Wholesale Liquidation Glossary of Terms

For those of you new to the industry, or even those with some experience, it can be confusing coming across acronyms or terms within listings, articles, forums or reviews that you haven’t encountered before. That’s why we’ve put together a list of terms you may find on this site or similar sites related to the liquidation, wholesale or retail spheres.

B2B (Business-to-Business)

In contrast to Business-to-Consumer or B2C and Business-to-Government or B2G, in the world of commerce, B2B or Business-to-Business is a business deal between two businesses, such as a retailer and a wholesaler.

B2C (Business-to-Consumer)

Also referred to as direct-to-consumer, B2C is a type of deal where there is no middleman involve between the seller and the consumer. For example, a producer having transactions with customers at a farmers’ market or a retailer making deals directly with their customers.

Back-Order

Products or goods ordered but not available for shipping due to supplier’s insufficient or out of stock inventory.

Balance Sheet

A financial document that exemplifies the comparative financial durability and strength of a company at a specific point in time. Assets minus Liabilities equal Net Financial Value.

BOL (Bill of Lading)

A bill of lading is the document given to the shipper that has the details of the shipment of a particular merchandise. The BOL or BL as it is sometimes called gives the primary details which are needed by the carrier to give the merchandise to a named party at the destination point. The bill of lading may contain information such as the sender’s and receiver’s name, the address of the receiver, dates of departure and arrival, a list containing the names of the goods that are being transferred and other such important information.

Case Cube

Refers to the measure that one case of your product takes up, and usually calculated by multiplying in inches the length, width, and height of your case pack, dividing the result by 1728, which results in giving you the case cube in feet cubed. This is a unit of measurement which is a requisite by larger retailers who will be warehousing backstock of your product.

Case Pack

Multiple units of one specific product comprised in a carton, usually sold and offered at a wholesale price to retailers. A practice used to simplify the ordering process for both buyer and seller,

Case Pack Quantity (CPQ)

Defined as the number of individual products in the master carton (often 8, 12, or 24). The Case Pack Quantity of a product is dependent on its value and physical size and usually estimated to fit on every retailer’s shelves at a time. With that given, larger CPQ’s can be used for products with smaller and/or lower price. In some instances, to enable retailers to purchase a product in any quantity that they want, wholesaler producers prefer to set their CPQ to an individual pack or one CPQ unit.

Cash on Delivery (COD)

Different from Prepay or pay for in advance and Net Terms or to be paid within a certain period of time, COD or Cash on Delivery is a term used in wholesale agreement wherein the retailer will pay for ordered goods upon delivery.

Central Buying Office or Organization

An individual or a department within a group or chain of retail outlets that are responsible for making wise decisions regarding inventory procurements.

Chain Store

A series of retail outlets owned by one management and operates centralized purchasing, marketing, and other duties.

Channels of Distribution

A chain of businesses through which paperwork and physical movement of goods or services pass until it reaches its end consumer. Channels may include sales representatives, brokers, wholesalers, distributors, jack robbers, trade shows, and retail outlets, but the simplest channel would be the producer selling directly to a consumer.

Churn Rate

Churn Rate which is also known as “attrition rate,” is a measure of the number of wholesale customers who, during a given period ceased from placing re-orders. Wholesale producers use this as a vital metric because active accounts reordering items generate more income than new accounts placing orders for the first time. The steps of bringing in new accounts are usually harder compared to customer retention which is generally cheaper and easier. Churn rate exposes issues with your product and customer service that if addressed and responded well, it will amend your customer retention. Accounts which ceased from ordering your products are said to have “churned.”

Co-op

Funds that big vendors reserve for the support and promotion of their product in a retail store usually forecasted as a percentage of what the retailer has bought from the vendor. For example, if a retailer bought $200k of goods from a vendor and that vendor has a 4% co-op policy, in that way the vendor will offer to pay $8k to support the retailer in selling that product, commonly in the form of public advertisements which focuses on the promotion of the retailer and the vendor. Although not required from small specialty producers, it must be braced beforehand as preparation if one of your retailers should ask for it.

Consignment (aka Sale or Return)

Consignment is an arrangement wherein a retailer doesn’t buy a product from the seller but places the product on their store and receives a percentage of the revenue when the products sell. Products are returned to the owner if a sale is not made.

