Essential Terms for the wholesale industry, baciano plain black and white logo

In every industry, there are special terms that are used to express different thing. Once in a while, it happens that you come across a term that you don't understand. It is always important to be prepared to not lose face in front of clients or business partners. Especially if you just started a career or business in a to you unfamiliar industry you should prepare yourself.

If you just started your wholesale business then this is a great article for you. In wholesale, there are many terms that are not used in retail or other business. Here are some of the most essential terms in wholesale and how to use them:

Back-order: Products that have been ordered but have not shipped, typically due to a manufacturer’s lack of inventory.

Big Box Stores: Also known as Chain stores, big box stores are part of a larger retail establishment. Big box stores often have multiple locations carrying the same type of inventory. Examples include Target, Anthropologie and J. Crew.

Boutique Shops: Independently owned retail shops. Each boutique carries its own product mix and boutique buyers are frequently the store owners. Think mom & pop shops, not tied to a retail chain.

Catalog: A digital or printed booklet detailing wholesale product details, terms & conditions and general sales policies. Catalogs serve as a sales tool but also a branded marketing piece and typically include photographs and digital images of products for sale.

Consignment: Sales agreement wherein a manufacturer will provide product to sell in a retail store and a retailer will pay for products once they sell. Retailers do not purchase the products outright, instead, they take a smaller percentage of profit (30 – 40% rather than 50%). The retailer may return or the manufacturer may claim any unsold merchandise at any time.

Drop Shipping: Arrangement between a retailer and manufacturer in which a manufacturer will ship products directly to the consumer. In this instance, a retailer will not keep products in stock. As orders come in, the retailer will send the details to the manufacturer who will then ship the order to the customer; common when working with online retailers.

Exclusivity: Some retailers may ask a manufacturer to refrain from selling single products or an entire product lines to other retailers within a specified geographic region. It is up to the manufacturer to decide if they want to offer exclusivity to a retail store.

House Accounts: An account that a manufacturer reserves for selling direct, rather than allowing a rep, broker or distributor to service the account. Sales reps do not receive a commission on house accounts.

Keystone: Also known as keystone pricing; the act of doubling the wholesale cost to determine the retail cost. This is a standard markup in most industries but there are some instances where retailers will more than double wholesale pricing – mainly geographic areas with high overhead.

Line Sheet: Typically a 1 – 2-page document that details all of the products in a manufacturer’s product line. A line sheet is an abbreviated version of a catalog, with all the pertinent details a retailer would need to order.

Manufacturer: A person or company that makes goods for sale. Also known as maker, producer, creator or designer. A manufacturer may sell to the wholesale market and/or direct to consumer.

Manufacturer’s Representative: Independent sales representatives or ‘reps’ who call on retailers to sell products for one or more, non-competing manufacturers on a commission basis. Reps are typically paid monthly and commissions range from 15 – 30% depending on the industry.

Minimum Order Quantity: Also known as MOQ; refers to the lowest quantity of a certain product that a retailer must order. In addition to meeting Order Minimums, a retailer must also purchase a certain number of each SKU to meet ordering requirements. Each industry has different MOQ standards, do your homework to make sure you know what they are.

Net Payment Terms: Pre-approved payment terms that enable a retailer to pay for the product after they’ve received it and had an opportunity to sell it. Offering Net Terms is most common when working with reps and/or with repeat wholesale customers.

Order Minimum: The overall dollar amount a wholesale customer is required to spend. Typically there is one amount for first-time orders and a slightly lowered amount for retailers placing re-orders.

Purchase Order: A filled out order form detailing which products and quantities a retailer wants to purchase from a manufacturer.

Resale Tax ID Number: In the US, wholesalers do not charge sales tax for items purchased by retailers, provided the retailer has a valid resale tax ID number. Manufacturers/wholesalers should request Resale Tax ID Numbers when selling to new retailers and keep them on file.

Retailer: A fixed location, including brick & mortar stores, online shops or pop-up shops that sell products to the end consumer. Retailers typically purchase goods from wholesalers or manufacturers and then resell to the end consumer. Boutique Shops and Big Box Stores are retailers.

Samples: Physical examples of a manufacturer’s products that are sent to a retailer before they purchase enabling a retailer to feel, touch and experience the product first hand. It is not necessary to send multiple samples. 1 – 2 will do.

Stocklist: A list of retailers that sell a manufacturer’s products. A manufacturer will often include a ‘Stockist’ list on their website to tell customers where they can purchase


Stock-keeping Unit (SKU): Also known as an item number, an SKU is a unique code or series of numbers assigned to each product in a line. SKUs are most often used when a manufacturer has a large inventory to manage. The manufacturer determines the SKU number and it is best to keep SKU numbers simple, include a mix of numbers and letters and allow room for growth (don’t use codes that limit your numbers). SKUs are different than UPC codes.

Turn-around time: Also known as lead time. Refers to the amount of time a manufacturer needs before shipping products to a retailer. Turn-around times should be included in a manufacturer’s wholesale terms & conditions.

Wholesaler: An individual or company that sells a product to a retailer and does not sell directly to consumers.

Hopefully,  this article helped you to prepare for the world of wholesale. If you haven't started your business yet, go check out our post on how to start a wholesale business. You will find some important tips and tricks on how to do it right and what to pay attention to.

Source: creativelife blog