metro retail compendium 2013

MeTro retail Compendium 2012 / 2013

80

gLos

sary

© MeTro aG 2012

81

gLOssary – aLL abOut traDe anD retaiL

METRO Retail Compendium 2012 / 2013

82 Glossary → “1 plus 4” Model → ssessm nt of D

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 classifi-cation 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 AG 2012

83

Glossary → Assortment

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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. Assort-ment 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


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 assort-ment 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 com-petency, 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 auc-tion 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 man-ually. 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 audit-ing 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 AG 2012

85

Glossary → Basket of Consumer Goods (Average)

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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).

b

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.

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.

Basket of Consumer Goods (Average) Goods and services selected for stat-istical 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.


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 con-tinuous, 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 mar-keting strategies to address this changing buyer structure. Retailing com-panies 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 work-flow 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 fol-lows: 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 deter-mined. After that, the necessary measures and actions for optimising one’s

© METRO AG 2012

87

Glossary → Brand Protection

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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 estab-lish long-term relationships of trust are created through a variety of fac-tors such as quality, design, in-store presentation and advertising. These brand management strategies are fixed components of a company’s trad-ition. 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 elem-ents 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


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 increas-ingly 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 AG 2012

89

Glossary → Buyer Structure

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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 manufactur-ers of the branded products. The consignment will also be paid to the manu-facturer. 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 commis-sioning 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 com-mercial agent receives a commission for acting as intermediary. The oppo-site 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 mer-chandising 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, Redcoonand 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.


90 Glossary → Buying Power Indi es → Capital Marke Or ent

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 com-panies. 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 market-ing 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 inten-ded 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 AG 2012

91

Glossary → Cartel

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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 con-sumers 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 func-tion 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: • Price cartels require their members to maintain fixed prices.• Condition-based cartels create uniform sales conditions such as terms

of payment, discounts and rebates (e.g. standard terms and conditions of the German textile trade).

• Production cartels determine the permissible output of each member in order to cap overall supply.

• Regional cartels prescribe that certain sales regions may be ploughed 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


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 compe-tition 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 specif-ically 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 AG 2012

93

Glossary → Commerce-Based Economy

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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 distinc-tion 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 substanti-ally 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 Associ-ation (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 pro-ducers 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 stat-istics 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 Repub-lic 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).


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 logis-tics 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 man-agement 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 require-ment 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 AG 2012

95

Glossary → Consumer Behaviour

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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 shop-in-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, can-not 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).

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 trans-action with a company, the European legislature considers that consumers require special protection. See consumer protection.

Consumer Behaviour The day-to-day purchasing decisions of consumers expressed by:1. the choice of store (for example: supermarket, superstore, specialty store

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. the degree of rationality in the decision to buy (impulse buying or planned

buying (must articles)),5. the profile of the buyer (which member of a household does the shopping?).


96 Glossary → Consumer Confidence → Consumer 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 Konsumver-band 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 indus-trial 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 in-dependent, parity-based network of the consumer goods industry. It brings together CEOs and other top executives from approximately 650 retail, industry

© METRO AG 2012

97

Glossary → Consumer Protection

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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-com-petitive collaborative processes. Its five priorities are Emerging Trends, Sus-tainability, 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 represen-tative 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 recalcu-lated every month by the German Federal Statistical Office. The consumer price index is an important measure of orientation in retailing companies’ price policy.

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


98 Glossary → Consumer Research → Corporate Social Re

organisations such as German consumer centres provide information. Inter-nationally 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 con-sumer 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 con-tains nationally and internationally recognised standards for good, responsible corporate management. It is intended to render the German corporate govern-ance system transparent and comprehensible. In its provisions and recom-mendations 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 remuner-ation, the handling of conflicts of interest, assessing the efficiency of the supervisory board,

5. transparency,6. accounting and auditing of financial statements.

© METRO AG 2012

99

Glossary → Country of Origin Label

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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 eco-friendly and ethical products, or provide its own employees with good work-ing 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 through-out 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 stand-ards for sustainable business management.

Corporate Strategy (Group Strategy) Consists of three elements: the clear formulation of the entire Group’s strategic goal (strategic goal formula-tion), 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.

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,


100 Glossary → Count y Scoring → Cus omer Card

“Parma ham” for ham from Parma in Italy or the labelling of beef to docu-ment 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 so-called pre-allocated cross-docking, the stores of a trading and retailing com-pany 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 manu-facturer, 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 de-livered. 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 comple-ment 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 AG 2012

101

Glossary → Customer Groups

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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. regional or local cards issued jointly by several retailers or their

advertising pool,3. and multi-partner cards managed by specialist service providers for

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.

2. In 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 delin-eation 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,


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 cus-tomer 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 order-ing and delivery services. See also Customer Relationship Management (CRM).

d

Data Warehouse A computer-assisted information tool that provides a gen-eral overview of the state of a company at all times. The data warehouse links up records from operational systems within the company and facilitates com-prehensive analyses by offering quick access to focused and structured informa-tion. 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 AG 2012

103

Glossary → Direct Marketing

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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, “Kauf-haus” 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 associ-ate 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” (depart-ment store, “Kaufhaus” Type) are often used as synonyms. The term “Waren-haus” 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 communica-tion using digital media which is enjoying increasing popularity in modern retail formats. Digital in-store communication is divided into different appli-cations 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.


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 custom-ers 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 mer-chandise is simple, and it is sold on the basis of an aggressive low price poli-cy. In return, customers usually have to forego advice and service. Discoun-ters 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 mer-chandise 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 AG 2012

105

Glossary → Duales System Deutschland GmbH

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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.