Consumer Packaged Goods (CPG)

Consumer packed goods are products packed for display on retail shelves and needed to be replaced frequently, such as food, beverages, cosmetics, clothing. and cleaning products. This is the exact opposite of items such as appliances and automobiles that can be used over an extended period of time.

Cost of Goods Sold (COGS)

Expenses that are attributable to the manufacturing and packaging of a specific product. This amount includes the cost of the materials used in creating the product along with the direct labor costs to produce the product.

Cross-merchandising

Adds exposure to a wholesaler’s product within the store and a method which displays product from different categories and putting them all in one place to persuade the customer to spend, and tie that up in the customer’s mind for future purchases.

Customer Returns

Products that have been purchased and then returned to the original retailer, due to a variety of possible reasons, are known as customer returns. Even though customer returns mostly occur because of a defect or functioning problem, some are returned for no reason at all. Customer returns are often the result of impulsive buying where the customer bought the product but wasn’t satisfied when he/she took it home. If a customer return is because of a defect internally or externally, it is either reconditioned or salvaged and resold.

Data Wipe

A data wipe refers specifically to use technological items that have been returned to the store. Before an item such as a computer or cell phone can be sold at auction, the memory must be wiped to ensure that any data that was once stored on the memory card or hard drive is removed. When a remote wipe is performed, any data on the device will be rendered unreadable. This ensures that the privacy of the original user will be protected and that the new users will have access to the full memory the device can provide.

Defacing

Defacing an item is the practice of removing any identifying markers, stickers, prices, badges or the like. This can include but is not limited to the manufacturer, model, serial number, customer return stickers, etc. Different levels of product defacing exist based on contractual obligations. In most cases, simply removing store level stickers, price and identifiers will suffice. In more advanced scenarios, product badges and stickers that identify the brand or product must be removed.

Delivery Window

Delivery window means the time period when the delivery is expected to arrive. Retailers often ask that you guarantee to deliver an ordered product within the expected timeframe so that adjustments and coordination regarding product inventory can be made.

Dimensional (DIM) Weight

Freight carriers bill shipping charges according to DIM weight. This is done when the box dimensions are multiplied and then, divided by a dimensional factor (length x width x height) / (dimensional factor).

Disco

A common term used by retailers, distributors, brokers, and producers to describe a discontinued product line or SKU, generally for slow movement.

Drop Shipping (or Dropshipping)

Drop Shipping is a method in the retail industry wherein a retailer doesn’t keep goods in stock, but instead, the retailer will transfer the customer order and will coordinate the shipment details to the manufacturer, the manufacturer will then ship the goods directly to the customer. This is one method that majority of online store owners practice to fulfill customer orders.

Factory Restored

Factory restored refers to a used electronic device that is returned to the original factory settings. This will remove any stored data and rids the device of any personalized settings the original users have put in place. A secondary market selling used electronics should run this procedure on all items to be sold to ensure that the device is functioning properly and does not contain any data from the original owner before selling these electronics to a customer. Most auction houses or retailers will restore factory settings before making any used electronics available for auction.

First In, First Out (FIFO)

FIFO which stands for First In First Out is an inventory management protocol that ensures products manufactured or purchased first is shipped out first and newly manufactured products are kept until newer products are brought in.

FOB

FOB (freight on board) refers to free on board, when the buyer pays to have the goods transported. The contractual agreements in this circumstance can vary widely depending on the terms the secondary market presents. In North America, a wholesale buyer may designate a FOB shipping point with freight collect or FOB destination with freight prepaid. This distinction is typically used to release the liability or risk of loss for the wholesale pallet from the seller to the buyer during shipping. The FOB point for used goods is typically used when a secondary market is keeping financial records because the FOB point can be used to track the period-end of the goods on a balance sheet.

FOB (Free on Board)

A physical point where the buyer shoulders the shipping charges and takes ownership of the seller’s goods.

FTL

Similarly, FTL refers to a full truckload, which is a shipment that will take up all or a majority of space in a shipping truck. FTL loads of wholesale goods are over 5000 pounds, though some shippers may have a maximum weight requirement per shipment. This should be noted before the sale is completed so customers can anticipate proper shipping costs. If an FTL is too large for a shipper to manage, it may be divided into partial loads during delivery.

