Retail Planning Glossary

Agentic AI: Software built from AI agents that sense what is happening, decide what to do and act on it, inside limits people set. In retail planning, specialist agents watch decisions such as the merchandise plan, open to buy, allocation and markdowns, propose changes with their evidence and, once approved, write them back to the systems that run the business.Agentic AI for retail planning
Allocation: Distributing inventory from distribution centers or vendors to stores and channels: how many units of each product, in which sizes, each store receives, and when. It covers the first delivery at launch, follow-up deliveries in season and transfers between stores.Allocation, explained
Assortment capacityAssortment planning & optimization: How many options a store or cluster can present well, set by its space and fixtures. Capacity caps the breadth an assortment plan can send to each cluster, so smaller stores get a tighter edit of the range.
Assortment planning: Choosing which products a retailer carries in a season, in which stores and channels, and in what breadth and depth. Ranges are usually set by store cluster and agreed in line reviews, inside the budget the merchandise financial plan sets.Assortment planning, explained
Average unit retail (AUR)MFP & OTB: The average price at which units sold: sales revenue divided by units sold. Planners read it alongside units, because a falling average with steady units usually means more markdowns or a shift toward cheaper products.

Baseline demandDemand forecasting: The demand a product would see at its regular price, without promotions, markdowns or one-off events. Forecasters estimate it first and add the effect of each planned price change or campaign on top, so a plan can tell normal selling from a lift that was paid for.
BOP and EOP inventoryMFP & OTB: Beginning-of-period and end-of-period inventory: the stock a department or category holds at the start and at the end of a week or month, usually valued at retail and at cost. They are the anchors of the merchandise plan and the open-to-buy calculation.
Breadth and depthAssortment planning & optimization: Breadth is the number of different options a category carries; depth is how many units of each option are carried, including the spread across sizes. With fixed space and budget, adding breadth reduces depth.

ClearancePricing, markdown & promotions: The last stage of a product’s life, when the remaining stock is marked down deeply to sell through before the season ends or to make room for new receipts. Planning it early, along the markdown ladder, usually recovers more margin than a late clearance.
Click and collectOrder fulfillment: An online order the customer picks up at a store, also called buy online, pick up in store. It needs store stock that is accurate in real time, and it draws on the same units the store sells to customers who walk in.
Comparable salesMFP & OTB: Sales growth measured only on stores open long enough to compare with the same period last year, leaving out openings, closures and major refits. Also called like-for-like sales, it shows how existing stores are trading apart from a changing store count.

Demand forecasting: Estimating how many units of each product customers will buy, by store, channel and week, from sales history, seasonality, prices, promotions and events. The forecast feeds the merchandise plan, the assortment, allocation, replenishment and markdowns, so its errors travel down the whole planning chain.Demand forecasting, on the Plan page
Discount depthPricing, markdown & promotions: How far a price is cut below the original retail price, as a share of it. Planners track the average depth of markdowns and promotions, because a deeper average that sells no extra units is margin given away.

Forecast accuracyDemand forecasting: How close a forecast came to what actually sold, measured at the level where decisions are made, such as style by store by week. Accuracy at a high level can hide large errors by store and size, which is where allocation and replenishment act.
Forecast biasDemand forecasting: A forecast’s tendency to run consistently above or below actual demand. Bias does more damage than random error because it compounds: a forecast that always runs high buys too much, allocates too much and ends in markdowns.

GMROIMFP & OTB: Gross margin return on inventory investment: the gross margin a product, category or store earns for each dollar of inventory held, measured at cost. It shows whether stock is earning its place, and it is used to compare categories with different margins and turn.
Gross marginMFP & OTB: Sales revenue less the cost of the goods sold, stated in currency or as a share of sales. Merchandise plans set gross margin targets by department and period, and markdowns, shrink and the cost of receipts all move it.

Initial allocationAllocation planning & optimization: The first distribution of a new product to stores at launch, before any sales history for it exists. It rests on forecasts, store grades and presentation needs, and holds stock back in reserve to follow up where the product sells.
Initial markup (IMU)MFP & OTB: The difference between a product’s first retail price and its cost, as a share of that price. Buyers plan it when they set prices and negotiate costs; it is the margin a season starts with, before markdowns and shrink take their share.
Inventory rebalancingTransfers: Redistributing stock across stores and the distribution center to match where demand has turned out to be, usually in season. It combines transfers, releases of reserve stock and reallocation, and is judged by how much full-price selling it adds.
Inventory turnoverMFP & OTB: How many times a business sells through its average inventory in a period, usually a year. Higher turn means stock sells quickly rather than sitting idle; turn that is too high can mean the business is running short.

