Metro retail compendium 2013

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Metro retail compendium 2013

  1. 1. 80 METRO Retail Compendium 2012 / 2013
  2. 2. glossary – all about trade and retail © METRO AG 2012 glossary 81
  3. 3. 82 glossary → “1 plus 4” nt of D ssessm Model A “1 plus 4” Model  A nutrition labelling concept developed by Germany’s Federal Ministry of Food, Agriculture and Consumer Protection (Bundesministerium für Ernährung, Landwirtschaft und Verbraucherschutz, BMELV). With the “1 plus 4” model, the energy content of food is shown on the front of the packaging along with the absolute quantities of the four nutrients sugar, fat, saturated fatty acids and salt contained in the product. The labelling also shows what percentage of the recommended daily allowance this corresponds to. Furthermore, it states how many grams of the product this analysis relates to, such as the total weight of the pack. There is also a table showing nutritional information on the back of the packaging. METRO GROUP started rolling out the “1 plus 4” model on its own-brand products back in 2008. Additives  Food additives   Agglomeration  A regional concentration of trading companies from the same or different lines of business in one location. Retailing companies with different assortments, for example, often settle in the direct vicinity of restaurants, telecommunications providers, etc.. A wide selection of products and services makes shopping areas, such as pedestrian zones, more attractive. The result is higher customer frequency and thus greater sales potential for the trading and retailing sector. Article  The smallest, indivisible unit of a merchandise assortment. The classification system of a merchandise portfolio can typically be structured as follows: type of merchandise (e.g. pasta), category (e.g. noodles), merchandise group (e.g. spaghetti), article (e.g. spaghetti from a certain manufacturer of branded products in a certain packaging size). Each article sets itself apart from other articles by at least one characteristic such as size, colour, weight, brand, packaging, taste, shape, etc.. Article Coding Systems  Numerical classification systems for the trade and retail sector that encode article-related information such as price or quantity on stock and make it machine-readable. They provide article-specific data collection in merchandise management systems and facilitate, among other things, stocktaking of current merchandise. One example of a standardised, non-company specific article coding system is the EAN barcode (international article numbering: Global Trade Item Number (GTIN)). It was developed in 1977 METRO Retail Compendium 2012 / 2013
  4. 4. glossary → Assortment 83 as a Europe-wide identification system. EAN barcodes are mostly attached to the articles in the form of a machine-readable barcode. They consist of a country code, a company number and the producer’s article number. EAN barcodes are assigned to the producers by the GS1 (Global Standards One) or, in Germany, the GS1 Germany. The international article number is also part of the Electronic Product Code (EPC). In addition to the article number, this code contains a serial number and thus enables the clear identification of individual articles and shipping units. The carrier technology used by the EPC is Radio Frequency Identification (RFID). As a member of the EPCglobal community, METRO GROUP supports the worldwide application of RFID and EPC technology in the trade and retail industry as well as in the consumer goods sector. Assessment of Demand  Trading companies use demand assessments to determine what types and quantities of goods and services they must keep in store for their customers and at what times. For this purpose they draw both on historical data, such as demand for a type of beverage during a defined period, and on estimates of future demand, for example with regard to new trends such as wellness products. Companies must assess the significance of such a trend for the demand behaviour of their own customers and gauge likely demand on this basis. Typical tools and data supporting demand assessments are retail panels, sales statistics and market research results. Demand can also be assessed on the basis of sales talks. Here, sales staff uses specific interview techniques to determine customer needs (demand) in order to be able to hold the suitable merchandise in stock. Assortment  The choice of products that a retailing company offers its customers. The core assortment depends on the industry sector in which the retailer is active. It is complemented by the so-called marginal assortment. Supplementary assortments comprise merchandise alien to the sector. In food retail, for example, all foods such as meat, vegetables and pasta belong to the core assortment, whereas pots, pans or washing-up liquid make up the marginal range. Assortments are generally classified as either “full” or “specialised”, and they may vary in width and depth. All retailing companies have predefined the width and depth of their specific product range. Assortment width is characterised by the number of products or categories offered. Assortment depth, on the other hand, is the variety available in each category. Variants may include different brands, sizes, colours, qualities, tastes, weights, designs or forms of packaging. Another differentiation is made between specialised and full assortments. Specialised assortments cater © METRO AG 2012 A B C D E F G H I K L M N O P Q R S T U V W Z
  5. 5. 84 glossary → Assortment Competency Barcode to the needs of a narrowly defined target group or consumer group, for example only to athletes. Full assortments always comprise different merchandise groups. Thus the “Sportarena” concept of Galeria Kaufhof GmbH offers a special assortment, while the Galeria Kaufhof sales brand of METRO GROUP has a full assortment covering a wide range of categories. Assortment Competency  The ability to present and market a line assortment in a way that is competitive and convinces the customer. This is assumed mostly with specialised assortments. Characteristic features of high assortment competency are a wide range and/or specialised merchandise offer, a good value-for-money ratio, high quality and the clear and logical display of merchandise. All sales lines of METRO GROUP boast high assortment competency, which means that they tune their assortment strictly to the needs of their respective customers. Auction  A special form of sale in which potential buyers make bids. Auctions are also used as a specific form of procurement. In this case, potential suppliers place bids as sellers. The classic form is the open auction, in which all bidders know what their competitors are willing to pay. In silent auctions, participants make their bids without knowing what their competitors are offering. Open auctions can be either ascending or descending: in an ascending auction, bidding starts at a set price and continues until no higher bids are placed. The last bid is accepted. In a descending auction, the process is reversed: the auction starts at a fixed maximum price and bidders place lower and lower bids. The bidder who makes the lowest offer wins the auction. Currently, Internet auctions are popular. One special type of online procurement auction is the Japanese auction. In an auction of this kind, suppliers do not place bids manually. The price falls from its starting level at set intervals until only one supplier is willing to deliver goods for the offered price in question. The auction then finishes immediately. Suppliers’ offers are often collected using an online request for proposal (RFP) before the auction begins. Auditing  Also referred to as an audit. A distinction is made between internal and external auditing. Audits assess processes and structures in a company and within its environment, such as the methods used by suppliers. The auditing process examines whether predefined requirements and guidelines are being complied with. These requirements could be specified as part of an ISO norm or they could result from a company’s voluntary undertakings. Following an external audit, the company may be certified to show that it complies with the relevant standards. Audits are usually conducted on METRO Retail Compendium 2012 / 2013
  6. 6. glossary → Basket of Consumer Goods (Average) 85 a regular basis. They play an important role in quality assurance as they provide information about the effectiveness of measures taken as part of ongoing process optimisation. Auditing is also a useful way of verifying suppliers’ processes and social standards, e.g. as part of BSCI (Business Social Compliance Initiative). A B C D E B F Barcode  A code used for data processing in conjunction with either optical or magnetic readers. Barcodes are used on receipts, product packaging and to automatically control machines. The EAN barcode is the best-known type of barcode. The barcode allocates a price to the merchandise, for example by means of the scanner at the electronic checkout. The fact that prices do not have to be entered manually speeds up the checkout process. See also article coding systems. G H I K L Basement  Department stores often have their grocery sections here in addition to side assortments such as magazines, gifts and souvenirs or services, such as a shoe repair service and a lock and key service. M Basket of Consumer Goods (Average)  Goods and services selected for statistical purposes which are considered representative of average consumer behaviour. The basket of consumer goods is used to calculate consumer price indices (price index) in Germany. It currently comprises around 750 products and services. A weighting system reflects the share of individual goods and services in overall consumer expenditure. The weighting system quantifies, for example, spending on rent, food, luxury goods or clothing as a share of overall expenditure. The Federal Statistical Office calculates the level and structure of household spending using the results of random sampling of income and consumption carried out every five years and annual economic statistics. The basket of goods is also the basis for calculating the consumer price index (CPI). It provides trading and retailing companies with basic information for their strategic positioning and assortment policy. O N P Q R S T U V W Z © METRO AG 2012
  7. 7. 86 glossary → Benchmark in Retail Brand Management Benchmark in Retail  A best in class orientation model for a trading company’s own target definitions. The aim is to optimise processes and thereby improve performance. Peers, companies from other sectors and organisations may serve as role models. Benchmarking  A tool for the analysis of competition and the basis for the development of optimisation strategies. Benchmarking represents the continuous, cross-industry search for role models and the comparison of their strategies, processes, methods, services and/or products with the company’s own performance. The aim of benchmarking is to analyse differences and deduce opportunities for improvement of one’s own operations to achieve optimal performance (best practice principle). Example: a trading and retailing company compares its customer retention programme with that of an airline and, on the basis of the knowledge thus obtained, works out an approach to optimise the potential. See also benchmark in retail. Best Agers  A marketing target group that encompasses people who are no longer young adults but who are not old in the traditional sense of the word. The target group has a broad range: depending on the definition, it can include all people older than 40, 50 or 60. As a result of demographic changes, the percentage of Best Agers will grow in Germany in the years ahead. At the same time, the buying power of older people is rising. Today, people older than 50 in Germany have more than €800 billion available to them each year (METRO AG evaluation). The trade and retail sector has begun to shape its sales and marketing strategies to address this changing buyer structure. Retailing companies are addressing the growing number of older customers in such areas as purchasing, store design and category management. For example, the METRO GROUP sales brand Real presents products that are in demand among Best Agers in special merchandise groups. Best Practice Principle  A strategy based on a company’s outstanding workflow structures and processes or methods as well as the implementation of optimisation measures in one’s own company. If, for instance, a company wants to improve its performance in terms of merchandise logistics or quality assurance on a certain stage of the value added chain, it will proceed as follows: once the target specifications have been defined, other suitable companies are selected that are considered to be benchmarks (models) in that area. The performance levels of all companies are compared with each other, and the best practice, that is the most efficient approach and procedure, is determined. After that, the necessary measures and actions for optimising one’s METRO Retail Compendium 2012 / 2013