Grade A, B, C Tech

When the same product type is differentiated into classes or categories, they are termed as Grade A, B, C tech. This grading is done with all sorts of merchandise such as electronics and also refurbished items that are graded according to their operating capabilities and appearance.

Gross

“Gross” refers to revenue before COGS have been deducted and “net” refers to the residual amount of revenue after COGS and all other expenses are deducted.

Gross Profit

Gross sales or the total sales revenue minus the cost of goods sold (CGS) before operating expenses are excluded from finding out the net profit.

House Accounts

A type of account which is handled not by a sales rep, broker, or distributor, but is given priority and usually reserved for selling direct by the producer while receiving the margins or commission on revenues from that account.

Inside Sales

Selling goods or products via phone calls and emails, different from outside sales, which requires going out into the field in person to sell a product.

Keystone Pricing or Keystoning

Keystone Pricing or Keystoning is a method that marks up merchandise, doubling the wholesale price, and may include or exclude shipping cost, a decision contingent upon the retailer. In some industries, e.g., gifts, this is the standard markup applied. Large cities like New York, California, and Hawaii triple the wholesale price or more because of its high real estate values.

Knock-off Products

The term “knock-off” is used to depict a counterfeited design or concept of a specific product. The counterfeit product (often imported) is factory made and sold at a lower price than the original, it literally “knock-off” an original product from the retail shelves.

Liquidation

Liquidation basically refers to the process of converting an asset into cash, which is a ‘liquid asset.’ An asset, whether it is a product, machinery or company, is said to be liquidated when it is sold off and the owner agrees to accept a cash payment (which may or may not be delivered) for the asset.

LTL

While it may seem like a misnomer, LTL stands for less than Truckload, which refers to shipments of used goods or wholesale items that are between 151-5000 pounds. These can be collected at a terminal and then delivered to the customer who won the option. All LTL shipments must be banded into skids or otherwise crated to ensure that they will not be damaged or materials will not be lost. Smaller items may be collected onto one skid to ensure a lower shipping price for the buyer.

LTL (Less Than Truckload)

A shipping service for small loads or freight. LTL or Less Than Truckload are services commonly offered by national parcel services and logistics companies.

Manifest

This term is used when a formally written inventory has been created for the merchandise in question. Therefore, a manifest can list information about the model numbers, the quantity of the goods, the retail value of the individual products and the wholesale value. The manifest contains fairly specific information while it doesn’t tell the retailer or buyer about the actual condition of the item or other such details. The manifest is also called the transport document which basically serves as a tally sheet that has a detailed summary of all bills of lading.

Margin, gross margin, or product margin

The percentage that shows the amount of the product sells or the selling price above and beyond the cost of purchasing a product.

Markdown

A name equivalent to a “Sale,” a “Markdown” is a temporary reduction of the original selling price of a selected product to meet the price of a competitor’s product, to flush out shopworn, slow-moving, overstock, or discontinued products, and to improve turnover.

Markup

The value or percentage added to the delivered cost of a product. “Markup” is added to make a wholesale or retail price to give profits on a specific product.

Master Case (aka Master Pack, Master Carton)

A Master Case or Master Pack is a carton which contains multiple smaller units of the same product. Your master case also has its own UPC, and high volume buyers such as distributors often placed their orders in terms of master cases.

Minimum Order Quantity (MOQ)

Minimum Order Quantity or MOQ is the minimum amount or case quantity required by manufacturers for retailers to order. It should be met or exceeded. Otherwise, wholesale pricing for ordered products will not be applied.

MSRP or SRP (Manufacturer’s Suggested Retail Price) (aka Price Point)

The manufacturers suggested retail price (MSRP), also known as suggested retail price (SRP) and recommended retail price (RRP) is a term used for the price at which the manufacturer recommends the product be sold for in retail outlets.

Multiple-Unit Pricing

Referred to as a tiered or quantity-based pricing schedule, Multiple-Unit Pricing is a policy through which customers who buy in quantity will incur discounts from retailers, wholesalers, distributor, and producers.

Net Profit

The gross profit of a company after operating expenses have been deducted.

