Reference
Retail AI Glossary
Definitions for the key concepts behind retail decision platforms — allocation, replenishment, markdown, forecasting, supply chain and financial terms.
Decision platform
- Allocation
- Distributing stock across stores before the selling season starts to match expected local demand.Read more →
- Decision layer
- The software layer between raw data and execution systems. It translates inventory positions into actionable allocation, replenishment and markdown orders.Read more →
- Decision loop
- The cycle from data collection to decision to execution to feedback. Closing this loop is what separates high-performing retailers.Read more →
- Markdown
- A planned price reduction applied to clear inventory before the end of a selling season.Read more →
- Markdown depth
- The magnitude of a price reduction, typically expressed as a percentage of the original selling price.
- Open-to-buy
- The remaining purchasing budget available for a category within a given period, after committed orders.
- Override
- A manual revision of an automated decision made by a buyer or planner.
- Override rate
- The proportion of automated decisions that are manually revised. A high rate signals model miscalibration or cultural resistance to the platform.
- Replenishment
- Restocking a store from a distribution centre to maintain target inventory levels.Read more →
- Sell-through rate
- The percentage of received inventory sold within a defined period. A key input for markdown and replenishment decisions.
- Shadow mode
- Running automated decisions in parallel with manual processes without acting on them, to validate model accuracy before full deployment.
AI & Data
- AI agent
- An autonomous software component that perceives state, selects actions and executes them to achieve a goal — without human input for each step.Read more →
- Censored demand
- Actual customer demand not observed because the product was out of stock. Models must correct for this to avoid underestimating true demand.Read more →
- Feature
- An input variable used by a machine learning model to generate predictions — for example week-of-year, store tier or historical sell-through.
- Holdout test
- A validation methodology that withholds a subset of stores or SKUs from automation to measure incremental impact against a control group.
- Lakehouse
- A unified data architecture combining the flexibility of a data lake with the structure and performance of a data warehouse.
- MAPE
- Mean Absolute Percentage Error — the average absolute percentage deviation between forecast and actual values. A common but imperfect forecast accuracy metric.Read more →
- Retraining
- Updating a machine learning model on new data to maintain accuracy as demand patterns shift over time.
- RMSE
- Root Mean Square Error — a forecast accuracy metric that penalises large errors more heavily than MAPE.
- WAPE
- Weighted Absolute Percentage Error — a variant of MAPE that weights errors by actual volume. More relevant for retail than simple MAPE.
Supply chain & Ops
- Distribution centre
- A central warehouse that receives goods from suppliers and distributes them to stores or fulfilment points.
- ERP
- Enterprise Resource Planning — integrated software managing transactions, finance and master data. The system of record for inventory and orders.
- Fill rate
- The proportion of customer demand fulfilled from available stock on the first request, without backorders or substitutions.
- Lead time
- The elapsed time between placing a purchase order and receiving the goods. A key constraint in replenishment optimisation.
- OMS
- Order Management System — software handling order routing, fulfilment orchestration and customer-facing order visibility.
- Overstock
- Excess inventory beyond the optimal holding level, tying up working capital and increasing markdown risk at season end.Read more →
- Safety stock
- Buffer inventory held to absorb demand uncertainty and supply variability, preventing stockouts between replenishment cycles.
- SKU
- Stock Keeping Unit — a unique identifier for a specific product variant such as size, colour or style. The atomic unit of inventory management.
- Slotting
- Optimised assignment of products to warehouse locations based on picking frequency, weight and co-location logic.
- Stock transfer
- Movement of inventory between stores or between a DC and a store to rebalance stock without new procurement.Read more →
- Stockout
- An out-of-stock event where a product is unavailable at the point of sale. Causes lost sales and, if chronic, erodes customer loyalty.Read more →
- WMS
- Warehouse Management System — software governing warehouse operations including receiving, slotting, picking and putaway.
Finance
- CapEx
- Capital Expenditure — one-time investment costs such as servers, outright licences or implementation fees. SaaS decision platforms typically carry minimal CapEx.
- Gross margin
- Revenue minus cost of goods sold, expressed as a percentage of revenue. The primary financial metric affected by allocation, replenishment and markdown decisions.Read more →
- IRR
- Internal Rate of Return — the discount rate at which the net present value of an investment equals zero. Used to compare decision platform returns against other capital allocations.
- OpEx
- Operational Expenditure — recurring costs such as SaaS subscriptions, cloud compute and team time. Most decision platform costs are OpEx.
- P&L
- Profit & Loss statement — the income statement summarising revenues, costs and profit over a period. Decision platform impact is measured as a named P&L line.
- Payback period
- The time required for cumulative returns to recover the initial investment. Typical decision platform payback is six to eighteen months.
- ROI
- Return on Investment — the ratio of net benefit to investment cost, expressed as a percentage. For decision platforms, typically measured over a 24-month horizon.Read more →
- TCO
- Total Cost of Ownership — the full cost of a platform over its lifetime, including integration, maintenance, retraining and team time. The key metric in build-vs-buy analysis.Read more →