  8. 8. glossary → Brand Protection 87 own methods are identified and implemented. See also benchmarking and benchmark in retail. Brand Management  Brand management consists of strategies used to position brand products successfully over a sustained period of time. As a result, brand management is a basic prerequisite for the success of brand manufacturers and retail companies. Brands with which customers establish long-term relationships of trust are created through a variety of factors such as quality, design, in-store presentation and advertising. These brand management strategies are fixed components of a company’s tradition. In brand management, pricing is a central element and an important means with which companies can position and manage a brand over the long term. Brand Products  Consumer goods that are marketed under an individual label, or brand, by producers or trading and retailing companies. A brand can be a name, emblem, design, symbol or a combination of these elements that serves to identify a product or service. The brand helps distinguish a product from its competitors. Further characteristics are: • consistent quality, • intensive advertising, • widespread distribution and • comparatively high name recognition. A distinction is made between producer’s brands, retail brands, house brands and private labels/own-brand products. In the case of producer’s brands, the brand is created by the manufacturer. In the case of the other labels, it is created by the retailer. Retail brands, house brands and private labels are often regarded as synonyms. While house brands and private labels/own brands are typically associated with an individual retailing company, retail brands may also be created by large retail groups. The sales brands of METRO GROUP offer both producer’s brands and private labels. Their own brands include Horeca Select (METRO Cash & Carry), real,- QUALITY (Real), KOENIC (Media Markt and Saturn) and manguun (Galeria Kaufhof). Examples of private labels or retail brands outside METRO GROUP include Tandil (Aldi), Mibell (Edeka) and ja! (Rewe). Brand Protection  Legal protection against the illegal use of brand labels, unfair competition and brand piracy. Brand name manufacturers can incur substantial financial and image losses from counterfeit or imitation of their brand products if organised product pirates use their well known brand © METRO AG 2012 A B C D E F G H I K L M N O P Q R S T U V W Z
  9. 9. 88 glossary → BSC (Business S cial Complian e Initiative) Business fo Third Pa ty Ac ount names to promote counterfeit merchandise. Apart from luxury items such as designer watches and leather goods, technical products (such as automotive spare parts), food, consumer goods and pharmaceutical products are increasingly being targeted by pirates. The legal basis for German brand rights is the Brand Law. It derives from the First Directive of the Commission for Standardisation of the Legal Regulations of the Member States on Brands (89/104/EEC), which the Council of Ministers of the European Union adopted on 21 December 1988. The Brand Law replaced the German Trademark Law, which dated back to 1874. This went hand in hand with the abolition of the German term “Warenzeichen” (trademark) in favour of the current designation of “Marke” (brand). BSCI (Business Social Compliance Initiative)  BSCI stands for the Business Social Compliance Initiative. Established in 2003, it brings together European retailers. METRO GROUP was one of the organisation’s founding members. The aim of the initiative is to safeguard and monitor compliance with minimum social standards during the product manufacturing process within the context of Corporate Social Responsibility. The implementation focuses on suppliers from certain high-risk countries defined by the BSCI. The initiative’s work is based on the United Nations’ Universal Declaration of Human Rights and conventions issued by the International Labour Organization (ILO). For instance, companies pledge to cooperate solely with suppliers who abide by all of the relevant country’s applicable laws and comply with rules designed to prevent discrimination, ensure acceptable wages and working hours, as well as stamp out both child labour and forced labour. Budgeting in Retail  Budgets are short term financial plans. In the trade and retail sector, a budget states the financial resources available for a certain corporate function during a set period, such as the funds for the procurement of certain commodities in purchasing. Budgeting comprises all concepts and tools for planning and controlling budgets. For this purpose, trading companies resort to historical variables such as sales figures as well as estimates of future demand. See also assessment of demand. Business for Own Account  The sale of merchandise and products in one’s own name and for one’s own account. Example: the head office of a trading company with outlets imports merchandise and pays for it, distributes it to the outlets and promotes sales through centrally controlled trade marketing. If the merchandise is not sold or sold below the landed price, the loss will be borne by the outlet itself, not by the supplier or an intermediate importer. Conversely, the trading METRO Retail Compendium 2012 / 2013
  10. 10. 89 glossary → Buyer Structure company may also retain all income rather than share profits with the supplier. Business for own account is a main characteristic of merchants (cf. § 1 II no. 7 HGB = German Commercial Code). In contrast to a merchant, a commercial agent conducts business in a third party’s name and for a third party account. For example, a commercial agent may exhibit collections of branded products from foreign producers in his business rooms, which trading companies can order from him. In this case, the commercial agent acts as an intermediary. The merchandise will be delivered by the manufacturers of the branded products. The consignment will also be paid to the manufacturer. The commercial agent receives a commission for his agent activity. Business for Third Party Account  Transactions of the procurement centre of a purchasing cooperative or a wholesaler in the name of a third party and for its own account or the account of a third party. The buyers of the merchandise are the member companies of the cooperative or the commissioning retailers. For example, a commercial agent may present the fashion collection of an Italian brand in his rooms which interested retailers may order from him for sale to end-consumers in their own stores. The retailers settle their bills with the manufacturer of the branded product. The commercial agent receives a commission for acting as intermediary. The opposite term is business for own account. Business-to-Business (B2B)  The sale of goods and services to commercial customers rather than consumers (business-to-consumer, B2C). The merchandising concept of METRO Cash & Carry (cash+carry) is based on the B2B approach because it targets only commercial and industrial customers such as restaurants and retailers. Business-to-Consumer (B2C)  B2C refers to sales and to consumers. See also business-to-business (B2B) for commercial customers. At METRO GROUP, the sales brands Real, Media Markt, Saturn, Redcoon and Galeria Kaufhof use this business model. Buyer Structure  Composition of the population or a defined customer category of a trading company in a defined region. The buyer structure is defined by means of different variables such as buying power, age structure, household size, level of education or income. These data are collected by market research (panels, customer surveys, etc.). The buyer structure is an important factor in the positioning and strategic planning of a company. Based on the knowledge of the buyer structure, a trading company will, for example, establish its purchasing or its category management. © METRO AG 2012 A B C D E F G H I K L M N O P Q R S T U V W Z
  11. 11. 90 glossary → Buying Power Indi ent Capital Marke Or es Buying Power Indices  These indices provide information on the regional distribution of the income-driven potential demand of final consumers in consumer goods markets. In conjunction with regional population statistics, they provide quantitative data for assessments of local demand for consumable goods and consumer durables that are sold through retail and service companies. Buying power indices are determined by market research institutes such as GfK in Nürnberg at annual intervals and show whether the trend in a certain region is above or below the buying power average in Germany, represented by the value mark 100. Trading and retailing companies such as METRO GROUP use buying power indices, for example, to decide on the location of new stores. C Campaign Management  The efficient planning and implementation of marketing promotions. The objective is to boost merchandise sales across the board or of an individual product and to promote customer loyalty. To accomplish this goal, retailing companies employ marketing activities such as discounts or bonus point systems conducted as part of customer card programmes (see also customer card and Payback). METRO GROUP uses a four-step process in campaign management. In the first phase, the marketing experts of the sales brands develop a marketing strategy and set the general tone of a campaign. In the second phase, they define the target group and the offer that will be made to customers. In the third phase, the target group is approached through strategically determined communication channels and the campaign rollout. In the last phase, the success of the campaign is measured. Improvements for the first phase of the next campaigns can be deduced from the results (“closed-loop CRM”). See also customer relationship management (CRM). Capital Goods  The term “goods” usually covers both products and services. Capital goods are industrial products that can be regarded as technically complete and thus ready for acquisition. They are generally acquired by private companies or governments as fixed capital assets. Goods are regarded as complete when they will not be subjected to further treatment and are intended for final use. Examples of capital goods in commerce are store fixtures, scales, checkout counters and shopping carts. Capital goods serve as resources for production and are not destined for resale to consumers. METRO Retail Compendium 2012 / 2013
