It’s undeniable: wholesale marketplaces are here to stay. Ecommerce has made the world of wholesale a lot more accessible to everyone, whether you’re an established retailer or an independent creator thinking of prepping your business for wholesale.
Sometimes, it can be hard to see the forest for the trees. Is your business ready to make the switch from retail to wholesale? How do you source products and plan for enough storage space? So many things to consider. And that’s not even touching on the lingo of the wholesale world.
… Because what on earth is an RMA? Or an MOQ? So much wholesale terminology to wrap your head around!
There are abbreviations and wholesale-specific terms aplenty to be found in this wonderful new world, and everyone seems to know what they mean (don’t worry, they don’t).
This is exactly why we made this guide. From the creative mind sitting at home with a million-dollar business idea, to the experienced retailer dreaming of going wholesale, and everyone in between. This glossary covers all the wholesale terminology essentials you’ll need to talk shop—with confidence.
(We’ve written an entire piece about the differences between wholesale and retail, if you’re still unsure how you want to position your business.)
The different types of product lines and products that you produce or offer for sale. A good assortment of products usually consists of a lot of variety, e.g., product types, sizes, colors, and so on.
Backorders are products that have been ordered but not shipped yet. This is usually because stock is low or lacking, or because an order for products has been received before production has begun. A good way to handle this as a company is to ship products that you do have in stock first, and send the missing product as a backorder once it’s available again.
The address where you send the customer invoice or bill (not to be confused with the shipping address). The shipping and billing address will be the same most of the time. But the billing address can be the main office of the retailer’s company, whereas the shipping address is the actual retailer store location.
The name and overall design that distinguishes your company from another. By branding yourself, you create a stronger position for your company and goods in the overall market, thereby attracting the right kind of customers for your business.
What it says on the tin. If a retailer still has some unsold stock left in their inventory (for whatever reason), they can ask the wholesale seller to “buy it back.” This is especially useful if a retailer wants to try out a new product or product line. In other words, the retailer wants some peace of mind that the wholesale seller will buy back the product if they’re not able to sell it. Also known as a guaranteed order.
Case packs are bundled quantities of products with the same SKU (stock-keeping unit). The “case pack quantity” then refers to the minimum order quantity you’re willing to ship (whatever is most efficient and cost-effective for your company).
Collect on Delivery / Cash on Delivery (COD)
COD happens when a retailer pays for their order upon delivery, instead of during the placement of the order.
A catalog showcases the products you sell (be it online or offline). The catalog should include everything that would make your products stand out to a retailer (photos, product details, pricing, etc.). Also known as a line sheet. A catalog does tend to be stylized in nature, whereas a line sheet is more of a basic overview of products.
A chargeback is a payment amount that is returned to the bank account or credit card of a customer. This typically happens if the customer disputes the payment for whatever reason. Both the customer and the bank can initiate a chargeback (which makes it different from a refund, which is typically done by the company itself).
Cost of Goods Sold (COGS)
COGS helps you to calculate all the costs involved when selling a product. A basic formula for COGS is: Beginning inventory (beginning of the year) + Purchases in Current Period – Ending Inventory (end of the year).
By selling your products on consignment, you can place your goods in a store but won’t receive any money until the products are actually sold. Any unsold products will typically be returned to you.
Sell directly to your customers through your own website (or an online marketplace), e.g. eBay or Shopify. Wholesale differs from D2C in that you sell in bulk to customers, and customers tend to be marketplaces or resellers, rather than consumers. Read more about D2C.
How long it takes for the products to be shipped (e.g. Standard, Express, etc.). This timeframe can be chosen by either the customer or the seller whenever an order is placed.
Distribution Center (DC)
A storage and shipping building that can store your products. A lot of major retailers typically have products sent to their distribution centers before they’re distributed to their various stores. This helps keep transport and other logistical costs at a minimum.
Dropshipping is a method of sourcing products for an online store. With dropshipping, you use a supplier that holds and ships products on your behalf. This means you save valuable time, space, and money, as you’re not sitting with boxes and boxes of stock that may or may not sell. Only when an order is placed does the supplier find and ship the product for you.
Estimated Time of Arrival (ETA)
The ETA is usually determined by the seller and tells the buyer the estimated day and time their product will arrive at the shipping address.
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.
An exporter typically ships your products to international wholesale customers.
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.
The document you send to a retailer once the retailer has placed and confirmed an order with your business. This is typically a PDF or email. Within the industry of wholesale, you should always include the regular price of your products, the wholesale discount the customer gets on the order, and the wholesale price they’re being charged. You can find invoice examples for any kind of business here.
A way of saying a 50 percent markup. It basically means doubling the wholesale price to get a suggested retail price, e.g. if your wholesale price is 5 dollars, a “keystone markup” would make it a 10 dollar retail price.
Also known as turnaround time. The amount of time it takes (usually days) from the moment an order is placed until the order is shipped from a wholesale seller to a retailer.
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”.
Also known as product line. The document that shows the line of products a wholesale seller carries. A retailer can use the line sheet to place an order by indicating how many of each item they want.
A company or individual who manufactures products to then sell them to wholesale buyers (at wholesale prices).
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.
Manufacturer’s Suggested Retail Price (MSRP)
Also known as recommended retail price (RRP). The price wholesale sellers recommend retailers charge for products.
The difference between the wholesale price and the actual cost of producing an item (ensures you’re actually making a profit when selling at wholesale prices).
The amount (or percentage difference) between the wholesale and retail price. Read more about the differences between margin versus markup.