106 Glossary → EAN-128 Code → E-Bus ness

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 inter-national 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 inter-est 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 aver-age 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 cor-porate management, EBITaC can also be a key element in the variable com-pensation 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.

e

© METRO AG 2012

107

Glossary → EDI User Group Retailing

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

E-Business Short for electronic business. The term describes all types of Internet-based electronic business processes. Electronic business trans-actions may involve two companies (business-to-business), companies and consumers (business-to-consumer), companies and their employees (busi-ness-to-employee) or companies and the government (business-to-govern-ment). In the trade and retail sector, the Internet is used for example for selling to end consumers (e-shopping) and for the procurement of merchan-dise (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 strong-ly 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 stand-ards, including EANCOM® (GS1 standards). This is an EDI application guide-line developed by the organisation GS1. Many message standards allow for


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 com-panies 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-of-stock 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 com-ponents 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 com-position 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. Com-panies in industry and retail – including METRO GROUP – helped develop these regulations. The Group is a pioneer in the implementation of EUL.

© METRO AG 2012

109

Glossary → Electronic Product Code (EPC)

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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:• Acousto-magnetic technology (AM): local antennae in the exit area emit

ultrasonic vibrations. The hard and/or adhesive tags contain two thin metal plates which are energised by the antennae and start to vibrate. The secur-ity system identifies these vibrations within the reception range and sets off an alarm.

• Autoactive technology (AA): active security tags that are equipped with an 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.

• Electromagnetic technology (EM): is based on the metal detection principle. The electronic detectors recognise a select metal and a specific magnetic coding and set off an alarm.

• Radio 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 na-tional 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


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 trans-ponder 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 check-out 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 oppor-tunities 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 award-ing the label, RAL, charges a one-one processing fee. RAL (originally Reichs-ausschuss für Lieferbedingungen, est. 1925) is the German institute for cer-tification 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 “Umweltzeichen-Werbefonds” established by RAL. This fund is used to finance public relations campaigns for the Blue Angel. Meanwhile, the European Union has also cre-ated an environmental label, the “European Flower”, a blossom on a stem with twelve petals in the form of stars.

© METRO AG 2012

111

Glossary → EPC Network

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

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 emis-sions 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 ma-terial. 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 infor-mation 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


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 Nether-lands, 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 Euro-chambres. 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 Euro-pean level and maintaining and intensifying trade relations between EU mem-bers 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 AG 2012

113

Glossary → Express 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

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 merchan-dise 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


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, acces-sories 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 turn-over and are generally consumed on a daily basis (such as food, household clean-ers 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 real-ised. 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 polit-ical 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 cus-tomers 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 AG 2012

115

Glossary → Food Additives

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

Flagship Store Brands and retail chains establish flagship stores at presti-gious 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 loca-tion, 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 pharmaceut-icals). Consumer products, on the other hand, are all products that are not intended for human consumption, for example cookware, packaging mater-ials, 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 food-stuffs 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 ex-pressly 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.


116 Glossary → Food and Luxury Sales → Fran his ng

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 spe-cifies 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 precaution-ary 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 AG 2012

117

Glossary → Future Store Initiative

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

information about new statutory regulations, consultancy for individual compa-ny 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 ini-tiative 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 cus-tomers’ 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.

Future Store Initiative METRO GROUP Future Store Initiative


118 Glossary → German Act Aga ns Unfair Competition → Global Lo a ion Number (GLN)

G

German Act Against Unfair Competition Unfair competition, fellow competi-tors, 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 require-ments, 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 Web-based capability assessment tool is divided into three parts:1. Standard capability assessment

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. Business measures 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 exam-ining an additional 18 KPIs.

© METRO AG 2012

119

Glossary → Global Trade Item Number (GTIN)

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

3. Implementation measures 15 KPIs to assess the extent to which GS1 standards involving collabor-ation 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 transpar-ent 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 sys-tem 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 de-velop 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


120 Glossary → GLOBALGAP → Gross Dome

use of barcode technology. The GTIN is assigned in Germany by the standard-isation 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 increas-ingly looking for suppliers whose products meet GLOBALGAP standards. Com-pliance 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 AG 2012

121

Glossary → GS1 EPCglobal

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

Gross Domestic Product (GDP) The equivalent of the monetary value of all goods and services produced in a country during a reporting period after deducting the value of the goods consumed as intermediate input in the production process. GDP is calculated on the basis of output compilation: this calculation defines the value added by all producers as the difference between the value of the merchandise produced and services provided (pro-duction value) and the consumption of intermediate input. Furthermore, taxes on goods are added (such as tobacco, oil and value added taxes), and then any goods subsidies are deduced. Intermediate input is defined as commodities and services purchased from Other economic areas and consumed for production. Subsidies are public financial aid to private companies in form of direct payments from the state or tax breaks. They serve to reduce the price of consumer goods or to sustain operations that would otherwise not be competitive. According to the German Federal Statistical Office, the trade and retail sector contributed approximately 10 percent to Germany’s nominal gross value added in 2011.

Group Strategy Corporate strategy

GS1 DataBar A linear barcode which can encode additional information aside from the GTIN (Global Trade Item Number) within a very small space. It can be read in any position or direction and is therefore perfectly suited for use at the point of sale. Primarily, a serial number is interesting as additional information which is used to differentiate products with different characteristics, such as weight or best-before date. Additional information required by law can also be encoded. The GS1 DataBar resolves problems with articles whose labelling has so far been restricted or even impossible. For example, the GS1 DataBar is used to label merchandise which has a variable weight, such as fruit or cheese. It is also suitable for other fresh products or vouchers. From 2014 at the latest, the GS1 DataBar will be deployed at the point of sale on the basis of bilateral agreements with the retail industry and suppliers. The first pilot projects are already up and running.