  12. 12. glossary → Cartel 91 Consumer goods, by contrast, are products for direct consumption in private house-holds, such as food and semiluxury goods (e.g. bread and cigarettes) and also clothing and furniture. Thus, the typical characteristics that distinguish capital goods from consumer goods are the type of purchaser (companies or state versus consumer) and the use of the product (output generation versus private consumption). Capital Market Orientation (of Retailing Companies)  Listed trading and retailing companies raise the funds they need to operate and expand their business on the capital markets, e.g. by issuing shares. They seek to increase their company’s capital market value to boost their attractiveness for investors and encourage investors to buy and/or hold their shares. METRO GROUP is a listed company whose activities and communications are therefore capital market-oriented. See also Initial Public Offering (IPO). Card Payment Systems  A comprehensive term for systems allowing consumers to pay for a purchase with a card – EC or credit card – instead of cash. For example, the Payback card may be equipped with a credit function allowing customers to use it as a means of payment. Cartel  A contractual joint venture of companies of the same industry which remain independent in both legal and economic terms and only agree on joint action in certain areas. The typical purpose of cartels is to restrict competition in order to boost the earnings of the cartel members. There are several kinds of cartels: • rice cartels require their members to maintain fixed prices. P • ondition-based cartels create uniform sales conditions such as terms C of payment, discounts and rebates (e.g. standard terms and conditions of the German textile trade). • roduction cartels determine the permissible output of each member in P order to cap overall supply. • egional cartels prescribe that certain sales regions may be ploughed R only by certain members. Because they restrict free competition to the disadvantage of other market participants, cartels are banned under Germany’s Act Against Restraints of Competition. In the European Union, cartels are also prohibited pursuant to Article 81 of the EC Treaty. The European Commission may ban cartel-like agreements, and companies infringing European competition law will be fined or charged with other sanctions. Under certain circumstances, the European Commission may grant exceptional permits. On an international level, the International © METRO AG 2012 A B C D E F G H I K L M N O P Q R S T U V W Z
  13. 13. 92 glossary → Cash+Car y Chain Store Competition Network (ICN) seeks to foster fair competition and notify competition-constraining behaviour to the competent national or European authorities. ICN is a project-oriented informal network of worldwide competition monitoring authorities based on consensus. The members also include the office of the chairman of the EU Commission’s competition directorate. The ICN does not have statutory powers and may only issue recommendations. The first ICN conference took place in Naples in 2002. Cash+Carry  A form of wholesaling where customers pick the products they need from a wide-ranging assortment in a market, pay for them and then carry them away according to the self-service principle. The offer is available only to commercial customers and bulk consumers, such as hospitals. The sales brand METRO Cash Carry is the international leader in this segment. Depending on the selling space, the assortment of METRO Cash Carry comprises up to 20,000 food and 30,000 nonfood articles. Category Management  The aim of category management is to consistently optimise the assortment in line with customer desires and requirements. Category management is a joint planning process conducted by the producer and the retailer. The objective is to define merchandise groups – also called categories – and to optimally place and present them in the store. Category managers rely on a variety of data, including internal company information and studies conducted by marketing research institutes. These studies shed some light on which products consumers buy at which retailers. Such information serves as a major decision-making tool for the category manager and his partners in the effort to define customer groups, determine categories, devise sales strategies and optimise the assortment. Working on the basis of specifically customer-oriented assortment strategies, category management helps boost sales and earnings, secures a competitive edge and enhances long-term customer retention. The category management process at METRO GROUP is the strategic starting point for purchasing-related decisions, e.g. supplier selection, product and brand decisions or unit sizes. Category management and purchasing are handled by the same team at METRO GROUP. Central Warehouse  Warehousing facility shared by several outlets and/or sales brands of a retailing company at one location. In the trading and retailing sector, the question of central or decentralised warehousing depends on a multitude of aspects. Advantages of central warehouses include lower space costs at peripheral locations as well as the pooling and control of flows of goods. This contrasts with the costs of warehousing and merchandise distribution METRO Retail Compendium 2012 / 2013
  14. 14. glossary → Commerce-Based Economy 93 to the outlets. An intensification of Electronic Data Interchange with the industry leads to lower process costs and allows for a reduction of inventory in central warehouses. At METRO GROUP, the logistics company METRO LOGISTICS is responsible for inventory management and distribution in Germany. It operates ten central food warehouses, another two central warehouses for nonfood articles and two logistics centres for fresh fish and meat as well as fresh produce. Chain Store Company  A retailing company that operates sales outlets (chain stores) at different locations under a central management. A distinction is made between small chain store companies that maintain up to 10 outlets and large multiples. The latter operate several hundred – some even more than 1,000 – outlets. They operate nation-wide and frequently also internationally. Over the past years, chain store companies have substantially gained importance. Their characteristic feature is a basic concept multiplied in a number of outlets. With its sales lines, METRO GROUP also benefits from the synergies and economies of scale of the chain store structure. Collaborative Planning, Forecasting and Replenishment (CPFR)  This stands for an innovative, Internet-based process that optimises information and merchandise streams between producers and retailing companies as well as inventory control. CPFR was developed in the United States at the end of the 1990s by the Voluntary Interindustry Commerce Standards Association (VICS), a federation of international industrial, trade, retail, consulting and IT companies. The CPFR process comprises three phases: planning, forecasting and replenishment. In the planning phase, retailers and producers stipulate the rules of their partnership. They agree on a business plan that sets goals and assigns tasks to the process participants. In the forecasting phase, the partners work together to predict sales and order quantity as precisely as possible. In the process, they study past sales statistics and consider future-related information such as planned advertising campaigns. In the replenishment phase, they place binding orders for merchandise and plan its storage. Commerce-Based Economy  A type of economy in which the trade and retail of goods and services is the main source of value creation – in contrast to industrial societies, which are based on production. In the Federal Republic of Germany, more than 70 percent of economic value is generated in the tertiary sector (trade, retail and service industries, including hotels/ caterers and transport). © METRO AG 2012 A B C D E F G H I K L M N O P Q R S T U V W Z
  15. 15. 94 glossary → Competence L adership Concessiona re Competence Leadership  Refers to a company’s leadership over its competitors in a specific area. A trading and retailing company may, for example, be the competence leader in the development and adjustment of customer-oriented merchandising concepts or in logistics through the continuous improvement of work flows along the value added chain. A trading company may design its logistics processes more efficiently than its competitors. A trading company may also hold competence leadership with regard to the composition of its merchandise portfolio or staff qualifications. Complaint Management  This is defined as the integral, organised management of customer complaints whereby customer complaints are registered and analysed. The evaluation of these analyses constitutes the basis for planning, implementing and controlling preventive measures. Efficient complaint management is a prerequisite for customer satisfaction in the retailing sector. Complaints about long queues at checkout points, for example, may cause a company to introduce more checkout points or faster checkout systems. Compliance  This term covers all measures taken to ensure that a company and its employees comply with legal requirements, social guidelines and ethical standards. Compliance can also encompass internal company regulations. Its aim is to prevent the company from incurring material and intangible damage caused, for example, by corruption. Compliance is enshrined as a fixed requirement in the German Corporate Governance Code (corporate governance). Concept Leadership  Individual merchandising concept that gives a trading and retailing company a distinct image in the marketplace. By continually fine tuning the concept, companies strive to achieve concept leadership in respective market segments. Concept Optimisation  Must be carried out continuously. Following the guiding principles of “customer orientation” and “increase in profits”, one objective is to continually increase the efficiency of business processes, improve and modernise the outlet chain, adapt stores to innovative marketing concepts and intensify customer retention measures. Another task involves initiatives for improving individualised communications with customers. Concession  A licence to operate a business or trade for a limited period of time granted by local authorities. Also: a special right to use public property, for example a waterway or a street. Streets in pedestrian zones are public property. Retailing companies for instance have to obtain a special permit METRO Retail Compendium 2012 / 2013
  16. 16. glossary → Consumer Behaviour 95 or concession for street selling, which involves setting up sales booths etc. in pedestrian zones. Concessionaire  Holder of a concession. In commerce, this is the contract counterpart of a trading company renting, for example, part of the total floor space of a department store, in which it operates its business independently. The concession area is typically separated from the rest of the sales area by elements such as walls and separate entrances. The concessionaire uses a separate checkout area in the concession area. The receipt does not state the name of the trading company but that of the concessionaire. The shopin-shop concept is an exception to this rule. Examples for concessionaires are a barber’s shop or a Saturn outlet in a Galeria Kaufhof department store of METRO GROUP. Consumable Goods  These are goods that, unlike consumer durables, cannot be reused, but are characterised by having a relatively short useful life. In the category consumer goods these are items such as food or hygiene articles. In the industry, consumable goods are also used in the production process (production goods). They can be used during the manufacture of a product and cannot be reused (e.g. varnish). A B C D E F G H I K L M Consumer  A consumer is anyone who concludes a contract, for instance a purchase contract, with a company but is acting as a private person and not representing commercial interests. As consumers are, relatively speaking, generally in a weaker commercial position when they make a legal transaction with a company, the European legislature considers that consumers require special protection. See consumer protection. N Consumer Behaviour  The day-to-day purchasing decisions of consumers expressed by: 1. he choice of store (for example: supermarket, superstore, specialty store t or single-line retail, 2. the frequency (daily, weekly, monthly, etc.) and time of shopping (after work, during the day), 3. the selection of preferred products, quality and brands (producer’s brand or trader’s brand), 4. he degree of rationality in the decision to buy (impulse buying or planned t buying (must articles)), 5. he profile of the buyer (which member of a household does the shopping?). t R O P Q S T U V W Z © METRO AG 2012
