance, customs duties, taxes, and other fees up to the port of destination or the buyer's warehouse.

Lead Time

The time elapsed between placing an order with a supplier (or initiating production) and receiving the goods or completing the production.

Letter of Credit (LC)

A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. Often used in international trade.

Licensing

An agreement where a company (the licensor) grants permission to another company (the licensee) to use its intellectual property (e.g., brand name, patented technology) in exchange for a fee or royalty.

Lien

A legal claim or right against assets that are typically used as collateral to satisfy a debt.

Line Sheet

A sales tool used by wholesalers (especially in fashion) that provides retailers with product information such as style numbers, descriptions, colors, sizes, wholesale prices, and suggested retail prices.

Liquidation

The process of selling off assets, often at reduced prices, to convert them into cash, typically when a business is closing down or needs to clear excess inventory.

Logistics

The detailed coordination of a complex operation involving many people, facilities, or supplies. In wholesale and retail, it refers to the management of the flow of goods from origin to consumption.

M

Manufacturer

A business that produces finished goods from raw materials through a process of manual labor or machinery.

Margin (Profit Margin)

The difference between the selling price of a good or service and its cost, usually expressed as a percentage of the selling price.

Markdown

A reduction in the selling price of a product, often to clear out old inventory, stimulate sales, or respond to competitor pricing.

Market Price

The current price at which an asset or service can be bought or sold.

Master Distributor

A primary distributor that typically has a direct relationship with the manufacturer and may manage other smaller distributors or resellers within a specific territory.

Merchandise

Goods that are bought and sold in business.

Minimum Order Quantity (MOQ)

The fewest number of units or minimum order value (MOV) required to be purchased at one time from a supplier.

Monopoly

A market situation where a single company or group owns all or nearly all of the market for a given type of product or service.

N

Negotiation

The process of discussion between two or more parties aimed at reaching a mutually acceptable agreement, often concerning prices, terms, or conditions in wholesale transactions.

Net Profit

The actual profit after all operating expenses, interest, and taxes have been deducted from total revenue.

Net Terms

Payment terms that specify the period within which a buyer must pay an invoice (e.g., Net 30 means payment is due in full within 30 days of the invoice date).

Niche Market

A small, specialized segment of a larger market, often with unique needs or preferences that are not being addressed by mainstream providers.

Non-Disclosure Agreement (NDA)

A legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties.

O

OEM (Original Equipment Manufacturer)

A company that produces parts and equipment that may be marketed by another manufacturer.

Open-to-Buy (OTB)

The amount of merchandise (in dollars or units) that a retailer can order during a given period without exceeding their planned inventory levels or sales goals.

Order Fulfillment

The complete process from point of sale inquiry to delivery of a product to the customer. This includes order processing, picking, packing, and shipping.

Outsourcing

The business practice of hiring a party outside a company to perform services or create goods that were traditionally performed in-house by the company's own employees and staff.

Overhead Costs

Ongoing business expenses not directly attributed to creating a product or service, such as rent, utilities, and administrative salaries.

P

Pallet

A flat transport structure, typically made of wood or plastic, that supports goods in a stable fashion while being lifted by a forklift, pallet jack, front loader, or other jacking device.

Patent

An exclusive right granted for an invention, which allows the patent holder to exclude others from making, using, or selling the invention for a limited period.

Payment Gateway

A merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar.

Penetration Pricing

A pricing strategy where a product is initially offered at a low price to rapidly reach a wide fraction of the market and build market share.

Price Point

The specific price at which a product is offered for sale. Businesses often have several price points for different products or product lines.

Private Label

Products manufactured by one company for sale under another company's brand name. The retailer specifies everything about the product, but the manufacturer produces it.

Pro Forma Invoice

An estimated invoice or preliminary bill of sale sent by a seller to a buyer in advance of a shipment or delivery of goods. It details the goods to be shipped and their value.

Procurement

The act of obtaining or buying goods and services. The process includes preparation and processing of a demand as well as the end receipt and approval of payment.

Purchase Order (PO)

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. It becomes a legally binding contract once accepted by the seller.

Q

Quality Control (QC)

A process by which entities review the quality of all factors involved in production. This includes inspections and testing to ensure products meet specified standards.

Quantity Discount

A price reduction offered to customers for buying in large volumes. Also known as bulk discount.

Quota

A government-imposed trade restriction that limits the number, or monetary value, of goods that a country can import or export during a particular time period.

Quote/Quotation

A formal statement from a supplier detailing the estimated cost for specific goods or services, valid for a certain period.

R

Rack Jobber

A wholesaler who supplies and maintains display racks of merchandise in retail stores, often for non-food items in supermarkets or convenience stores.

Rebate

A partial refund to someone who has paid too much for tax, rent, or a utility; or a deduction from an amount to be paid, or a return of part of an amount given in payment.

Receiving

The process in a warehouse or distribution center that involves taking delivery of goods, inspecting them for damage or discrepancies, and acknowledging their receipt.

Reorder Point (ROP)

The inventory level at which a company would place a new order for a product or start a new manufacturing run to replenish stock before it runs out.