GS1 EPCglobal GS1 EPCglobal was established in 2003 as a joint venture of the standardisation organisations EAN International and Uniform Code Council (now GS1 and GS1 US). It aims to advance the research on RFID technology (Radio Frequency Identification) conducted by the Auto-ID Centre at the Massachusetts Institute of Technology (MIT) and to implement it. GS1 EPCglobal uses the results of this research as a basis for the development of


122 Glossary → GS1 Germany → GS1 Standard

economic and technical standards for the EPC network. The goal is to further develop the Electronic Product Code (EPC) and establish it around the world. As a data standard, the EPC serves as a central precondition for the uniform, international use of transponder technology (Radio Frequency Identification). National organisations support this effort on behalf of GS1 EPCglobal. In Germany, GS1 Germany is responsible for coordinating the EPC network and assigning the EPC to companies.

GS1 Germany (formerly: Centrale für Coorganisation, CCG) A service hub and centre of excellence for companies in the consumer goods industry, based in Cologne. GS1 Germany is the German member organisation of GS1, Global Standards One. GS1 Germany was founded in 1974 by Markenverband and by Rationalisierungsgesellschaft des Handels mbH, known today as the Euro Retail Institute. GS1 was originally called Centrale für Coorganisation (CCG). The primary mission of GS1 is to establish uniform communication standards and business processes in industry, trade and retail in an effort to accelerate the flow of merchandise and data along the process chain, with the overall effect that partners can substantially cut their costs and improve their competitive edge. One of the organisation’s most important standards is the Global Trade Item Number (GTIN). Almost all articles and product packages feature a GTIN in the form of a barcode by which they can be clearly identified. Another standard is the Serial Shipping Container Code (SSCC). It enables precise identification of shipping units such as cartons or pallets at every point along the process chain. Based on the GTIN numbering system, the GS1 subsidiary EPCglobal Inc. de-veloped the Electronic Product Code (EPC). Merchandise and other objects are equipped with a serialised coding containing the EPC. The data are recaptured with the help of the carrier technology RFID (Radio Frequency Identification, RFID) or the databar (GS1 DataBar). As a member organisation of GS1, GS1 Germany coordinates the assignment of GTINs to enterprises operating in Germany. GS1 also supports companies from industry, trade and retail in implementing Efficient Consumer Response (ECR) processes. METRO GROUP has been working closely with GS1 Germany since 1975. The Group is active in numer-ous ECR projects and is a member of important committees.

GS1 Global Office (formerly: EAN International) A non-profit organisation regis-tered in Belgium with headquarters in Brussels. The purpose of GS1 Global Office is to develop and manage a uniform coding scheme for worldwide use by the consumer goods industry. The code will serve to identify merchandise and services on a global scale and integrate communication processes between trading partners. The EAN barcode is an example of such a scheme: it consists

© METRO AG 2012

123

Glossary → GS1, Global Standards One

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

of an 8- or 13-digit code by which an article can be clearly identified. The organ-isation was founded in 1974 by manufacturers and suppliers from 12 European countries in order to develop a uniform article coding system for trade items. The organisation now has more than 100 member organisations in over 100 coun-tries. Its German member organisation is GS1 Germany, based in Cologne.

GS1 Standards Global, non-overlapping numbering and coding systems used to clearly identify merchandise and services. With GS1 standards, such specific logistical information as article descriptions, addresses or characteristics of shipping units are numerically encoded and made machine readable. The infor-mation is shown either as a barcode on articles, packaging and shipping units or translated into a special communication language (EANCOM®) for electronic data communications (Electronic Data Interchange, EDI). The GS1 standards basically consist of the following three major numbering and coding systems:1. The Global Location Number (GLN) allows for the unmistakable identification

of the addresses of companies, subsidiaries, branch offices and logistically relevant equipment, such as delivery ramps.

2. The Global Trade Item Number (GTIN) is used for the global and uniform identification of merchandise and services.

3. The Serial Shipping Container Code (SSCC) is used to encode information on such transport and storage units as pallets.

GS1 standards ensure the fast and error-free processing of information ex-changes among producers, distributors, service providers and retailers. As a result, they help optimise the process chain. Users receive the numbers after paying a fee to the national member organisations of GS1. In Germany, this is the responsibility of GS1 Germany.

GS1 US A North American standards organisation. Its task is to develop and manage a uniform numbering scheme for identifying goods and services valid throughout the American consumer goods industry. One example of such a scheme is the Universal Product Code (UPC). It consists of an 8- or 12-digit code that clearly identifies the given item. The UPC appears on product packaging in the form of a machine readable barcode. The organisation was founded in 1969 by American manufacturers and retailing companies under the name Uniform Code Council.

GS1, Global Standards One Merger of EAN International and the Uniform Code Council (now GS1 and GS1 US). Since 1 January 2004, the two standards organisations have been pooling their forces under the GS1 umbrella. As of January 2005, EAN International changed its name to GS1 Global Office. In an


124 Glossary → GS1 128 Code → Habitual Buyin

environment characterised by the global exchange of goods and business data, GS1 aims to establish a unique, global standard for article numbering, the Global Trade Item Number (GTIN). GS1 has member organisations in more than 100 countries. Its German member organisation is GS1 Germany, based in Cologne.

GS1-128 Code The international GS1 standard that is used to clearly code such logistical information as production and expiry date, weight of an article, size of a pack, batch number as well as manufacturer and recipient identifica-tion. With the help of the GS1-128 code, more than 70 different data elements can be displayed in the form of a barcode and read by a machine. The GS1-128 code was developed at the beginning of the 1990s. The central element of the code is the 18-digit Serial Shipping Container Code (SSCC). The GS1-128 barcode is printed on the so-called transport label that manufacturers use to mark transport units such as pallets.