  17. 17. 96 glossary → Consumer Confidence Panel Consumer Confidence  A measure of consumer optimism toward current and future economic conditions, which provides information about the willingness of consumers to spend money and buy goods and services, for example from trading companies. Consumer confidence is subject to heavy fluctuation over time. It is essentially influenced by a country’s economic cycle, by the price trends, the development of wages and salaries as well as political decisions and events. In order to identify changes in consumer confidence, market and opinion research institutes conduct consumer surveys. Consumer Cooperatives  Pursuant to § 5 of the German Cooperatives Act, consumer cooperatives are “societies for the joint wholesale buying of food or economic necessaries and retail delivery (consumer societies)”. In this context, delivery means sale. Originally, the activity of consumer cooperatives was restricted to passing on the goods acquired on a wholesale basis only to their members, who benefited from favourable prices. Since the abolition of the “identity principle”, they may also sell their goods to non-members. The tradition of consumer cooperatives in Germany dates back to the 19th century. Before the country’s two halves united in 1990, the stores of the consumer cooperatives traded under the name “Konsum” and then “Coop” in the West. In the former German Democratic Republic, “Konsum” was the second largest retailing company. The consumer cooperatives are associated in Konsumverband eG, Berlin, and Zentralverband deutscher Konsumgenossenschaften e. V. (central organisation of consumer cooperatives), Hamburg. Consumer Durables  Unlike consumable goods, these items are intended for longer-term use. Consumer durables can be both consumer goods for private consumption (e.g. household appliances) as well as production goods for industrial use (e.g. machinery). In the industry, consumer durables are usually used for the production of other goods. Consumer Goods  In contrast to production goods, these are intended exclusively for the end consumer, in other words, goods that are for private, not commercial, use. The use of consumer goods, therefore, does not generate any economic value added. For some goods, it does not become clear whether it is a consumer or production good until it is actually used. For instance, flour can be used by a bakery as a production good or in a private household as a consumer good. Consumer Goods Forum (CGF)  The Consumer Goods Forum (CGF) is an independent, parity-based network of the consumer goods industry. It brings together CEOs and other top executives from approximately 650 retail, industry METRO Retail Compendium 2012 / 2013
  18. 18. glossary → Consumer Protection 97 and service companies along with other stakeholders from a total of 70 countries. The Forum was created in June 2009 by the merger of CIES – The Food Business Forum, the Global Commerce Initiative (GCI) and the Global CEO Forum. Its task is to develop joint positions on strategic and practical issues that affect the consumer goods industry and to optimise non-competitive collaborative processes. Its five priorities are Emerging Trends, Sustainability, Safety and Health, Operational Excellence as well as Knowledge Sharing and Human Resource Development. Consumer Panel  Panel based on regular surveys of households (household panel) or individuals (individual panel). The household panel is a random check of private households (panel households), which continuously records their purchases (for example classified by product or brand). On this basis, a market research institute can infer the shopping and consumption behaviour of the household and identify changes in areas such as brand loyalty and shop loyalty. With the aid of individual panels, information is gathered on the shopping and consumption behaviour of individuals considered representative of a certain target group. The results of the consumer panel provide trading companies with basic information for their strategic assortment policy. See also retail panel. Consumer Price Index (CPI)  A key figure that reflects the change in the price of consumer goods in comparison to a chosen base year. To determine the change in price levels, a basket of consumer goods is taken as a reference which currently comprises about 750 products and services and is recalculated every month by the German Federal Statistical Office. The consumer price index is an important measure of orientation in retailing companies’ price policy. A B C D E F G H I K L M N O P Q R Consumer Prices  Consumer price index Consumer Protection  Measures to safeguard the health and safety as well as the economic interests of consumers. The foundations for consumer policy were laid by US President John F. Kennedy in a speech before the US Congress. He declared consumers’ right to safety, to information, to choose and to be heard. Consumer protection is based on legal regulations which strengthen the market position of consumers. The European Union substantially extended consumer rights in the 1980s and 1990s. In the German Federal State of Berlin, for example, a law was adopted in 2003 governing the consumers’ right to information in the food trade. Moreover, consumer © METRO AG 2012 S T U V W Z
  19. 19. 98 glossary → Consumer Social Re Corporate Research organisations such as German consumer centres provide information. Internationally leading retail and wholesale companies like METRO GROUP, which are aware of their responsibility for the consumers’ health have their own quality assurance. It is designed to improve food safety and ensure that only impeccable and high quality products are delivered to their stores. Consumer Research  Research of the purchasing behaviour of consumers. Consumer research includes, for example, readership research, panel and test market investigations as well as consumer statistics. The main areas of consumer research are: information behaviour, buying decisions, follow-up buying, changing values, etc.. The results of consumer research provide trading and retailing companies with information about the needs and preferences of their customers and supply basic material for strategic corporate management. Convenience Store  An organisational form that is characterised by a limited assortment of commodities for everyday usage as well as a service offering that may even include gastronomy. These stores’ business hours frequently exceed standard store opening hours. Price levels tend to be high. Typical convenience stores include service station shops or neighbourhood stores. Corporate Governance  A set of standards for managing large corporations and for monitoring their corporate behaviour. In Germany, all essential legal provisions that govern the management and control of listed companies are summarised in the German Corporate Governance Code. The code also contains nationally and internationally recognised standards for good, responsible corporate management. It is intended to render the German corporate governance system transparent and comprehensible. In its provisions and recommendations for good corporate governance, the German Corporate Governance Code addresses the following topics: 1. shareholder rights; duties and responsibilities relating to the general meeting, 2. cooperation of the management board and the supervisory board, 3. duties and responsibilities of the management board, its composition and remuneration, and handling conflicts of interest, 4. duties and responsibilities of the supervisory board, the tasks and authority of its chairman, formation of committees, board composition and remuneration, the handling of conflicts of interest, assessing the efficiency of the supervisory board, 5. transparency, 6. accounting and auditing of financial statements. METRO Retail Compendium 2012 / 2013
  20. 20. glossary → Country of Origin Label 99 Corporate Social Responsibility (CSR)  The term CSR is used to describe companies’ voluntary activities to foster ecologically and socially responsible development that go beyond legal requirements (compliance). CSR relates to a responsible approach to business within a company’s normal operations (core line of business). In practice, CSR activities can comprise a company’s commitment to protect the climate and preserve resources, promote ecofriendly and ethical products, or provide its own employees with good working conditions. Maintaining dialogue with relevant stakeholders is also part of CSR. For METRO GROUP, CSR mainly means safeguarding the future by taking a responsible approach to business. This involves respecting social and ecological requirements both in its business for own account and throughout its supply chains at an early stage. Since 2002, METRO GROUP has been publishing a sustainability report annually to document its various CSR activities (sustainability). METRO GROUP also founded a Sustainability Board in 2009, which helps to develop and implement Group-wide binding standards for sustainable business management. Corporate Strategy (Group Strategy)  Consists of three elements: the clear formulation of the entire Group’s strategic goal (strategic goal formulation), the description of the ways to achieve the goal, and the specification of the resources needed to implement the strategy. The business goals of METRO GROUP’s sales brands METRO and MAKRO Cash Carry, Real, Media Markt, Saturn, Galeria Kaufhof and METRO PROPERTIES are formulated in accordance with the Group’s strategy. METRO GROUP’s corporate strategy is based on profitable growth. Its strategic focal points Transform, Grow, Improve, Expand and Innovate lend a shared identity and a shared direction to the Company – creating added value for the customers (Customer Value) and achieving a sustained positive sales and earnings development. A B C D E F G H I K L M N O P Q R Cost of Living Index  Consumer price index Cost Structure  Breaks down the costs of a company, a line of business or an economic sector and the relationship of these costs to the whole. Large cost blocks in trading are, for example, procurement costs, personnel expenses and rent. The analysis of the cost structure reveals where trading companies have additional room to cut costs and increase efficiency. Country of Origin Label  A product name or packaging information providing information about the geographical origin of a product. For example the origin label “Rioja” for Spanish wines coming from the region La Rioja, © METRO AG 2012 S T U V W Z
  21. 21. 100 glossary → Count y Scoring Cus omer Card “Parma ham” for ham from Parma in Italy or the labelling of beef to document where an animal was born, raised, slaughtered and carved. Some labels that originally denoted merely the geographical origin have over time come to represent product categories (e.g. Pilsener beer, Eau de Cologne). Country Scoring  Method used by trading and retailing companies to examine selected countries for their suitability for market entry. Cross-Docking  A merchandise distribution system that does not require inventory in the distribution centre. The manufacturer puts together the goods ordered by a retailer and delivers them to the retailer’s distribution centre. The merchandise is accepted there and is immediately shipped to the stores. There are two different varieties of cross-docking: in the first form, the socalled pre-allocated cross-docking, the stores of a trading and retailing company send their orders independently to the manufacturer. The manufacturer then places the individual orders on pallets and generates a delivery notice and an invoice for each store. Then the manufacturer – or, in the case of METRO GROUP, the logistic partners of METRO LOGISTICS – delivers the goods to the retailer’s distribution centre, from where they are shipped to the stores without further repackaging. In the second form, the retailer collects the orders of his individual outlets and sends a combined request to the manufacturer, who treats it as one mass order. He packs all of the merchandise onto pallets without sorting it by individual outlet. The manufacturer delivers the merchandise to the retailer’s distribution centre where it is broken down for the individual stores (known as break-bulk cross-docking) and then delivered. Cross-docking enables manufacturers and retailing companies to cut transport and handling costs. Moreover, faster supplies to stores improve the availability of goods. The need for storage capacity is reduced because less storage space is needed. The METRO Cash Carry sales brand has been using cross-docking for its fresh produce since 1996 and for fish since 1997 thereby substantially reducing warehouse management and logistics costs. Cross-Selling  Cross-selling means actively offering products that complement customers’ shopping but for which demand has not previously been registered. For example, the staff at the cheese counter could draw customers’ attention to a wine that is currently on offer and goes with the cheese they have purchased. Cross-selling serves to boost sales and customer retention. It is also an effective way of linking the main product ranges with marginal goods. See also upselling. METRO Retail Compendium 2012 / 2013