Retailer

A business that sells goods directly to end consumers, typically in small quantities, through physical stores or online channels.

Return on Investment (ROI)

A performance measure used to evaluate the efficiency or profitability of an investment. It is calculated as (Net Profit / Cost of Investment) x 100%.

RFID (Radio-Frequency Identification)

A technology that uses electromagnetic fields to automatically identify and track tags attached to objects. Used in inventory management and logistics.

S

Sales Representative (Sales Rep)

An individual who sells a company's products or services, often acting as a liaison between the wholesaler and retailers or other businesses.

Shipper

The person or company that transports or sends goods by any mode of transport.

SKU (Stock Keeping Unit)

A unique alphanumeric code assigned to a specific product to identify and track it for inventory purposes. Each variation of a product (e.g., size, color) will have its own SKU.

Sourcing

The process of finding, evaluating, and engaging suppliers for acquiring goods and services.

Spot Market

A public financial market in which financial instruments or commodities are traded for immediate delivery (spot T+2).

Standard Operating Procedure (SOP)

A set of step-by-step instructions compiled by an organization to help workers carry out complex routine operations.

Stockout

A situation in which the demand or requirement for an item cannot be fulfilled from the current inventory.

Supply Chain

The entire network of entities, resources, activities, and technology involved in the creation and sale of a product, from the delivery of source materials from the supplier to the manufacturer, through to its eventual delivery to the end user.

Surcharge

An additional charge or payment, often for specific services, conditions, or to cover increased costs (e.g., fuel surcharge).

Surplus

An amount of something left over when requirements have been met; an excess of production or supply over demand.

T

Tariff

A tax or duty to be paid on a particular class of imports or exports.

Terms of Sale

The conditions agreed upon by a buyer and seller for a transaction, including payment terms (e.g., Net 30), delivery details, responsibilities, and any discounts or penalties.

Third-Party Logistics (3PL)

The outsourcing of a company's warehousing, transportation, and other logistics services to a specialized third-party provider.

Tiered Pricing

A pricing strategy where the price per unit decreases as the order quantity increases, often set at specific quantity thresholds.

Trade Show

An exhibition organized so that companies in a specific industry can showcase and demonstrate their latest products and services, meet with industry partners and customers, and observe competitors.

Trademark

A symbol, word, or words legally registered or established by use as representing a company or product.

Transit Time

The time taken for goods to be transported from one point to another, such as from the supplier's warehouse to the buyer's location.

Turnover (Inventory Turnover)

A measure of how many times inventory is sold or used in a time period such as a year. Calculated as Cost of Goods Sold / Average Inventory.

U

Unit Cost

The total expenditure incurred by a company to produce, store, and sell one unit of a particular product or service.

Universal Product Code (UPC)

A barcode symbology that is widely used in many countries for tracking trade items in stores. It consists of 12 numeric digits that are uniquely assigned to each trade item.

Upselling

A sales technique where a seller invites the customer to purchase more expensive items, upgrades, or other add-ons in an attempt to make a more profitable sale.

Utility

In economics, the satisfaction or benefit derived by consuming a product; thus the utility of a good or service is its capacity to satisfy human wants.

V

Value Added Reseller (VAR)

A company that adds features or services to an existing product, then resells it (usually to end-users) as an integrated product or complete "turn-key" solution.

Value Added Tax (VAT)

A consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale.

Vendor

A person or company offering something for sale. In wholesale, this typically refers to the manufacturer or supplier from whom goods are purchased.

Venture Capital

Financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.

Volume Discount

A financial incentive to encourage individuals or businesses to purchase goods in large quantities. Similar to quantity discount.

W

Warehouse

A large building where raw materials or manufactured goods may be stored before their export or distribution for sale.

Warranty

A written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary within a specified period of time.

Waybill

A document issued by a carrier giving details and instructions relating to the shipment of a consignment of goods.

Wharfage

A charge assessed by a pier or dock owner for the use of the wharf for mooring, loading, or unloading a vessel or for storing goods on the wharf.

Wholesaler

A business that buys large quantities of goods from manufacturers or distributors and resells them to retailers, other businesses, or sometimes directly to consumers in bulk.

Working Capital

The capital of a business which is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities.

X

X-Docking (Cross-Docking)

A logistics procedure where products from a supplier or manufacturing plant are distributed directly to a customer or retail chain with marginal to no handling or storage time. Goods are unloaded from an inbound vehicle and loaded directly onto an outbound vehicle.

Y

Year-over-Year (YoY)

A method of comparing financial or business data from one period to the same period in the previous year to analyze trends and performance.

Yield

The income return on an investment. In a broader business sense, it can refer to the amount of usable product obtained from a manufacturing process or the revenue generated from sales efforts.

Z

Zero-Rated Supply

Goods or services on which VAT (Value Added Tax) or a similar sales tax is charged at a rate of 0%. Although no tax is paid by the consumer, the seller can still reclaim input tax.

Zone Pricing

A pricing method in which a seller sets different prices for a product in different geographic areas or zones, often based on transportation costs or market demand.