Guideline Daily Amount (GDA) A guide value for the recommended daily intake of a nutrient. GDA information on products helps consumers plan their indi-vidual diet. It indicates the amount of caloric and nutritional values that covers a person’s daily requirements. While GDAs are based on the latest dietetic research, they should be viewed as a suggestion only. The actual need will depend on many personal factors, including age, sex and physical activity. This is reflected in the different GDA tables for men, women and children. Statutory nutrition labelling normally shows the GDA of a healthy middle-aged woman with an average level of physical activity. This standard was also adopted for METRO GROUP’s food labelling system.

© METRO AG 2012

125

Glossary → Hybrid Customer

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

h

Habitual Buying (also called habitual purchasing, behaviour or routine purchasing). Unlike in unpremeditated buying situations, the customer makes his or her buying decisions by force of habit. The customer is not inclined to explore alternative choices and repeatedly chooses the same product (product loyalty) or products of the same brand (brand loyalty).

Hazard Analysis and Critical Control Points (HACCP) This system is used for monitoring food safety and thus consumer protection. In accordance with the HACCP concept, companies check critical points and potential dangers in the production process. They ensure the safety of food products and lay down guidelines for procedures for intervention in critical situations to min-imise risks. The concept was originally developed by NASA in the 1950s to monitor food rations in space, but it has since been adapted for use in the food retailing industry. The food hygiene regulation has made the use of HACCP compulsory for all companies in Germany that produce, process or sell foodstuffs. In addition to this, since 2006 it has been illegal in the EU to import or trade in foodstuffs that do not comply with the HACCP guidelines.

Household Size The number of persons living in a private household, described, for example, as a single-person household, a 2-person household or a 4-person household. The household size is a key figure in consumer research (see also panel). Household size also plays an important role in category management, where retailing companies determine the core target group for their stores.

Hybrid Customer A description of a customer known for situational buying behaviour. Generally speaking, the hybrid customer brings together contra-dictory forms of behaviour within a single person. Such a customer will do such things as buy products for his or her daily needs at a discounter and then purchase products for similar reasons or on impulse at high priced filling station convenience stores. Faced with such variable behaviour, the goal of trade and retail should be to establish a long-term partnership with customers. The hybrid customer should be distinguished from the smart shopper who generally buys quality merchandise at the lowest possible price.


126 Glossary → Hype market → Inf rmation

Hypermarket Retail store with a minimum selling space of 5,000 square metres and about 33,000 to 63,000 different articles that are mainly offered in the self-service mode. In addition to food, the assortment includes consumable durables and consumable goods. Durables are goods that can be used for an extended period of time, such as household appliances. Consumables satisfy an immediate need. They include food, clothing and the use of living space. Hyper-markets are typically located outside city centres (location). METRO GROUP’s sales brand Real operates 423 hypermarkets. See also cash+carry.

i

Importer A retail or wholesale company that procures merchandise abroad and resells it on its domestic market (e.g. an Italian delicacy wholesaler that buys goods in Italy and sells them to restaurants or delicatessen shops in its own country).

Imports The procurement of goods and services from foreign countries. In the case of direct imports, the trading company buys the goods directly from the foreign manufacturer of branded products. In the case of indirect imports, the importers are intermediaries who may themselves act as suppliers to trading entities. See also exports.

Impulse Buying Also referred to as spontaneous purchasing. A buying behaviour where unforeseen influences prompt customers to make a purchase. Trading and retailing companies use targeted incentives such as the presentation of the merchandise at the Point of Sale (PoS) or advertising activities and in-store sales events to trigger such spontaneous purchases. The opposite of impulse buying is routine, needs-based or habit buying.

Incoming Goods Control Inspection of delivered merchandise upon arrival. In most cases, a random quality inspection (quality assurance) is carried out on the merchandise. In retail, another quantitative inspection is performed to identify whether the quantity and type of incoming merchandise correspond to the order.

Industry Sector An economic sector that can be defined in terms of character-istics relating to production or materials, such as trade and retail, or businesses

© METRO AG 2012

127

Glossary → Innovation Management

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

whose assortment is characterised by some kind of relationship between the articles offered (such as food retail or fashion retail). A trading and retailing company’s affiliation with a specific industry affects the choice of location, the composition of its assortment, its price policy, its target group marketing and its store design. Cost structures, productivity features and trade margins also vary between sectors.

Information Terminal An interactive in-store medium at the Point of Sale (PoS) that offers comprehensive information to customers – for example on production methods, product ingredients, sales prices and special offers. Additional applications include recipe ideas, housekeeping tips, suggestions for healthy nutrition, hair colour advice, and information about the quality and source of products. The customer can directly print out the information at the terminal. Information terminals are easy to operate via touch screens.

Initial Public Offering (IPO) The process of a company floating its shares on the stock exchange for the first time. An IPO is generally supported by one or more banks. As corporations have to produce various documents, a lead time of one year is usually needed prior to stock market flotation. IPOs enable companies to boost their liquidity and fund their growth. In return, however, they must allow shareholders to participate in their success.

Innovation Management Core business activity understood to mean the sys-tematic planning, control and monitoring of innovations within organisations. The aim of innovation management is to increase the value of a company. Innovations are a crucial means of generating sustainable growth and boost-ing both earning power and company value at METRO GROUP. That is why the Company’s strategy includes further developing its business processes as part of its Group-wide innovation management system and pooling activities and issues relating to research and development. METRO GROUP sees itself as a driving force in the process of modernising national and international trade and retail. Innovation management at METRO GROUP is primarily about mak-ing shopping even more convenient and more stimulating for customers at its sales lines in the future. In addition to this, the Group aims to further increase efficiency in its collaboration with suppliers and industry partners. For this reason, METRO GROUP’s understanding of innovation comprises both new, customer-orientated service concepts and modern technologies. The Group’s aim is to road-test new concepts, utilise innovative technologies in its stores and warehouses and ramp up their use in conjunction with suppliers and business partners. These activities are focusing on modern information and


128 Glossary → In-Store Media → International F

communication technologies (ICT) as well as Radio Frequency Identification (RFID), a technology that enables the contactless logging of products and goods movements by computer systems. As part of its innovation management activities, METRO GROUP provides resources that help the individual segments to develop needs-based solutions and implement pilot projects. These include, for example, testing equipment and development partnerships. Moreover, the Group is involved in a number of national and international bodies – such as GS1 Germany, ECR Europe, the EPCglobal Community and the consumer goods forum – in order to drive international standards and technological innovations in the consumer goods industry forwards together with other companies.