Net Terms (NET)

Net terms or NET refers to the period or number of days (15, 30, 60 or 90 days) within which a retailer has to pay in full for their orders. Net30 or Net60 are examples meaning retailers has to pay you within 30 or 60 days. Vendors offer 2-3% discounts if a retailer pays within 15 days of the 30-day term usually labeled as “3/15 Net-30.”

Niche or Target Market

The market in which a business or a company aims to sell its products and services.

Offer/Bid

A bid or offer is a general term that is used when a prospective buyer is willing to buy a product at a specific price. The bid is often seen as the willingness to buy or sell items or services or to undertake a certain project or tasks at a specific price and within a particular time frame. This term is also used when contracting and when a specific job needs to be completed by a specific time. The company or contractor who is receiving the bid may choose to reject the bid, make a counteroffer, or accept the bid as it is.

Operating Expenses

Disbursements associated in operating a business minus the cost of inventory or cost of goods sold.

Order Lead or Turn Around Time

Period of placing an order up to the date of receiving, pricing, and putting that order on the sales floor.

Overstock

Overstock is the term which is given to the process where a particular company or manufacturer has larger reserves of certain resources. A number of companies are overstocked merchandise, products or components that are needed to manufacture an end product. These excessive stocks can result from the over-delivery or a supplier or the poor management of the buyer. However, overstocks are sometimes beneficial because they can be used for other purposes or needs.

Overhead Expenses

Expenses in operating a business and is not directly related to a given product, these are expenses which contribute indirectly to creating a product and consist of non-labor expenses that are necessary for the business to operate.

Pallet

Pallets are collections of wholesale merchandise that have been gathered for resale. These can be new or used merchandise that was not sold through the original retailer. Some pallets may contain cosmetic damage or factory errors, but most auction houses will outline such issues to ensure that buyers can determine the marketability of the products before purchase. Pallets are typically shipped to a secondary market as a wrapped unit which can be opened and sold accordingly upon arrival.

Point-of-Purchase (POP) Display

Commonly used for “impulse” goods, this is used to sway consumers in buying impulse products through the use of materials and displays that indicates product inventory and promotional inventory of that product.

Points

Points is another term used for “Margin.” It refers to the result that you get from the selling price of a product minus the cost of the selling product divided by the selling price. This calculation can be converted into a percentage or left in decimal form.

Previously Owned/Pre-owned

Pre-owned products or second-hand goods are those that have been purchased, returned and transferred to a second or later end user. Previously-owned products may or may not be those that have been used by the previous owner as some of them are returned before they are even opened from their packaging. Even though these goods have some risks associated with them, they can be beneficial when bought after careful consideration.

Profit-and-Loss (Income) Statement

An income statement which documents a company’s business operations, indicating revenues and expenses during a particular period of time.

Psychological Pricing

Also known as price ending and charm pricing, it is the practice of pricing below whole numbers and often expressed as “odd prices” a little less than a round number to send a perception of a lower price. E.g. $99.99 instead of $100; or $39.90 instead of $40.

Purchase Order (aka PO)

Purchase Order is a legally binding document submitted by a buyer to a seller containing details about the product that they’d like to purchase, the quantity of the order, the costs of the item, terms of payment, and its expected date of delivery.

QR Code

Short for “Quick Response Code.” This is a type of 2D square, a pixilated barcode that is used to link the viewer to more details and information about your product and can be printed onto your packaging to be scan and read by smartphones.

Rack Jobber

Also known as a “service merchandiser” because of its purpose of adding “keep full” service, a Rack Jobber is a wholesaler or distributor that provides and maintains stocks of ‘convenience’ merchandise, regularly fills up and checks product inventory. Rack jobbers also make sure that shelves and display racks allocated for the product within every retail store are properly replenished.

Reconditioned/Reconditioning

Reconditioned products or items are those who after having been returned by a customer because of a problem, are cleaned up, tested and repaired before being sold to a new customer. Reconditioning refers to the process where the product undergoes extensive testing before it is repaired using new and modern technology or components. Some companies offer come with a warranty that is provided by the original manufacturer, which gives the customer the satisfaction that the product can be returned if any problems come up.

Recycled/Recycling

Recycling is the process where items are reused, reprocessed or re-fabricated after their initial use. These products can either be used to fulfill their original purpose, like when paper is recycled to be used as newspaper or is passed through a series of changes or treatments so they can start benefiting in a different way. Recycling is generally conducted to save environmental resources but can also be advantageous in financial and economic terms.