  22. 22. glossary → Customer Groups 101 Customer Card  A card issued in the customer’s name, typically in a credit card format, that may provide special benefits. There are three types of customer cards: 1. cards issued by an individual store, 2. egional or local cards issued jointly by several retailers or their r advertising pool, 3. nd multi-partner cards managed by specialist service providers for a members. These joint cards are distributed and promoted by a central body (loyalty scheme provider) on a cross-channel, multimedia basis for companies such as retailers, wholesalers, service providers and online businesses throughout Germany. This group includes the Payback card. Customer cards may offer various advantages to their holders: 1. They reward customer loyalty. Customer cards are usually most attractive for regular customers because it can be assumed that they have a strong link with the card issuer. The cardholder’s purchases are registered with the customer’s written consent. On the basis of these data, the customer receives tailored information about the companies within the scheme and individual buying incentives. I 2. n addition, the cards replace discount stamp booklets. The customer collects points that he or she may exchange for cash or premiums in kind straight from the programme partners, convert into miles or donate to charities. As an alternative to collecting points, some companies offer customers direct discounts depending on the purchase volume. 3. Customer cards can also have a credit card function and be used by customers as a means of payment instead of their usual debit or credit card. Customer cards enable trading and retailing companies to keep better track of consumer behaviour, wishes and expectations in order to meet the customer’s needs more precisely within the scope of Customer Relationship Management. Companies frequently offer cardholders special conditions and extra services, thus binding the customer to the company (see also customer retention). Among other companies, the METRO GROUP sales brands Galeria Kaufhof and Real participate in the Payback programme, the market-leading customer card programme in Germany. Customer Groups  Classification and subdivision of a company’s customers into different groups. This involves defining various socio-demographic delineation criteria such as age, sex, income, interests, etc.. On the basis of these groups, a company can identify its buyer structure and tailor its marketing correspondingly. The customer groups also play an important role, however, © METRO AG 2012 A B C D E F G H I K L M N O P Q R S T U V W Z
  23. 23. 102 glossary → Customer Relationship Management (CRM) Departmen Sto e, “Kaufhaus” Type in drawing up the product assortment. Examples of customer groups would be best agers, smart shoppers and hybrid customers. Customer Relationship Management (CRM)  A general term that describes all marketing activities that foster and strengthen customer retention. CRM is an important module for long-term success in the trade and retail business. On the one hand, CRM aims to optimise existing customer relationships on the basis of a data pool (see also data warehouse) and to establish new customer contacts. On the other hand, it is also designed to improve the efficiency of steps in the sales process. Typical CRM activities include direct marketing or cross-selling. In this context, customer retention programmes like the successful Payback loyalty scheme, in which, among other companies, the METRO GROUP sales brands Real and Galeria Kaufhof participate, are of great importance. Customer Retention  Strategies and initiatives to safeguard permanent customer loyalty to a retailing company. In this way, the company improves the satisfaction and loyalty of customers. At the same time, retailers gain better knowledge of their customers and can thus attend more precisely to their individual needs and desires. Examples of successful customer retention activities are the customer card (see also Payback) and services such as ordering and delivery services. See also Customer Relationship Management (CRM). D Data Warehouse  A computer-assisted information tool that provides a general overview of the state of a company at all times. The data warehouse links up records from operational systems within the company and facilitates comprehensive analyses by offering quick access to focused and structured information. These data facilitate strategic management decisions. METRO GROUP’s data warehouse links up key data of the METRO Cash Carry and Real sales lines. Using it has considerably boosted the efficiency of various process flows. Demand  The consumer’s wish to purchase a certain product or use a service. In market economies, the price of products and services is determined by supply and demand. The lower the price of a product, the higher is its demand and vice versa. The revenue of a trading and retailing company depends on METRO Retail Compendium 2012 / 2013
  24. 24. glossary → Direct Marketing 103 consumers’ demand for goods from its assortment. Trading companies often strive to boost demand by special offers and special actions. Department Store, “Kaufhaus” Type  A stationary retail format offering merchandise from two or more lines on a comparatively large sales area, including at least one line with a broad and deep assortment. Textile and clothing stores are the most widespread form of department stores, “Kaufhaus” type. There are two German terms for department store, “Kaufhaus” and “Warenhaus” (department store, “Warenhaus” Type), which are often used as synonyms. A distinction between the two terms was originally made for tax policy reasons. A “Warenhaus” had to offer at least four large merchandise categories and a food department. Consumers are frequently more favourably disposed toward the term “Warenhaus” which they associate with such famous upmarket stores as Galeries Lafayette (Paris) or Harrods (London). Department Store, “Warenhaus” Type  A large-scale retail store in a central location with a wide assortment, above all in clothing, textiles, household appliances, necessaries and food including restaurants. According to the official statistics, a selling space of at least 3,000 square metres is required. In German, the department store terms “Warenhaus” and “Kaufhaus” (department store, “Kaufhaus” Type) are often used as synonyms. The term “Warenhaus” has a more positive image as the customer frequently attributes to it famous department stores like Galeries Lafayette in Paris or Harrods in London. The Galeria Kaufhof department stores of METRO GROUP are “Warenhaus”-type department stores. Digital In-Store Communication  Digital communication on the sales floor. Also known as digital signage. An innovative form of customer communication using digital media which is enjoying increasing popularity in modern retail formats. Digital in-store communication is divided into different applications of digital media: customer guidance systems, advertising, customer information, kiosk systems and in-store ambience. These systems can be supplied with content either centrally or locally and require corresponding infrastructure. See also in-store media. Direct Marketing  A distribution channel (sales channel) where customers do not buy merchandise in a retail store, but order goods directly from the producer who also delivers these goods to the consumer for example via the Internet or through catalogue sales. See also mail-order business. © METRO AG 2012 A B C D E F G H I K L M N O P Q R S T U V W Z
  25. 25. 104 glossary → Direct S ore Delivery (DSD) Diversifi ation Direct Store Delivery (DSD)  Orders are packed at the manufacturer’s facility for each store individually and directly shipped there. This eliminates the need for storing the goods in the retailing company’s central warehouses. See also cross-docking. Discount  A percentage reduction on the invoiced price upon payment within a specified time frame. From an economic point of view, the term “discount” describes the interest rate for the loan which a supplier grants to his customers by advance financing and/or granting a payment period. If the customer pays before the end of this period, he can deduct a discount which is scaled by time periods. For example: a purchase price is payable within three months net, within one month with a two percent discount or within ten days with a three percent discount. A discount granted on immediate payment is also referred to as a cash payment discount. Discounted Mass Distribution  A sales policy strategy according to which mass consumer goods are offered through clearly defined ranges and stores in a simple setting (discounter) and at favourable prices. Discounter  An organisational form characterised by the offer of a very limited range of goods with a high turnover frequency. The presentation of the merchandise is simple, and it is sold on the basis of an aggressive low price policy. In return, customers usually have to forego advice and service. Discounters are widespread in the food retailing sector. Their sales areas are usually under 1,000 square metres. Distance Retail  The purchase and sale of merchandise over a certain distance. Customers do not view the merchandise at the Point of Sale (PoS), but order products from a catalogue, via the Internet or based on a sample. The merchandise is delivered directly to the customer who can pay cash on delivery, by credit card, automatic debit or bank transfer. See also mail-order business and e-commerce. Distribution  The distribution, planning and monitoring of activities related to the route of a product from the producer to the consumer. In the trade and retail business, distribution is closely related to logistics and inventory management. Distribution Channel  Sales channel METRO Retail Compendium 2012 / 2013
  26. 26. glossary → Duales System Deutschland GmbH 105 Diversification  The extension of a company’s performance range to areas it did not previously cover. For example, a trading and retailing company may diversify by adding new products to its product range (e.g. a textile retailer adding shoes to its range) or through upstream integration (e.g. a textile retailer opens up own production facilities and becomes a producer). This is called collateral diversification because a relationship exists between the new and the old lines. However, a trading and retailing company may also diversify beyond its own line (e.g. a food retailer also offers insurance brokerage). This is known as lateral diversification. Heightened competition and stagnant markets cause companies to look for growth beyond their traditional product and/or consumer groups by diversifying their range. Domestic Trade  The procurement and/or sale of goods and services within the national borders of a state. The term “domestic trade” denotes the purchase and sale of goods in the home country as well as the entirety of companies conducting domestic trade. See also foreign trade and trade and retail. Domestic Wholesale Trade  A specific form of wholesale with a focus on business within the customs area of a country. Domestic wholesale trade cooperates with domestic market partners in both procurement and sales. These partners may also be importers. Duales System Deutschland GmbH  A privately organised German waste management system for packaging materials identified by the so-called Green Dot. On behalf of industry and trade, Duales System Deutschland GmbH handles companies’ disposal and recycling obligations. In exchange, companies pay licence fees to use the Green Dot. The disposal regulations governing sectors such as trade and industry as originators of packaging garbage are laid down in the German Packaging Ordinance of 1991 as amended in 2009. A B C D E F G H I K L M N O P Q R S T U V W Z © METRO AG 2012