In-Store Media Media deployed at the Point of Sale (PoS). They include advertis-ing posters, radio (in-store radio), TV and interactive information terminals. In-store media are designed to entertain customers and inform them about products and the store. The goal of the advertising and explaining products is to encourage the customer to buy products or special offers. METRO GROUP uses various types of in-store media in the stores of its sales lines, including multi-media information terminals in its Galeria Kaufhof branches or its Real stores. These information terminals enable customers to check their number of Pay-back loyalty points and exchange them for merchandise vouchers or access wine recommendations and recipe suggestions, for example.

In-Store Radio Transmission of music and information into the sales area. Retailing companies make use of in-store radio to create a pleasant shopping atmosphere and inform customers about special offers or new products. See also in-store media.

In-Store Restaurant Chain A standardised, multipliable and centrally con-trolled restaurant concept in shopping facilities, which can easily be trans-ferred to new locations, including abroad. One of Germany’s leading chains is Dinea, a wholly owned subsidiary of Galeria Kaufhof GmbH.

International Accounting Standards (IAS) International Financial Reporting Standards (IFRS)

International Expansion A corporate strategy to grow by tapping new markets abroad. Before entering new markets, companies typically conduct a feasibility study. As a retail and wholesale company geared to the continuous and sustained increase of its Economic Value Added (EVA), METRO GROUP has consistently stepped up its international expansion. This strategy is an important growth driver for the Group, especially in the emerging markets. See also expansion.

© METRO AG 2012

129

Glossary → Inventory Management

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

International Financial Reporting Standards (IFRS) Formerly: International Accounting Standards (IAS). Accounting directives for corporations. The IFRS have been issued by the International Accounting Standards Board (IASB) since April 2001. The International Accounting Standards (IAS) issued by its pred-ecessor, the International Accounting Standards Committee Board (IASC), remain in effect as well. The basic elements of accounting under the IFRS/IAS are: the balance sheet, income statement, cash flow and the notes and supple-mentary information. In contrast to the annual financial statements prepared under German law, the IFRS/IAS accounting standards focus on investor-oriented information. The standards provide more comprehensive disclosure than the German Commercial Code (HGB). As a result, the assets and liabil-ities position of a company become more transparent to the investor. The EU regulation 1606/2002 requires companies to produce annual reports accord-ing to the International Financial Reporting Standards (IFRS) beginning in 2005. METRO GROUP changed its accounting practices to IAS/IFRS already in 2000.

Internationalisation A (retail and wholesale) company strategy that involves multiplying its merchandising concept beyond national borders in order to generate growth.

Inventory On a closing date, the assets and liabilities of a company must be precisely determined. The result is written down in the inventory. The positions and values of the inventory are included on the balance sheet. Physical articles are tracked by number, size, weight or estimation. Mon-etary assets like claims and debts are determined through accounting and receipts, and bank balances through account statements. In a trading and retailing company, inventory is a time-consuming job because of the large number of products. METRO GROUP already employs forward-looking Radio Frequency Identification (RFID) at METRO Cash & Carry and Real. It simplifies the automatic control of all goods movements. Should RFID be used exten-sively at item level in the future, this will allow for selective inventory control.

Inventory Management Now usually computer aided, inventory management encompasses the receipt, unloading and booking of merchandise at the ware-house of a wholesale or retail store or at the intermediate warehouses of a trading and retailing company. The adequate warehousing of merchandise is also part of inventory management, as are regular stock checks and the (electronic) registration of deliveries and shipments. Today, information about changes in merchandise inventories is typically stored in computer-based merchandise management systems. Using Radio Frequency Identification (RFID),


130 Glossary → tinera t Retail → Labelling Ob ig

stores can assess the inventory situation at all times (assessment of demand). RFID allows the wireless identification of merchandise via radio signals. As a result, it provides greater efficiency and precision in the delivery and shipment of merchandise, in picking and inventory control.

Itinerant Retail A form of trading in which, in contrast to stationary retail, mer-chandise is not sold at fixed locations and selling partly occurs without Points of Sale (PoS). Itinerant retail includes door-to-door peddling, market or fair selling, street selling or weekly markets.

k

Key Account Major customers or “key customers” of a company, mainly in the services sector. A key account is measured by its importance for a company’s revenue and earnings. Key accounts typically secure a company’s economic existence. The cooperation with and attendance to key accounts is described as key account management.

Key Performance Indicator (KPI) KPIs are figures used to assess the per-formance of a company or its organisational units. The use of such indicators enables managers to spot undesired trends quickly and react to them, for instance by adjusting processes. At the same time, KPIs define a company’s interests and targets. Different indicators are used for different organisational units. For example, earnings and profitability are crucial for financial con-trolling. Meanwhile, the marketing department might use advertising reach as a KPI, and production would examine fault rates, rejects and delivery times.

© METRO AG 2012

131

Glossary → Listing Fee

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

l

Labelling Obligation Also referred to as statutory labelling obligation. The obligation to provide certain goods with specified data to inform the consumer. Food, for example, has to be marked with the best-before date or textiles with the material composition and care instructions. This obligation is based on the German Food and Consumer Products Act. See also food safety. Beyond the legally required information, many manufacturers voluntarily affix word and/or pictorial symbols to their products in order to highlight the quality of the product or its geographical origin. See also quality seal, country of origin label.

