---
title: "Finally Learned SKU, KPI, VMD, VP, PP... 23 Professional Keywords"
description: "This article explains 23 key retail and FMCG terms, including SKU, KPI, VMD, VP, PP, IP, growth rate, gross margin, sell-through rate, break-even point, inventory turnover, and more, with formulas and examples."
author: "New Distribution"
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published: "2017-05-25"
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# Finally Learned SKU, KPI, VMD, VP, PP... 23 Professional Keywords

> This article explains 23 key retail and FMCG terms, including SKU, KPI, VMD, VP, PP, IP, growth rate, gross margin, sell-through rate, break-even point, inventory turnover, and more, with formulas and examples.

**1. SKU:** SKU = Stock Keeping Unit, the unit for measuring inventory in and out; for clothing, it can be measured in pieces.
**2. KPI:** Key Performance Indicator (KPI) simplifies performance evaluation to a few key indicators, using them as standards to compare employee performance.
**3. VMD:** We usually call it "Visual Merchandising" or "Merchandise Planning Visualization." VMD involves not only display, decoration, presentation, and sales floor issues but also important "strategies" such as corporate philosophy and operating systems. It requires cross-departmental expertise and skills, not just the narrow sense of "display and presentation," but broadly the overall store presentation including environment and products.
**4. VP (Visual Presentation):** Purpose: to express the overall impression of the store, guide customers into the store, focus on scenario and atmosphere creation, and emphasize themes. VP is an important demonstration space that attracts customers' first glance. Locations: windows, store entrances, central island displays, flat display tables, etc. Responsible: designers and visual merchandisers.
**5. PP (Point of Purchase Presentation):** Purpose: to express the impression of the regional store, guide customers into the depths of each counter, show product features and coordination, and display the relevance to actual sales. PP is the main area where customers focus after entering the store and the main display area for product selling points. Locations: display cabinets, racks, mannequins, store pillars, etc. Responsible: sales associates.
**6. IP (Item Presentation):** Purpose: to classify and organize actual sales products, focusing on product placement. Clear, easy to access, easy to choose, and easy to sell. IP is the main storage space and the necessary touchpoint for customers to finalize purchases, also called the capacity area. Locations: display cabinets, racks, etc. Responsible: sales associates.
**7. Growth Rate:** Sales growth rate = (sales amount or quantity in one period) / (sales amount or quantity in the previous period) - 1. Quarter-on-quarter growth rate = (reporting period - base period) / base period × 100%.
**8. Gross Margin:** Sales gross margin = gross profit / sales revenue × 100%.
**9. Old Customer Contribution Rate:** If a store has 500,000 yuan in annual gross profit, with old customers generating 400,000 yuan and new customers 100,000 yuan, then the old customer contribution rate is 80%, and new customer contribution rate is 20%.
**10. Category Support Rate** = sales quantity or amount of a category ÷ total sales quantity or amount of all categories × 100%.
**11. Inventory-to-Sales Ratio (Dynamic):** Also known as sell-through rate. Formula: (inventory in a period) / average daily sales in the period. Whether the inventory-to-sales ratio is scientifically set determines: first, whether order supply can truly extend to order production; second, whether the enterprise can truly adapt to the market, respect the market, and respond to orders; third, whether inventory management can truly meet market demand without overstocking or stockouts.
**12. Sell-Through Rate:** Formula: number of items sold / number of items in stock × 100%. Items sold: all products sold this month (excluding non-margin items). Inventory amount: average daily sales amount of all products in stock (at retail price) for the month.
**13. Inventory-to-Sales Ratio (Static):** Equals (in a period) purchases this period / ending inventory. It is an indicator to check whether inventory is reasonable, such as monthly inventory-to-sales ratio, annual average inventory-to-sales ratio, etc. Calculation: monthly inventory-to-sales ratio = average monthly inventory / monthly sales; annual average inventory-to-sales ratio = average annual inventory / annual sales. A high ratio indicates excessive inventory and slow sales; too low may mean production cannot keep up.
**14. Stock-to-Sales Ratio:** The stock-to-sales ratio is the ratio of product inventory to average daily sales in a period, expressed in days to reflect the relative number of current inventory status. A more precise method uses average daily inventory and average daily sales to reflect the current inventory-to-sales ratio. The more popular a product, the smaller the stock-to-sales ratio we set, which better accelerates product turnover; the more sluggish the product, the larger the stock-to-sales ratio.