  27. 27. 106 glossary → EAN-128 Code E-Bus ness E EAN-128 Code  GS1-128 code EAN Barcode  A standardised, internationally valid and non-overlapping 8- or 13-digit article number for products and services; also called GTIN (Global Trade Item Number). The EAN barcode is the underlying informational standard for barcode scanning systems. It greatly accelerates electronic data processing. Main areas of utilisation in the retail industry include merchandise logistics, inventory management and billing goods at the store checkout. The code enables retailers to clearly identify an article at every point of the supply chain. EAN Code  EAN Barcode EAN Standards  GS1 Standards EBIT (Earnings Before Interest and Taxes)  Serves as the basis for international comparisons of companies. EBIT after Cost of Capital (EBIT aC)  A benchmark for the economic success of a company. The following formula is used to calculate EBITaC: EBITaC = EBIT – capital cost or EBITaC = EBIT – (capital employed × Weighted Average Cost of Capital). This means EBITaC is positive when the earnings before interest and taxes (EBIT) are higher than the cost of financing the capital employed. To determine the cost of capital, the capital employed is multiplied by the Weighted Average Cost of Capital (WACC) which results from the weighted average of equity and borrowed capital employed. The business assets are the interest-bearing assets. It is made up of segment assets plus cash flow from operations, less trade liabilities and deferred income. For value-oriented corporate management, EBITaC can also be a key element in the variable compensation system for executives. The EBITaC indicator is similar to Economic Value Added (EVA) but is based on pre-tax figures. To ensure standardised measurement of a company’s performance, absolute value contributions are used. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) This metric serves as the basis for comparisons between companies using different accounting standards. METRO Retail Compendium 2012 / 2013
  28. 28. glossary → EDI User Group Retailing 107 E-Business  Short for electronic business. The term describes all types of Internet-based electronic business processes. Electronic business transactions may involve two companies (business-to-business), companies and consumers (business-to-consumer), companies and their employees (business-to-employee) or companies and the government (business-to-government). In the trade and retail sector, the Internet is used for example for selling to end consumers (e-shopping) and for the procurement of merchandise (e-procurement) from suppliers. See also request for proposal and auction. E-Commerce  Short for electronic commerce. It represents the electronic marketing and the trade and retail of merchandise and services over the Internet. It is a form of e-business. All sales lines of METRO GROUP offer their customers online shops. See also multichannel retailing. Economic Sectors  Sectors into which companies of a national economy are allocated for statistical purposes in line with defined criteria. The essential structural principle is based on the similarity of their performance. The economic sectors are subdivided into industry sectors. The German Federal Statistical Office in Wiesbaden, for example, differentiates between the retail revenue of economic sectors such as retailing in motor vehicles and retailing in clothing. METRO GROUP is active in the economic sectors of wholesale with food, beverages and tobacco, retail trade in different kinds of merchandise, the group of food (sales brand: Real), retail trade in household electronics, radio and TV appliances (Media Markt, Saturn) and retail trade in clothing (Galeria Kaufhof). Economic Value Added (EVA)  Like EBITaC (EBIT after Cost of Capital), EVA is an indicator of a company’s economic success that takes the operating result and cost of capital into account. The main difference between the two is that EVA is an after-tax indicator, while EBITaC focuses more strongly on balance sheet figures. This means that EBITaC does not utilise the scope for adjustments included in EVA. EDI User Group Retailing  A joint user group of 18 retailing companies. The key mission of this user group is to agree on binding standards and the technical presentation of EDI messages (Electronic Data Interchange). The electronic data exchange, which the partners use to accelerate their national and international business processes, is based on so-called message standards, including EANCOM® (GS1 standards). This is an EDI application guideline developed by the organisation GS1. Many message standards allow for © METRO AG 2012 A B C D E F G H I K L M N O P Q R S T U V W Z
  29. 29. 108 glossary → Efficient Consumer Response (ECR) Ele tron c Article Survei lance (EAS different presentations of specific information, including the format for the date. The task of the EDI user group is to recognise such differences and prepare recommendations for standardisation. The group then passes its recommendations on to GS1 Germany. The German membership organisation of GS1 ensures their implementation in standardised formats. The EDI user group retailing was founded in 1997 by nine retailing companies, including METRO GROUP. Efficient Consumer Response (ECR)  ECR describes a holistic approach to the entire supply chain. ECR focuses on the best possible response of trading companies to the expectations and needs of customers. Consumer needs should be met as efficiently as possible. This can only be achieved if business processes are analysed and optimised throughout the entire value added chain from suppliers through producers to the retailing company and ultimately the consumer. Thanks to ECR, potential supply gaps, such as imminent out-ofstock situations, can be recognised promptly and avoided. ECR helps companies fine-tune their inventories in accordance with actual sales to prevent surplus stocks. Processes along the value added chain can be devised more efficiently on the basis of ECR. This produces time and cost savings and an improved and comprehensive offer of merchandise for the customers. At METRO GROUP, the ECR approach is implemented within the scope of category management, among others. Efficient Unit Loads (EUL)  A system that ensures the efficient use of packaging and transport units such as pallets. Unit loads are efficient only when all components along the process chain – i.e. packaging, pallets, shelves, truck loading space, loading ramps, receiving/shipping gates and distribution centres – are optimally coordinated. EUL can help industry and trade and retail substantially reduce logistics costs. The prerequisite for these savings is the use of so-called EUL standards. They lay down the requirements for such things as the composition and application of disposable transport packaging. They should have specific dimensions to optimally utilise the space on the transport pallet or in the warehouse or on the store shelf. Specific EUL standards have also been developed for reusable transport items such as pallets, boxes and crates. One example is the euro pallet. Moreover, the EUL standards specify the uniform marking of packaging and transport units. The organisation GS1 Germany published a recommendation for the use of efficient unit loads in 2002. Companies in industry and retail – including METRO GROUP – helped develop these regulations. The Group is a pioneer in the implementation of EUL. METRO Retail Compendium 2012 / 2013
  30. 30. glossary → Electronic Product Code (EPC) 109 Electronic Article Surveillance (EAS)  The protection of merchandise from theft by attaching specific tags. These tags trigger acoustic and/or optical alarm signals when an active tag passes through the exit gates. The tags are only removed or deactivated when the merchandise is paid for. Embedded in an integral merchandise protection system, EAS is supposed to prevent theft and manipulation by changing the tags or exchanging the packaging in order to minimise leakage and the resulting inventory differences in trade and retail. There are four main EAS systems in use on the market: • cousto-magnetic technology (AM): local antennae in the exit area emit A ultrasonic vibrations. The hard and/or adhesive tags contain two thin metal plates which are energised by the antennae and start to vibrate. The security system identifies these vibrations within the reception range and sets off an alarm. • utoactive technology (AA): active security tags that are equipped with an A acoustic alarm transmitter. They set off an alarm when the tag is tampered with or when somebody tries to remove the tag from the merchandise. • lectromagnetic technology (EM): is based on the metal detection principle. E The electronic detectors recognise a select metal and a specific magnetic coding and set off an alarm. R • adio frequency (RF)/Radio Frequency Identification (RFID): transmitting and receiving antennae generate a spatially restricted radio frequency field. As soon as a secured product leaves this field through an exit barrier, an alarm goes off. Electronic Data Interchange (EDI)  Data are exchanged electronically between companies (external exchange) and among individual business units (internal exchange). EDI can accelerate business processes at national and international level, make them more transparent and significantly reduce operational costs, e.g. for logistics, improve service level and speed up operations. Seamless communication between producers or suppliers and retail is an essential part of an end-to-end ECR (Efficient Consumer Response) process. EDI enables retailers to substantially optimise their inventory level while appreciably increasing the availability of goods at the same time. For years METRO GROUP has been involved in this area and is eager to implement EDI with its entire supplier portfolio. This provides the opportunity to gain synergies and optimise the processes at their end. Electronic Product Code (EPC)  A number for the unique identification of individual articles and shipping units in the process chain. The Electronic Product Code consists of the article number (EAN barcode) and a serial © METRO AG 2012 A B C D E F G H I K L M N O P Q R S T U V W Z
  31. 31. 110 glossary → Elec ronic Shelf Labelling (ESL) Environm ntal Management number. The combination of these two numbers not only provides key product data – such as the brand name or the manufacturer – but also clearly identifies each article from this manufacturer. This makes it possible to fully trace the route of the merchandise along the process chain. The carrier technologies for the EPC include Radio Frequency Identification (RFID) or the two-dimensional barcode standard databar (GS1 DataBar). The EPC is stored on an RFID transponder or on a databar. Electronic Shelf Labelling (ESL)  Shelf labelling on the store shelves that uses electronic price displays. Using the Wireless Local Area Network, or WLAN, the labelling is controlled by a price management system that is linked to the checkout network. Price changes are sent automatically to the display on the shelf and to the checkout register at the same time. As a result, the price labels are always up to date and are identical to the ones at the checkout counter. METRO GROUP uses electronic shelf labelling at various METRO Cash Carry stores (cash+carry). Emerging Markets  A term used to describe national economies that are less developed than industrial countries but feature strong economic momentum and high growth potential. Emerging countries are attractive as sales markets but are often somewhat unstable and thus harbour heightened economic risks. Therefore, a trading company should carefully weigh the risks and opportunities related to market entry before expanding into emerging markets. End Consumer  Consumer Environmental Label  Quality seal identifying products whose impact on the environment is minimal or nonexistent. The “Blue Angel” environmental label is granted to companies for their products upon submitting an application to the German Federal Environmental Office. On application, the institute awarding the label, RAL, charges a one-one processing fee. RAL (originally Reichsausschuss für Lieferbedingungen, est. 1925) is the German institute for certification and labelling. After a label utilisation contract has been concluded, companies pay an annual contribution to RAL based on the annual sales of all products carrying the environmental label. In addition, the label users pay a certain amount to the environmental label advertising fund “UmweltzeichenWerbefonds” established by RAL. This fund is used to finance public relations campaigns for the Blue Angel. Meanwhile, the European Union has also created an environmental label, the “European Flower”, a blossom on a stem with twelve petals in the form of stars. METRO Retail Compendium 2012 / 2013