Landed Price The purchase price plus the trading company’s procurement and acquisition costs less rebates and discounts. Procurement and acquisiti-on costs represent that component of overall costs which the trading com-pany incurs before it has received the merchandise and which can be allocated directly to the merchandise, invoice or supply. Procurement and acquisition costs include freight charges, insurance fees, administrative costs and the costs of the procurement unit itself.

Like-for-Like Growth A trading company’s total sales and revenue growth in comparison to the year earlier period which, in the case of chain store retailing companies, is adjusted for the sales increases and/or losses of the newly opened and/or closed retail space during the reporting period. Only the like-for-like change in sales shows whether a trading company has improved its productivity per area unit (sales related to selling space, euro per square metre).

Listing Fee The listing fee is a sum of money agreed between the retailer and the manufacturer for the addition of a new product to a product range. The listing fee represents a discounted price that the manufacturer grants the retailer either on a one-off basis or on the price of the respective article in each goods transaction.The economic reasons for the listing fee includes sharing the risk posed by the launch of a new product. Adding new products to an existing product range is a high-risk strategy and the costs involved are considerable, which is why manufacturers and retailers share them. Another factor is the effi-cient use of shelf space, which is a scarce resource.


132 Glossary → Location → Lu ury G

Location The geographical position of a trading company and/or its outlets. The selection of the location (location planning) or store site for retailers typically depends on sales-oriented aspects. Ideal locations are characterised by high customer frequency, good transport connections, a large catchment area, a suitable target audience and parking facilities. First-class business locations (prime locations) are frequently found in city centres, with the dis-advantage of high rents. METRO GROUP, for example, selects top city centre locations for the sales formats of Galeria Kaufhof GmbH (Galeria Kaufhof, Sportarena). METRO Cash & Carry wholesale stores, in contrast, are often positioned in business parks outside of city centres, with the advantage of being able to offer comprehensive parking facilities free of charge.

Location Planning All activities for finding and selecting a suitable location for the business of a trading company or individual stores. The envisaged target group and the company’s own merchandising concept are key criteria for the selection of a location. The basis for location planning is a market and location analysis which makes allowances for relevant factors, such as the density of competition, acceptance of the assortment, population, population structures, catchment area and buying power indices. As a service provider for the search, development and construction of retail locations, METRO PROPERTIES supports and accelerates the international expansion of METRO GROUP's sales lines.

Logistics Supply chain management. Logistics is an essential part of the supply chain in a trading company. With the use of a well-conceived monitoring system of the supply chain, transport and warehouse costs can be reduced. As part of its innovation management, METRO GROUP is continuously working to optimise logistical processes, for example by means of its projects efficient unit loads and cross-docking.

Loyalty Card Also customer card. Loyalty cards are issued by retailing com-panies to customers to increase shop loyalty. They reward card holders for every purchase by offering discounts or points that can be redeemed on future purchases. Some loyalty cards are a combination of credit and customer cards. Examples of loyalty cards include Payback cards, Miles & More (Lufthansa) and the Ikea Family Card. Various sales brands of METRO GROUP use loyalty cards to strengthen customer ties. Galeria Kaufhof and Real, for instance, offer the Payback card.

© METRO AG 2012

133

Glossary → Mass Distribution

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

Luxury Goods Food and other comestibles that are not concerned with nutritional requirement, but rather are consumed solely due to their flavour and/or other stimulative effects. Luxury goods include, among others, alcohol, coffee, chocolate and tobacco.

m

Mail-Order Business Typical organisational form of distance trade, in which a trading company offers customers merchandise via catalogue, advertisement, prospectus, Internet, CD-ROM, radio or TV. Customers place their orders by phone, fax, order slip or the Internet and receive the merchandise, usually within a few days, by post or courier.

Market Leader A company that holds the largest market share in its indus-try sector or segment. This share is measured by sales. Market leaders fre-quently serve as benchmarks for their competitors. The METRO GROUP sales lines METRO Cash & Carry as well as Media Markt and Saturn are the market leaders in their segments in Europe.

Market Research Measures designed to identify and map real market condi-tions. Market research typically uses statistical methods. Market research is applied by a trading or service company to analyse customer behaviour, the effects of marketing activities as well as the recognition of relevant outlet markets. With the aid of market research, a trading company may, for ex-ample, become aware of a change in the consumer behaviour of its key target group or of its own market share in comparison with competitors with respect to sales in a certain category. The systematic and objective identification, collec-tion and analysis of such information aids decisions on what goods and services can be placed on the market in what amount and at what conditions.

Mass Distribution The sale of mass market products (durables and con-sumables) for which there is uniform demand by a large group of consumers and which are typically produced over a long period of time. The rate of stockturn is generally higher for mass distribution products. They also allow trading companies to exploit economies of scale. These are generated, for example, when the fixed cost of warehousing or of visual merchandising is divided among a larger number of products sold. The distribution of mass


134 Glossary → Master Data → Merchand se

products is typically effected through large-scale formats of the retail trade such as chain store companies, department stores and discounters. See also discounted mass distribution.

Master Data Also called item master data. These include basic data for the identification of articles (Global Trade Item Number, GTIN) and suppliers (Global Location Number, GLN) as well as information on the size and weight of the product or on the type of packaging. All characteristics of an article together make up the master data record. Master data are the prerequisite for nu-merous business processes – from ordering, shelf management, logistics and inventory count to sales and marketing. Nowadays, manufacturers and retailers increasingly exchange their master data records on the Internet via data pools. They replace the error-prone transfer by mail or fax. One example for such a data pool is SA2 Worldsync. This is where manufacturers input their article master data and retailers can retrieve them. The advantage: there is only one central address for data interchange, and the information is saved fol-lowing a specified pattern. Master data can thus be transferred rapidly and without error. METRO GROUP has been using SA2 Worldsync since 1999. Buyers of the METRO GROUP sales brands call up the required master data from the data pool and then process them using MCAT, a data catalogue used by METRO GROUP’s standardised merchandise management system for man-aging assortment composition. The employees can then add further details – such as the retail price of the article. In the end, each store receives master data records adjusted to its needs.