Recommended Retail Price (RRP)

see MSRP.

Remanufactured/Remanufacturing

Remanufactured goods are those that are put through an extensive disassembly and manufacturing process where they are restored and repaired to a good as new condition. These products are remanufactured by the original companies to meet the OEM (Original Equipment Manufacturer’s) performance specifications and are offered with a warranty. Customers usually expect remanufactured machines to work like new ones because there isn’t a lot of difference between their prices since they go through the entire rebuilding process.

Return to Vendor/RTV

Purchased products or materials that are marked at ‘return to vendor’ are thought to be unacceptable and are returned to the original supplier. Once these products are returned, they are either replaced or placed in credit. A product is marked as RTV if it was damaged, expired or not what the retailer or manufacturer asked for. If the products are damaged or expired, they are repaired and sent back or replaced by another product if it is not what the buyer asked for.

Retail Ready

Products which are placed and ready to be sold to customers are known as retail ready. These products are packaged and placed so they can be easily located and purchased when a customer is looking for them. These retail-ready products don’t need to be cleaned up or tested if they are functioning properly but are instead ready to be sold to the consumer.

Resale Numbers and Tax IDs

Resale numbers exempt you from paying sales taxes on purchased items for resale to customers and not for items for use in your own business, but if you are the end user of a purchased item, you are responsible for paying sales taxes. Tax IDs, on the other hand, are used to identify a business and is used for other purposes like proving the legitimacy of your business. Resale numbers are issued by the state government, while tax IDs are issued by the IRS.

Refurbished/Refurbishing

Items which are ‘refurbished’ are those that are restored or renewed to a new condition in terms of appearance. Refurbished items are mostly used products that have been returned for one reason or another. Once returned, these items are cleaned up, tested and then repackaged so they can be sold to another client. Most of these pieces are updated and renewed using newer and more modern technology and are often considerably inexpensive as compared to brand new products.

Robinson-Patman Act

Prohibits price discrimination of goods made by manufacturers and wholesalers when selling products or goods of similar quality to individual retailers.

Salvage/Salvaged/Salvaging

Salvaging is the act of saving something that is at risk of being destroyed or damaged. Salvaged items are recovered or saved from being abandoned, deteriorated or worn out and are instead recycled or restored but cannot be fixed to fill the original purpose it was created for. Products that are salvaged often have a higher value when it is fixed as compared to its value as scrap. Companies salvage and repair items, depending upon the extent of damage and the level of repair or restoration needed.

Secondary Market/Secondary Markets

The term secondary market refers to the market that has a use other than the one that the product was initially created for. This market consists of the customers other than those for whom the product was originally offered. All stock exchange and over-the-top markets are secondary markets that help in reducing the risk of investment and assist in maintaining liquidity in the financial system. For instance, even though corn was originally used for food production, its second or third market has been using it for ethanol production.

Sell-Through Rate (aka Movement)

Sell-Through Rate or Movement is a metric that shows how a product sells in a store based on the amount of inventory shipped to the retailer versus the amount of inventory sold to customers over a period (generally a month.) Sell through rate allows retailers to see which products are performing or “moving” well and which products are stagnating. By monitoring sell-through rates, retailers can keep their shelves fresh and engaging to the consumers

Shelf Life

Shelf life is the length of time set for perishable products and indicates how long a product is good for consumption from the day it is manufactured. A product’s shelf life is found in the product packaging in the form of an expiration date.

Shrinkage

The reduction of inventory in a retail setting caused by factors such as theft (both by employees and shoplifters), damage in transit, damage on the shelf, vendor fraud, cashier error, administrative error, and so on.

Skid

A skid is often considered to be synonymous with a pallet, but skids are a smaller platform that is typically used for moving or storage of goods before they are transported to a secondary market. These typically contain a single deck pallet of used goods, offering more stability and support than traditional wood pallets. These are designed to manage wholesale goods that will need to be stored or transported for longer periods of time compared to pallets that might be unloaded more quickly.

Slotting Fee

A fee charged by large retailers to suppliers for bringing in a new product that will fill in a new space on their shelves, slotting fee is charged every time a new product is introduced. This is a mandatory fee made, usually in the form of a free fill or cold hard cash.