  32. 32. glossary → EPC Network 111 Environmental Management  A component of company management which focuses on the impact of business activities on the environment. A major part of a (trading and retailing) company’s Corporate Social Responsibility activities. The production, sale and use of food and other consumer goods are associated with various consequences for the environment. METRO GROUP is part of this value added chain. It can exert the greatest influence on reducing or avoiding environmental impact through the use of energy, resources or emissions at its own locations. Environmental management at METRO GROUP concentrates primarily on making efficient use of energy and conserving resources in order to reduce damaging emissions and operating costs alike. The Company’s sales brands constantly implement measures to boost energy efficiency, cut energy consumption and use renewable energies. For instance, the sales brands METRO Cash Carry, Real and Galeria Kaufhof in Germany are supplied with 10 percent green electricity. When buying paper, MGA METRO GROUP Advertising ensures that high environmental standards are observed for paper consumption for the purposes of promotional material. Wherever possible, METRO GROUP uses recycled paper and paper sourced from sustainable forestry and/or chlorine-free production. In 2011, over 80 percent of the paper bought for promotional purposes complied with these standards. The METRO GROUP 2011 Annual Report was produced using 100 percent recycled paper bearing the EU Ecolabel. It was also the first Annual Report worldwide to have been published with the Saphira Eco label, which guarantees that the consumables used in preparing the report, such as ink, dye, chemicals and printing plates, meet the requirements of the most important international environmental certification programmes. Both the 2011 Sustainability Report and this Retail Compendium fulfil these requirements. Waste generated at the Group’s sales outlets is recycled wherever possible or disposed of in an environmentally friendly manner. In 2011, about 67 percent of the waste produced worldwide was recycled. METRO GROUP publishes key environmental management figures on a regular basis in its Sustainability Report. These include greenhouse gas emissions, energy, coolant, paper and water usage, and the amount of waste produced. EPC Network  A special system architecture that enables the user to access the Electronic Product Code (EPC) in order to obtain detailed information about merchandise or mail-order units. Each EPC contains special information or master data. This information includes the article name, price, weight and packaging size. The information is stored in a database. The link between the EPC and the data assigned to it is provided by the © METRO AG 2012 A B C D E F G H I K L M N O P Q R S T U V W Z
  33. 33. 112 glossary → EPCglobal Ex ansion EPC network. The organisation GS1 EPCglobal set up the network to ensure the fast and smooth implementation of the transponder technology (Radio Frequency Identification). EPCglobal  GS1 EPCglobal Ethnic Product Range  The selection of products by which a retailing company caters to the needs of different ethnic groups and cultural backgrounds. For some time now, METRO GROUP’s sales brands Real and METRO Cash Carry have been stocking a range of international products. EU-12 New Member Countries  The EU-12 new member countries comprise the twelve Central and Eastern European countries that joined the European Union due to expansion in 2004 and 2007: Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia. See also EU-15 member countries. EU-15 Member Countries  The EU-15 member countries include the countries that joined the European Union before April 2004. These are: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Portugal, Sweden, Spain and the United Kingdom. See also EU-12 new member countries. Eurochambres (Association of European Chambers of Commerce and Industry) The umbrella organisation of 45 national chambers of commerce in Europe and a transnational organisation comprising 2,000 regional and local chambers with more than 19 million member companies across Europe. The German Chambers of Industry and Commerce in Berlin is also a member of Eurochambres. The functions of Eurochambres include representing the interests of the member companies before EU authorities, developing programmes to support the European economy, promoting economic integration on the European level and maintaining and intensifying trade relations between EU members and non-EU countries. European Retail Round Table (ERRT)  A working group through which major European trading groups maintain close contact with the EU institutions and contribute to political decision making at the European level. METRO GROUP is the only listed German trading and retailing company involved in this group, which speaks out on such subjects as the development of EU environmental policy, legal parameters for e-commerce and the liberalisation of worldwide commerce. METRO Retail Compendium 2012 / 2013
  34. 34. glossary → Express Self-Checkout 113 Expansion  The growth strategy of a company. The targeted drive for greater sales and revenue through an extension of the sales area, the establishment of new outlets or the acquisition of other trading companies. Expansion may be aimed both at the home market and at foreign countries. Expansion is considered to be the motor that drives corporate development. See also internationalisation, international expansion and foreign markets. Exports  The sale of goods and services to a foreign country. The direct export business is characterised by direct transactions between domestic companies and foreign buyers. In the indirect export business, domestic companies operate through an intermediary, a company specialising in exports (exporter, see also foreign trade). In the retail sector, exports are less important than imports. The reason is that classic retailers do not typically produce merchandise for sale on foreign markets. However, retailers buy food or clothing, for example, on foreign markets and then sell this merchandise on their domestic market. Express Self-Checkout  Self-Checkout A B C D E F G H I K L M N O P Q R S T U V W Z © METRO AG 2012
  35. 35. 114 glossary → Facto y Outlet Centre (FOC) Flagship Store F Factory Outlet Centre (FOC)  A special form of shopping centre with stores that offer only one brand each. As a rule, FOCs are planned, financed, built and managed uniformly, usually in greenfield locations. Typical FOCs, above all in the USA, include stores from the fashion/textiles, leather goods, shoes, accessories and jewellery segments. In contrast to conventional retailing, FOCs usually sell articles of second class quality, from excess production, phaseout models or sample collections at distinctly reduced prices. Fast Moving Consumer Goods (FMCG)  Consumer goods that have a quick turnover and are generally consumed on a daily basis (such as food, household cleaners and personal hygiene products). Consumers buy these goods spontaneously and routinely, without a long decision-making phase. FMCGs are characterised by a low per-unit profit margin. Capital goods and luxury goods are at the other end of the turnover/margin spectrum. However, even these goods can become FMCGs if they are offered at reduced price during a promotion campaign. Feasibility Study  An economic calculation and viability analysis that examines whether a process technology, a project or a business transaction can be realised. To this end, a comprehensive future model is developed to predict the economic efficiency and ability to integrate the project or business transaction into the existing corporate strategy. METRO GROUP, for example, conducts feasibility studies before deciding to enter new foreign markets. METRO GROUP analyses the viability of expansion projects and, based on such factors as political stability, economic growth and buying power of the population, gauges the likely success of a project. Field Force  A collective term for all sales employees who regularly visit customers at their usual premises, e.g. at their place of business for commercial customers. Direct contact is advantageous for both parties: customers benefit from comprehensive advice as well as products and services tailored specifically to their requirements. Meanwhile, the company can tap existing sales potential more effectively and boost customer retention. At the same time, the company garners up-to-date information about target groups and trends by speaking to customers in person. By actively seeking out customers, the field force also strengthens the company’s image as a competent business partner. In the retail and wholesale sector, the field force approach is primarily used in the cash+carry segment. METRO Retail Compendium 2012 / 2013
  36. 36. glossary → Food Additives 115 Flagship Store  Brands and retail chains establish flagship stores at prestigious locations. Their prime function is to convey a certain brand image. Flagship stores also often provide an environment for piloting new sales concepts and technologies. As these stores have to communicate the brand’s identity particularly strongly, they tend to be distinctive in terms of their location, architecture, interior design, size, workforce and product range. One example of a flagship store is Prada in New York: the fashion brand spent 40 million dollars purchasing a former branch of the Guggenheim Museum and having it converted by the internationally famous architect Rem Koolhaas. The store now displays the latest collections in an area spanning over 2,000 square metres. It uses state-of-the-art technology, including Radio Frequency Identification (RFID) to some extent. Food  The general definitions of food and consumer products (nonfood) are laid down in the German Food and Consumer Products Act. According to this definition, food includes all substances that may be eaten or drunk in either unaltered, prepared or processed condition (excluding pharmaceuticals). Consumer products, on the other hand, are all products that are not intended for human consumption, for example cookware, packaging materials, toys, etc.. METRO GROUP defines the term food more widely to include the following product categories: fresh food (such as fruit, vegetables, fresh meat and fresh fish, dairy products), storable foods (such as sausage and other meat products, preserves, delicacies, nutrients such as pasta and sauces), frozen foods and beverages of all kinds (including alcoholic beverages), luxuries (e.g. cigarettes), dietary supplements (e.g. vitamin preparations), pet food, detergents, and household cleaners. All other products belong to the nonfood category. The term “nearfood” can be used to refer to luxury goods, pet food, detergents and household cleaning products. Food Additives  All substances that are neither food ingredients nor foodstuffs themselves, but are added to foodstuffs to change or enhance certain characteristics. They can, for example, be used to extend the shelf life, change appearance or improve taste. Within the EU, additives are generally subject to the prohibition principle, in other words: anything that is not expressly permitted is forbidden. Permitted additives may only be used if they do not mislead customers, are technically necessary and present no risk to health. All permitted food additives within the EU are assigned a standardised E-number and must be clearly declared on the product label. A B C D E F G H I K L M N O P Q R S T U V W Z © METRO AG 2012