Meeting Metro An information event of METRO GROUP for potential junior managers. In 2012, the event also took place abroad for the first time. The German event is held at the graduate congress in Cologne. Under the METRO GROUP umbrella, the Group presents its sales lines at both national and international level. The event is aimed at students and graduates, especially those majoring in business, economics and IT business computing. The event offers visitors information on the great diversity of activities in the trade and retail sector as well as career opportunities within the internationally oriented METRO GROUP.

Merchandise (Goods) Item offered for sale, object of trading. The assortment of a retail store (example: textile trade) can be subdivided into various kinds of merchandise (example: menswear). These can be broken down into further categories (suits, shirts, trousers). Within a certain category, various groups of articles can be differentiated (cotton trousers, jeans, woollen trousers). An

© METRO AG 2012

135

Glossary → Merchandising

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

article group comprises several articles (cotton trousers with a pleated front, with creases or cargo pants). These articles are composed of models which distinguish themselves by colour, size, etc.. The main task of a trading and retailing company is to offer the right merchandise to the customer in the right assortment and quantity at the right time.

Merchandise Group Covers like-kind articles of an assortment. The articles are pooled to article groups which are then combined to merchandise groups. The composition of merchandise groups is done by category management. Category managers at METRO GROUP have created four categories of merchandise groups:1. products that aid the profile of a sales brand,2. products which have to be classed as obligatory articles,3. articles that complement the core assortment and round off the “everything

under one roof” shopping concept,4. seasonal goods.The merchandise groups are weighted differently depending on the target group of the sales brand. For example, Real has created a merchandise group under the name “Babywelt” (baby world) that includes everything from baby food and diapers to clothing for toddlers.

Merchandise Management System Computer-aided information system that records and manages the quantity and value of goods in the supply chain down to the last item. It covers areas such as planning, ordering, incoming goods, invoice checking, outgoing goods, general ledger and invoicing. The purpose of such a system is to manage inventory and performance. Merchandise management systems provide retail and wholesale companies with assess-ment and management information about suppliers, customers and merchan-dise. METRO GROUP’s own system, the Metro Merchandise System (MMS), is operated by the central IT service provider METRO SYSTEMS GmbH.

Merchandising Distribution of merchandise, sale, sales strategy and policy. In German, the term “merchandising” is used in different ways. On the one hand, it describes the sum of all sales promotion activities in retailing such as advertising campaigns, tastings and special actions. On the other hand, merchandising is defined as customer friendly merchandise presentation. This includes the arrangement of the products on the shelf as well as all store design and technical measures taken to present products. Refilling shelves, labelling goods, monitoring merchandise supplies in the shelves and the reordering of articles that are sold out are just a few examples.


136 Glossary → Me chandising C ncept → Mobi e C mmerce

Frequently, producers’ field staff is responsible for merchandising on the premises of food retailers such as superstores (German “Verbrauchermärkte”) or hypermarkets (German “Selbstbedienungswarenhäuser”).

Merchandising Concept The marketing concept of a trading and retailing com-pany. This includes elements such as the scope and kind of assortment, size of the selling space, prices and services offered. Different merchandising concepts include cash+carry, hypermarket, superstore, single-line retail, specialty centre, department store, supermarket and discounter. At METRO GROUP, each of the sales lines – METRO Cash & Carry, Real, Media-Saturn and Galeria Kaufhof – has its own merchandising concept of which the efficiency is continuously increased through concept optimisation.

Methods of Payment The payment modes in trade and retail. They are usually classified as either cash, semi-cash and noncash (cashless). Cash payment is made in notes and coins. POD (payment on delivery), which may be employed in mail-order business, is a form of semi-cash payment. Payments made by check or credit card are called cashless. Most retailing companies accept different payment methods, for example payment by credit card. Bank transfers and monthly accounting are rarely used, but food wholesalers occasionally offer the latter. In addition to cash payment and EC card payment, METRO GROUP’s sales brands METRO Cash & Carry, Real and Galeria Kaufhof also accept pay-ment by credit card. The online shops of all sales brands offer their customers a variety of payment methods including payment by credit card.

METRO GROUP Future Store Initiative Association of more than 75 com-panies from trade, the consumer goods industry, information technology, the service segment and the field of scientific research. The METRO GROUP Future Store Initiative was founded by METRO GROUP, SAP and Intel. Its goal is to promote national and international modernisation processes in retailing. The focus of the initiative is the development of innovative technologies and new concepts that offer the consumer more convenience, service and experience while shopping and boost the efficiency of trade and retail at the same time. Mobile shopping and Radio Frequency Identification (RFID) are of key importance in this process. RFID can be used to track and manage merchandise throughout the entire supply chain.

METRO GROUP Innovation Centre An information and development platform for METRO GROUP innovations, such as RFID technology. On a total floor space of around 1,900 square metres, the METRO GROUP Innovation Centre gives

© METRO AG 2012

137

Glossary → Multichannel Retailing

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

partners from the consumer goods industry and the IT sector as well as the METRO GROUP sales lines the opportunity to familiarise themselves with the professional use of technical innovations – including Radio Frequency Identifi-cation (RFID) – and to test the technology under real-life conditions in more than 25 installations.

Mobile Commerce The term mobile commerce (m-commerce) stands for all modes of electronic commerce carried out over mobile phones (smartphones), personal digital assistants (PDAs), tablet computers and other mobile com-munication devices. This non-stationary, daytime-independent form of shop-ping is delivered via computer controlled networks (notably the Internet). The constant expansion of data transfer bandwidth is allowing applications with a greater degree of technical and contextual complexity to be used in m-commerce. See also mobile shopping.