SPIFF

Slang term used to describe a monetary incentive provided for distributor sales reps to motivate them to focus more on pushing and selling a specific product to retailers. This is a common practice in the retail and distribution industry wherein manufacturers set up a friendly competition between distributor reps, the rep that sells most of your goods within a given period (a month or a quarter of the year) of time, will receive a monetary incentive. Incentives are in the form of additional monetary compensation most of the time, but it could be anything that the reps may want, or the manufacturers may want to offer to them.

Spoilage Allowance

To account for any products or goods that might expire, a spoilage allowance is set, usually by adding a 2-3% discount to your invoices. This is applied for products that have shelf life under a year. An additional fee is made as well on top of this if disposing of the spoiled product was taken care of by the retailer or if they decided to return it to you.

Stock Keeping Unit (SKU)

Stock Keeping Unit (SKU) is an identification code that wholesalers placed to every item in their product line. It is usually a combination of about eight characters and reveals product details, brand, size, manufacturer, etc..

Supply Chain

A supply chain refers to a company and suppliers interconnected and working together to produce and distribute a specific product. It also represents the method or processes to get the goods or a product to the end consumer.

Surplus

The term surplus refers to the amount of an asset or resource that is more than the amount used. In business, this term implies that the asset exceeds the original amount needed for a particular task and it can include the excess of things like income, capital, goods or profits. However, even though surpluses are the main factor on which capitalism is built, they can sometimes lead to a negative outcome when the production is more than the demand.

Temporary Price Reduction (TPR)

TPR or Temporary Price Reduction occurs in both B2C and B2B supply chains. It’s a marketing tool intended to drive sales for the short-term and for acquiring new customers. It can be used to encourage your buyers or distributors to improve their order volume and to try out your new products. Businesses and retail outlets have used this method to improve sales by offering free shipping, coupons, and limited time or seasonal offers.

Threshold

The threshold value is the minimum and maximum lines that are established for a particular attribute, or item which serves as a benchmark for guidance and comparison. If this threshold is breached or crossed in any way, it may mean that the product or item needs to be reviewed again and may even require redesigning. This threshold also marks a boundary beyond which there are different rules and guidelines.

TI-HI

The number of boxes or cartons, or tier, (TI) and the number of layers high that it will be stacked on the pallet (HI). Retailers and distributors usually ask for the “TI-HI” when ordering a pallet of your product or goods, to provide them an idea or reference when arranging the transportation and the allocation of space in their warehouse of the ordered product.

Unique Selling Proposition (USP)

A unique selling proposition or unique selling point is a factor that differentiates your product from its competitors, such as the lowest cost, the highest quality or the first-ever product of its kind. A USP could be considered to address “what you have that competitors don’t.” In order to set your USP, a clear understanding of your Unique Value Proposition is a must.

Unique Value Proposition (UVP)

Unique Value Proposition (UVP) is used to express a company’s identity and strength, it communicates its purpose, existence, and the focus of its sales effort, it also helps a company articulate its Uniques Selling Proposition.

Unit Pricing

A practice common in larger grocery stores and chains, where retailers tell you the price of a product per pound, quart, or any other unit of measure.

Universal Product Code (UPC)

A type of code printed on a consumer product by a series of thick and thin bars. When an item is sold, product information such as model number, size, and color will be identified through its UPC. It is also used by retailers to track unit sales, inventory levels, and other factors.

Used

Used goods are those that were previously owned by one customer who used the product for a specific time but returned or gave away the product later. These used products can also refer to those items that are no longer in the same condition as were when they were originally created but have some use nonetheless. Used items may be given informally to friends and family members, or bought at a reduced price from retailers that got hold of them.

Vendor

A person or company that sells and supplies products at wholesale prices to retailers.

Wholesale

Wholesale refers to the business of buying goods and selling them in large quantities to retailers who then sell them in smaller quantities to the consumers. Wholesalers buy a lot of goods from various vendors, warehouses, and producers and resell them to retailers. Wholesalers that only have non-competing goods are called distributors but deal with the same wholesale equipment or products as well. Wholesale products are often a lot more inexpensive than when they are on sale because they only include the costs before the retail markup.

Direct Liquidation is a goTRG company.

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