Landed costPurchase orders & procurement: The full cost of a product once it reaches the retailer: the supplier’s price plus freight, duties, insurance and handling. Margin plans built on the supplier’s price alone overstate profit, so an estimated landed cost is used until the actual one is known.
Lead timePurchase orders & procurement: The time between placing an order and the stock being ready to sell. Long lead times force earlier, less certain commitments, and replenishment and safety stock both depend on how long and how variable lead time is.
Line reviewAssortment planning & optimization: The meeting where buyers, planners and merchants agree the range for a season: which options to keep, add or drop, their prices and the clusters they go to. Its decisions become the assortment plan and the starting point for purchase orders.

Maintained markup (MMU)MFP & OTB: The markup actually kept once markdowns, discounts and shrink have reduced the initial markup. Comparing the two shows how much margin a season gave back, and where.
Markdown: A permanent or temporary reduction in a product’s selling price, usually to clear stock that is selling slower than planned or reaching the end of its season. Markdowns reduce margin, so retailers plan their depth and timing, often as a ladder of steps by store cluster.Markdown optimization, explained
Markdown ladderPricing, markdown & promotions: The planned sequence of price reductions for a product: a shallow first cut, then deeper ones at set intervals until the stock is gone. A ladder chosen for each product and cluster usually sells through with less discount than one deep cut everywhere.
Merchandise financial planning (MFP): Setting a retailer’s financial targets for its merchandise (sales, gross margin, markdowns, inventory and receipts by department and period) and managing the business against them. The plan is built before the season, reconciled top-down and bottom-up, and re-forecast in season.Merchandise financial planning, explained
Minimum order quantity (MOQ)Purchase orders & procurement: The smallest order a supplier will accept for a product, a color or a whole purchase order. Minimums can force a buyer to commit more than the plan needs, so they shape which options are worth carrying in a smaller range.

On orderMFP & OTB: Merchandise a retailer has committed to buy but not yet received, counted by the period it is due to arrive. It is subtracted from planned purchases to give open to buy.
Open to buy (OTB)MFP & OTB: The amount a buyer can still spend for a period without going over the inventory plan: the purchases the merchandise plan needs, less what is already on order. It is set by department, channel and month, and it moves whenever sales, stock or orders change.Open to buy, explained
OptionAssortment planning & optimization: One style in one color, the unit most assortment plans count. The number of options in a range sets its breadth; each option then gets its own depth, size curve and allocation.
Order fulfillment: Getting each customer order from available stock to the customer: choosing the location that ships it, then picking, packing and delivery or pickup. For a retailer with stores, it decides whether store stock sells online or waits for a customer to walk in.Order fulfillment, on the Sell page
Order routingOrder fulfillment: Choosing which location fulfills each online order, weighing its stock, the shipping cost, the delivery time and the risk of leaving a store short. Good routing ships from stock that would otherwise end in a markdown.

Plan versionMFP & OTB: One of the parallel sets of numbers a merchandise plan keeps: the original budget approved before the season, the working plan planners change, the latest re-forecast, and last year’s actuals for comparison. Keeping versions apart shows how far the season has moved from its commitments.
PrepackSizing & prepacking: A carton holding a fixed mix of sizes, or of colors, that ships as one unit from the supplier to the store. Prepacks cut handling costs, but a pack that does not match a store’s size curve sends it sizes it will not sell.
Presentation minimumAllocation planning & optimization: The fewest units a store needs to display a product properly, such as one of each size on the shelf. Allocation and replenishment do not take a store below it, even when its sales alone would justify less.
Price elasticityPricing, markdown & promotions: How much demand for a product changes when its price changes. An elastic product gains many units from a small discount; an inelastic one sells much the same at any reasonable price, so discounting it gives margin away.
Procurement: Buying the merchandise the plan calls for: choosing suppliers, negotiating cost and terms, and placing and tracking purchase orders. It turns open to buy into commitments, and decides what happens when a supplier ships late, short or not at all.Purchase orders and procurement, on the Buy page
Product lifecycleAssortment planning & optimization: The stages a product moves through from launch to exit: introduction, peak selling, decline and clearance. Assortments mix core products that run for years with seasonal and fashion products that live for weeks, and each is planned, bought and marked down differently.
PromotionPricing, markdown & promotions: A temporary offer, such as a discount for a weekend or a multi-buy, meant to lift traffic or sales for a set period before the price returns. Unlike a markdown it is not meant to clear stock, so its cost is judged against the lift it brings.
Promotional liftDemand forecasting: The extra units a promotion sells over baseline demand while it runs. A useful estimate also counts what the promotion takes away: sales pulled forward from the weeks after it, and sales moved from other products in the range.
Purchase orderPurchase orders & procurement: A buyer’s commitment to a supplier for specific products, quantities, costs and delivery dates. Once placed, its value counts as on order and reduces open to buy, and its delivery window decides when the stock can reach stores.