The stock-to-sales ratio is generally calculated monthly: month-end inventory / total monthly sales. The unit can be quantity or amount; currently, enterprises mostly use quantity. For example, if month-end inventory is 900 pieces and total monthly sales are 300 pieces, the stock-to-sales ratio is 900/300 = 3. Personally, I think calculating by amount is more reasonable, as inventory exists in financial statements in monetary form.
**15. Sell-Through Rate (Sell-Out Rate):** = (in a period) pieces sold / pieces purchased. Best-selling products do not need promotion; only slow-moving products need promotion. Slow-moving products can be identified by sell-through rate. Generally, the sales life cycle of clothing is 3 months; if within three months, not due to season or weather, the sell-through rate is below 60%, it can be roughly judged that the product's sales have problems. Of course, you don't have to wait until three months to determine; generally, within three months, in the first month with complete sizes and colors, the sell-through rate will be 40-50%; in the second month about 20-25%; in the third month, due to broken sizes, only 5-10%. When the first month's sell-through rate is significantly below 40% and there is no other reason, it is necessary to pay special attention, strengthen display, or promote.
**16. Break-Even Point:** Break-even point (BEP), also known as zero profit point, break-even point, critical point, loss-profit divergence point, or revenue turning point. It usually refers to the output when total sales revenue equals total costs (the intersection of the sales revenue line and total cost line). With the break-even point as the boundary, when sales revenue is above the break-even point, the enterprise profits; otherwise, it loses. The break-even point can be expressed in sales volume or sales revenue.
Calculated by unit: Break-even point = fixed costs / (unit product sales revenue - unit product variable costs).
Calculated by amount: Break-even point = fixed costs / (1 - variable costs / sales revenue) = fixed costs / contribution margin ratio.
**17. Wave (Batch):** The batches in which clothing enterprises put new products in stores. Generally, people think spring, summer, autumn, and winter are natural waves for new products. If a brand has multiple stores across the country, it should combine local temperature changes for new product launches.
**18. Inventory Turnover Rate:** Equals (in a period) cost of goods sold / inventory cost. Inventory days = 365 days ÷ product turnover rate. It focuses on reflecting the speed of inventory sales and is helpful for studying the use and flow of working capital of a specific enterprise. Its economic meaning reflects the number of times inventory turns over in a year. Theoretically, the higher the inventory turnover, the better the management level of current assets and product sales.
**19. Sales per Square Meter (Efficiency):** Refers to the efficiency of 1 square meter in the terminal store, generally an important standard for evaluating store strength. Sales per square meter = sales performance ÷ store area.
**20. Cross Ratio:** The cross ratio is usually calculated quarterly, and products with low cross ratios are prioritized for elimination. The larger the cross ratio, the better, as it considers both gross margin and turnover rate; the larger the value, the higher the gross margin and the faster the turnover. Cross ratio = gross margin × turnover rate.
**21. Seasonal Index Method:** It is a method that uses the characteristics of seasonal periodic changes in time series to calculate the seasonal index describing the change. The seasonal index forecasting method in statistics predicts the future state of the target based on the seasonal variation regularity presented in the data of the time series. Once the seasonal variation pattern is mastered, it can be used to forecast market demand for seasonal products. When using the seasonal index forecasting method, the time unit of the time series is either quarter or month, with a cycle of 4 quarters or 12 months. In clothing, the calculation formula is: (actual monthly performance / cumulative performance in the same period) × 100%.
**22. Attachment Rate (Uplift Ratio):** The ratio of total sales quantity divided by the number of sales receipts is called the attachment rate. Attachment rate = total sales quantity ÷ number of sales receipts (below 1.3 indicates serious problems with overall add-on sales). Personal attachment rate = personal total sales quantity ÷ personal total receipts (below 1.3 indicates problems with personal add-on sales).
**23. Average Transaction Value (Customer Unit Price):** Refers to the average amount each customer purchases in a store, i.e., the average transaction amount. The formula is: sales amount ÷ number of transactions.
**Source: Warehouse Community**
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