Minimum Order Quantity (MOQ)
Also known as the order minimum or vendor minimums. One of the most important terms in wholesale, the “‘minimum order quantity” (MOQ) is the minimum number of products an order should consist of to make the order worth it (read: profitable) for the wholesale seller. You can adjust the MOQ per product type, color, size etc. Whatever makes the most sense for your business setup and product lines. It all comes down to how varied your customer base is, and what their industry needs are. Make sure you use the right formula in your own MOQ considerations.
Minimum retail price
The minimum retail price wholesale buyers should follow.
Net payment terms
Another staple of all things wholesale. Net payment terms indicate how much time retailers have to pay for their invoice and when the payment is due. For example, net payment terms of 30 (a.k.a. “net 30”) means a customer has 30 days during which they can pay for their order.
Typically, net payment terms come in 30, 60, or 90 days. This is great if retailers want a bit more time to get their finances in order before they fulfill their orders (or if they want to test out the success of a new product or product line). The little bit of breathing space they get can make them feel a little more confident in extending their inventory with more wholesale products.
The budget a wholesale retailer has to place orders within. This document, sometimes referred to as a “checkbook,” functions as an overview of the “open” receipts they have to spend. Basically, “open-to-buy” means what a retailer has available to spend.
The payment terms you list in your wholesale terms sheet. It details the when, how, and where of payments made to you, the wholesale seller. Important information for retailers to have at the ready!
A list that indicates which products should be “picked” from your wholesale stock to fulfill placed orders made by retailers. Typically includes product/SKU quantity. This list is especially useful for sellers with a huge inventory or many custom SKUs.
Point of sale (POS)
The “place” where the wholesale seller receives payment from the retailer. This is typically an online marketplace (traditionally, it happens at a counter/register).
If you place a pre-order, it means a customer orders a product before it’s actually released. This means the product will be shipped to them as soon as it’s available. As a merchant, you can choose to have the customer pay for the product in full or pay a deposit (which also reserves the product). The remaining fee will then be charged once the order is shipped. Read more about the advantages of pre-orders.
Also known as white label and private brand. Private label products are products that are created by one company, but are sold and branded by another company. Popular products to sell using a private label setup are cosmetics, coffee, and t-shirts. Find other brand examples of private labels.
A list that documents the prices of all your wholesale products. You can make custom price lists for different retailers according to the agreement you’ve made with them (e.g. based on custom products, volume, MOQ, etc.).
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).
Return and Exchange Policies
Aside from payment terms, any wholesale business also needs to have its return and exchange policies in place. If things go awry, you want your business to be properly and fairly covered. E.g., what will you do if a retailer gets a defective item? Will you implement a money-back guarantee or not? Will you uphold a time period during which returns will be accepted? You can add these policies to your wholesale Terms & Conditions and send them out with every order.
Return Merchandise Authorization (RMA)
The process a retailer has to follow in order to return a product (for whatever reason). 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. Here are some RMA best practices you can be inspired by.
Return on investment (ROI)
Knowing one’s ROI is a critical step to success for any wholesale business. It means return on investment, and it essentially measures and shows the performance and effectiveness of all your spending. Or, in other words: are you getting your money back? Are you earning more? Or are you losing money on your activities?
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 (previously agreed upon percentage) of a closed (=successful) sale.
Samples of your products for potential retailers/customers. This helps them become familiar with your work before placing a large(r) order. You can mail them samples or bring some along whenever you visit a potential new retailer. Try to keep the selection focused, and restrain yourself from bringing along every size and color under the sun. Less is more in this case. Bring your star products, and let them speak for you!
The speed (in hours or days) at which a product sells in a specific location, store, or channel (online, offline, branch locations, etc.).
The address you send the product order to.
Documentation that outlines all the details surrounding shipping. A shipping policy often covers the details surrounding the costs, delivery times, shipping types (standard, express, etc.), as well as whether or not a company ships internationally. Find more examples and a free shipping policy template here.
The timeframe between which an order can be shipped or canceled. Two weeks is a typical period of time (e.g. if an order was placed on January 1st, the last cancel date would be January 15th). As a wholesale seller, you can ship anytime between these two dates.
A list of retailers that have your items in stock.
Stock-Keeping Unit (SKU)
A SKU is a unique code made up of both letters and numbers. It defines specifics about your products, e.g. the manufacturer, color, size, brand, style, and so on. How to use SKUs in your inventory.
Labels (“tickets”) with relevant information attached to your products. Also known as hang-tags.
Universal Product Code (UPC) Labeling
A unique barcode assigned to each of your products to make inventory and sales scanning/tracking faster and easier. Not to be confused with the SKU codes!
An individual or company – typically a wholesale seller or manufacturer – that sells and supplies products to a retailer.
Another thing to add to your wholesale Terms & Conditions! And a pretty important one, at that. Vendor compliance covers everything from insurances (especially when it comes to liability) to shipping agreements, product testing, and so on. It ensures that retailers know exactly how your wholesale business complies with your industry’s necessary and recommended rules and regulations. Whenever you set up a new agreement with or confirm an order from a retailer, make sure to send this information along in your T&Cs.
The wonderful world of wholesale. Selling wholesale products means selling in bulk (large quantities) to retailers who then sell the products to consumers.
WTD, MTD, STD, and YTD
Also known as Week to Date, Month to Date, Season to Date, and Year to Date. These are some of the most common time periods you’ll find connected to product quantity/dollars on receipts and invoices. E.g. you’ve sold 200 products YTD (Year to Date, or from the beginning of the year until the date on the document). It may not come up in wholesale conversations that often, but it’s always good to know what an obscure abbreviation on a receipt stands for, right?
… And that’s it! You’ve made it to the end in one piece.
Yeah, we know this is a lot. Thankfully, you won’t need to know everything from go (and there won’t be a pop quiz).
At the very least we hope this guide has made some things a little easier to understand, so you can go into your next wholesale conversation with confidence.