ReceiptsMFP & OTB: Merchandise arriving into a retailer’s stock in a period. Planned receipts are what the merchandise financial plan needs to arrive for its sales and ending inventory targets to hold.
Reorder pointReplenishment: The stock level at which a new replenishment order is placed: enough to cover expected demand until the order arrives, plus safety stock. It is set for each item and location from the forecast and the vendor’s lead time.
Replenishment: Reordering products a retailer sells continuously, so they stay in stock without excess. It applies to basics and continuity lines, from a distribution center to stores and from vendors to the distribution center, within pack sizes, minimum orders and vendor schedules.Replenishment, explained
Reserve stockAllocation planning & optimization: Inventory held back at the distribution center instead of sent to stores at launch, so it can follow demand once early sales show where a product is selling. Too little reserve forces transfers later; too much leaves stores short.

Safety stockReplenishment: Extra stock held to cover uncertainty in demand and in supplier lead times, so an item stays available until the next delivery. More variable demand, longer or less reliable lead times and higher service targets all call for more of it.
SeasonalityDemand forecasting: The pattern by which demand rises and falls with the calendar: holidays, school terms, weather and the fashion seasons. A forecast separates seasonality from trend, so a strong spring is not mistaken for lasting growth, and aligns fiscal weeks that shift from year to year.
Sell-throughAssortment planning & optimization: The share of the units a store or channel received that sold in a period, often measured at full price. It is the main measure of how well a product, an option or a range performed, and it guides keep, add and drop decisions and markdown timing.
Service levelReplenishment: The share of demand a retailer aims to meet from stock without running out, set for each product and location. A higher service level needs more safety stock, so it is set by weighing the cost of a lost sale against the cost of holding inventory.
Ship from storeOrder fulfillment: Fulfilling online orders from a store’s stock instead of the distribution center. It sells inventory that would otherwise wait for a walk-in customer and shortens delivery, but every unit shipped leaves the store’s shelf, so it has to respect presentation minimums.
ShrinkMFP & OTB: Inventory lost to theft, damage, administrative error or supplier fraud: the gap between the stock the books expect and the stock counted. Merchandise plans carry a shrink allowance, because every unit lost lowers both inventory and margin.
Size curve: The share of a style’s sales that each size takes, built from sales history for similar products and stores. Allocators use it to decide how many units of each size to send and which prepacks to buy. A size run is broken when key sizes are missing.
Size runSizing & prepacking: The sizes a style is offered in, and the stock held in each. A size run is broken when key sizes sell out while others remain, which leaves inventory that looks healthy in total but cannot meet demand.
Split shipmentOrder fulfillment: An order sent in more than one package because no single location holds every item in it. Each extra package adds shipping cost, so routing tries to fill an order from one place when it can.
Stock keeping unit (SKU)Assortment planning & optimization: The most detailed product identifier a retailer tracks: one style in one color and one size. Plans are built at higher levels, but allocation, replenishment and stock counts work at the stock keeping unit.
Stock-to-sales ratioMFP & OTB: The inventory at the start of a period set against the sales planned for it. Planners set it month by month to decide how much stock each period needs to support its sales, which in turn sets how much has to be received.
StockoutReplenishment: A product or size that is out of stock where a customer wanted it. A stockout loses the sale and often the visit, and it hides true demand in the sales history the next forecast learns from.
Store clusterAssortment planning & optimization: A group of stores with similar sales volume, climate, space or customers that receive the same range. Clusters let a retailer localize its assortment without planning every store separately.
Store gradeAllocation planning & optimization: A ranking of stores, usually by sales volume or capacity, that sets how much of a product each receives and which options it carries. Grades are simpler than store clusters and are often used with them.
Store-to-store transfer: Moving stock from a store where a product is selling slowly to one where it is selling out, instead of waiting for new receipts. Transfers repair broken size runs and save markdowns, but every move has a cost, so they are planned where the margin gained exceeds it.Transfers, on the Flow page

Unconstrained demandDemand forecasting: What customers would have bought if a product had been in stock in every size and store. Sales history understates it whenever items sold out, so forecasters estimate the lost sales before using history to plan the next season.

Weekly sales, stock and intake (WSSI)MFP & OTB: The week-by-week view of the merchandise plan, common in UK and fashion retail. Each week shows opening stock, sales, markdowns, intake and closing stock as plan, actual and re-forecast, so a gap between plan and actuals shows while there is still time to act.
Weeks of supplyAllocation planning & optimization: How many weeks current stock would last at the expected rate of sale. Also called weeks of cover or forward cover, it is used to spot overstocked and understocked products, stores and sizes, and to set allocation and replenishment targets.

Retail planning glossary

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