  37. 37. 116 glossary → Food and ng Fran his Luxury Sales Food and Luxury Sales  The key figure defining the consumption of food and luxury goods within a determined period of time. Examples of food are greens, meat and pasta, luxuries include cigarettes and alcoholic beverages. In the wholesale and retail trade, this parameter is used as a basis for strategic assortment planning and price policy. See also demand. Food Retail  A general term for companies in the retail industry whose stores offer an assortment that primarily consists of food. These include supermarkets, superstores, discounters and hypermarkets. Many of these stores also offer such nonfood products as textiles, household products and electronic products. However, such merchandise categories are marginal. At METRO GROUP, food retail is one of four business areas. It is represented by the sales brand Real. Food Safety  Describes measures taken to protect consumers against health risks and hazards related to the consumption of food. Consumer health is at risk, for example, when eating spoiled food or food products whose ingredients and additives (food additives) are identified incompletely, incorrectly or in a misleading manner (labelling obligation). The German government works to ensure this protection within the parameters of the Food and Consumer Products Act. It specifies the conditions under which food may be sold for consumption. Compliance with the provisions is checked by means of regular official food monitoring. In turn, many trading companies themselves take comprehensive and precautionary measures to ensure food safety. The food destined for sale at the stores of METRO GROUP has to pass several examination phases within the scope of the Group’s own quality assurance. In this area, the Group closely cooperates with independent food inspectors. Foreign Markets  Countries outside of a company’s domestic market. Trading and retailing companies operate in foreign markets in order to tap additional growth potential and compensate for fluctuations in domestic demand. See also internationalisation. Foreign Trade  The procurement (imports) and/or sale (exports) of merchandise beyond the national borders of a state. The opposite is domestic trade. See also trade and retail. Foreign Trade Association (FTA)  Association of foreign trade companies representing the interests of the European trading sector, based in Brussels. The FTA is composed of companies as well as national trade associations. Its main functions are: representation of the members vis-à-vis the EU institutions, METRO Retail Compendium 2012 / 2013
  38. 38. glossary → Future Store Initiative 117 information about new statutory regulations, consultancy for individual company issues relating to foreign trade. Franchising  Also referred to as a licenced sale or franchise system. A contract-based form of organisation: the franchiser grants independent franchisees the right to offer certain goods and/or services to third parties using the name and/or trademark of the franchiser. In exchange, on joining the system, the franchisee makes a contribution in cash or in kind and pays a revenue-based commission to the franchiser. This enables the franchiser to keep capital investments low when expanding further. Franchise systems are widespread in the clothing retail trade and the restaurant sector. Fresh Produce Assortment  The range of goods of a retail store such as a superstore or a hypermarket where fruit, vegetables, fresh meat, fish, dairy products, bakery products and frozen food are offered. See also fresh produce competency. Fresh Produce Competency  The ability to consistently offer customers extremely fresh food. An essential component of fresh produce competency is an uninterrupted cold chain. This is the sustained, controlled cooling of fresh products such as meat, fruit and vegetables from the producer to the store. See also logistics. Future Store (Real Future Store)  The Real Future Store in Tönisvorst near Krefeld is METRO GROUP Future Store Initiative’s test market. Here, the initiative is able to test new technologies and concepts that will make shopping of the future a simpler, more convenient and more interesting experience. In this interactive Supermarket customers are able to test the technologies for themselves. These include the Mobile Shopping Assistant (MSA), the Mobile Shopping List and even an Interactive Floor that reacts to the customers’ own movements. Technologies and concepts that are positively received by customers and contribute to enhancing the company’s value are introduced to further METRO GROUP stores. See also Mobile Shopping. A B C D E F G H I K L M N O P Q R S T U Future Store Initiative  METRO GROUP Future Store Initiative V W Z © METRO AG 2012
  39. 39. 118 glossary → German Act AgaNumber (GLN) Global Lo a ion ns Unfair Competition G German Act Against Unfair Competition  Unfair competition, fellow competitors, consumers and other market players are protected from unfair business transactions by the German Act Against Unfair Competition (UWG). The act’s objective is to prevent distorted competition. The UWG was introduced in 1896 and has been adjusted several times, mainly in line with European requirements, and harmonised with legislation throughout the EU. As part of the most recent amendment, a blacklist of 30 unfair business practices was incorporated into the UWG. The act primarily prohibits misleading advertising, misleading or unfair business practices and unacceptably aggressive sales techniques. German Discount Law  Until July 2001, this law governed price discounts granted to consumers. Global Commerce Initiative (GCI)  Consumer Goods Forum (CGF) Global ECR Scorecard  (Efficient Consumer Response) An annual survey conducted by the Consumer Goods Forum (CGF) to establish what progress has been made in implementing global ECR standards and to what extent the companies involved fulfil these norms in their business processes. Around the world, numerous companies from the retail industry and wholesale industry are involved in the scheme, along with manufacturers/suppliers, commodity suppliers, packaging suppliers and service providers. The Webbased capability assessment tool is divided into three parts: 1. tandard capability assessment S 39 criteria relating to staff (“prepare our people”), customers (“focus on the customer”), the supply chain (“share our supply chain”) and the flow of information between partners (“connected business information”) can be given a score of 0 to 5 depending on how well defined they are. 2. usiness measures B 14 Key Performance Indicators (KPI) that reveal how efficiently the company performs, such as supplier service level, unit fill rate, on-time delivery, inventory cover, on-shelf/point-of-sale out-of-stocks, order-to-delivery cycle time, spoilage and distribution costs. There is the option of examining an additional 18 KPIs. METRO Retail Compendium 2012 / 2013
  40. 40. glossary → Global Trade Item Number (GTIN) 119 3. mplementation measures I 15 KPIs to assess the extent to which GS1 standards involving collaboration and transactions between trading partners have been implemented, such as the allocation of Global Trade Item Numbers (GTIN), Serial Shipping Container Codes (SSCC), Global Location Numbers (GLN), EDI message formats and global data synchronisation. Comparable statements can be made thanks to the uniform KPI definitions. The ECR skills and capabilities of all companies involved are made transparent in the Global ECR Scorecard. The scores assess the current level of ECR implementation and enable benchmarking with best practice and other industry partners. This process also reveals specific opportunities for ECR improvements and establishes the basis for internal company targets and action plans involving trading partners. All METRO GROUP sales lines have been using the Global ECR Scorecard to assess their business processes since 2004. Global Location Number (GLN)  A clear, global, non-overlapping number used to identify companies, subsidiaries, branch offices and such organisationally relevant company units as warehouses or delivery ramps. The GLN – formerly the International Location Number (ILN) – is a GS1 standard. On forms, it replaces the sender and recipient address data that were difficult to read by machine and to process. Companies that want to join the global numbering and coding system of the GS1 have to apply for a GLN at one of GS1’s member organisations. At the same time, the GLN is also the precondition for a company to receive Global Trade Item Numbers (GTIN) that will clearly identify their products. Global Standards Management Process (GSMP)  A process that helps develop and constantly review global standards. The most important standards include the GS1 standards, such as the Global Trade Item Number (GTIN) that is used to identify products and the Global Location Number (GLN) that is used to identify producers. The aim of the Global Standards Management Process (GSMP) is to standardise transfers of merchandise and data around the globe and to eliminate communication barriers. The two organisations EAN International and Uniform Code Council (UCC), now GS1 Global and GS1 US, initiated the Global Standards Management Process (GSMP) in 2002. Since January 2005, the GSMP has been directed by GS1, Global Standards One. Global Trade Item Number (GTIN)  An internationally coordinated, uniform and non-overlapping 8- or 13-digit article number for the clear identification of products and services. The GTIN is a GS1 standard. It forms the basis for the © METRO AG 2012 A B C D E F G H I K L M N O P Q R S T U V W Z
  41. 41. 120 glossary → GLOBALGAP Gross Dome use of barcode technology. The GTIN is assigned in Germany by the standardisation organisation GS1 Germany. The precondition for the assignment of a GTIN is the Global Location Number (GLN). GLOBALGAP  GLOBALGAP is a private-sector body that certifies agricultural and aquaculture products. The global standard for Good Agricultural Practice (GAP) is based on an initiative by European retail and wholesale companies and includes guidelines for wages, occupational safety and hygiene along with production standards. The aim of the standard is to strengthen consumer confidence in the agricultural production of food. Certification according to GLOBALGAP is particularly relevant for business-to-business (B2B) and forms part of companies’ Corporate Social Responsibility. Businesses are also increasingly looking for suppliers whose products meet GLOBALGAP standards. Compliance with GLOBALGAP standards is particularly important to METRO GROUP in terms of fruit and vegetables. Good Corporate Citizenship  Social responsibility taken on over and beyond pure business concerns. Enterprises show good citizenship when they get involved in social, ecological or cultural programmes and initiatives. These activities provide companies with new ways to position themselves within the competitive field – externally as well as internally. Assuming socio-political responsibility is a cornerstone of METRO GROUP’s corporate culture. The Group encourages charitable activities by its employees by liaising with internal and external partners as part of its Good Corporate Citizenship and Corporate Social Responsibility (CSR) programmes. The Group also assumes responsibility by launching or participating in initiatives and programmes on the local, national or international level. Goods  Merchandise Green Dot  Duales System Deutschland GmbH Green Logistics  This describes an approach to logistical processes and systems which takes ecological criteria into account as well as economic factors. Environmentally friendly logistics that preserve resources help to safeguard a company’s value in the long term. The METRO GROUP procurement logistics concept fulfils the criteria of green logistics by pooling consignments to a large extent and ensuring high transport utilisation rates. A certified emissions calculator is used to show that greenhouse gases have been reduced – a key ”green“ effect of the concept. METRO Retail Compendium 2012 / 2013

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