Mobile Shopping Mobile shopping is an umbrella term that comprises cus-tomer services for mobile devices. Mobile phones have become a major part of many consumers’ day-to-day lives. Smartphones are becoming increasingly versatile, with features including autofocus digital cameras, Internet access and other interfaces. Since 2008, METRO GROUP has been offering the Mobile Shopping Assistant (MSA) at the Real Future Store. This software program enables customers to manage a shopping list, access product information and prices, find their way around the store, and pay quickly and easily at the checkout, all with their own mobile phone. Trials using the MSA as an iPhone app have been underway at the Real Future Store since February 2011. One part of the MSA software, the Mobile Shopping List, has been available to Real customers all over Germany since 2009. The Mobile Shopping List is an electronic tool which customers can use to create their own shopping lists on the Real website and then access it using their mobile phone. It is also pos-sible to add articles to the list via mobile phone. If the mobile phone has a camera with an automatic focus, even the barcode on a product’s packaging can be scanned and added to the Mobile Shopping List. In addition to this, further apps have been developed for the iPad (such as “METRO iPad POS” – a checkout system for restaurant owners), iPhone and iPod Touch which provide a range of information and services for Real and METRO Cash & Carry customers. See also mobile commerce.

Multichannel Retailing The selling of merchandise through several sales channels. The individual channels and the background processes are inter-linked. This creates sales synergies. Example: a retail store simultaneously


138 Glossary → ust Articles → NGO

offers its merchandise for sale in the store itself, on the Internet (e-commerce), by catalogue or on TV.

Must Articles Term used in retailing for all articles which, in contrast to impulse articles (impulse buying), appear on shopping lists on a regular basis. Must articles are bought on schedule. If a customer always buys the same breakfast jam by the same producer, this is a must article for him.

n

Near Field Communication (NFC) This is a radio standard for short-range, contactless data transmission. With the aid of NFC, electronic devices equipped with the relevant computer chips can exchange data over a distance of a few centimetres. One chip fulfils the role of a reader. In order to start the encoded communication, it creates an electromagnetic field in a frequency range of 13.56 MHz, which activates the second chip. Unlike Radio Frequency Identifica-tion (RFID) transponders, NFC chips can act as both active transmitters and passive receivers. The standard is primarily used to simplify payment processes. For example, pilot projects in local public transport networks allow passengers to buy tickets using NFC. All they have to do is hold their mobile phone (equipped with a chip) close to an NFC terminal and confirm the trans-action, e.g. by entering a PIN. The ticket price is then debited from their account. METRO GROUP first tested contactless payment at its Real Future Store in Tönisvorst back in 2008. Since 2011, the GS1 Mobile Payment working group, in which METRO GROUP is also involved, has been working on the development of a new contactless payment system, and testing this technology in real environments. In the Real Future Store, customers can pay for their shopping with an NFC technology card (such as a Payback Maestro card). METRO GROUP has been testing contactless NFC payment with smart-phones internally since June 2012.

Nearfood Food

Neighbourhood Store Convenience store

© METRO AG 2012

139

Glossary → One-Way Deposit

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

NGO Short for non-governmental organisation. Coined by the United Na-tions, this generic term encompasses organisations that have to fulfil certain criteria. In particular, they must be organised democratically and they may not operate profit-orientedly. Furthermore, NGOs have to act independently of government bodies. The most famous NGOs are those dedicated to social and environmental issues. These include Amnesty International and Greenpeace along with humanitarian organisations such as Médecins Sans Frontières and Welthungerhilfe.

Nonfood Food

Nutrition Labelling A system used by manufacturers to show the nutritional contents of food products on packaging. Methods include the ”1 plus 4” model, which METRO GROUP uses for its own-brand products, and the traffic light system. Listing nutritional information on food packaging has been voluntary in the European Union to date. However, the form of any such information was clearly defined in the various national laws on nutritional labelling. In July 2011, the European Parliament voted for a modernised, uniform label-ling system. This makes it obligatory to state the energy contents and the levels of six nutrients – fat, saturated fatty acids, carbohydrate, sugar, protein and salt – per 100 grams or 100 millilitres. This information must be listed in a clear table on the back of the packaging. Manufacturers may also choose to repeat the information on the front of the packaging and provide additional details on the nutritional contents per portion in relation to the Guideline Daily Amount (GDA). Producers, retailers and wholesalers have five years to implement the EU directive.

o

One-Stop Shopping A merchandising concept designed to allow customers to meet all of their needs for merchandise and related services in a single store or shopping centre. E-commerce and the mail-order business are also based on this principle.

One-Way Deposit A fee added to the purchase price of non-reusable beverage containers. The relevant deposit legislation for single-use containers took effect in Germany on 1January 2003. It applies to non-reusable containers for


140 Glossary → Online Shop → Packa ing R

beer, carbonated soft drinks and mineral water, but does not include single-use containers for wine, fruit juice and milk. Since 28 May 2005, the standard deposit for all kinds of containers has been at least 25 cents. Since 1 May 2006, the industrial and trade and retail sectors have been required by law to operate a uniform deposit and refunding system for all single-use containers that fall under the deposit legislation. This means that consumers can return their sin-gle-use cans and bottles to any point of sale that sells drinks in non-reusable containers and get their deposit back, no matter where the beverages were purchased. Retailers commit to take back all beverage packaging made of materials they carry in their product range. Since 1 May 2006, stand-alone solutions employed by individual companies have been banned.

Online Shop Online shops are Web-based retail portals that support all stages of online ordering. Similar to shopping in a conventional store, online shops let customers select articles from a range of products and place them in a virtual shopping basket. Customers complete the ordering process by submitting their order online. All METRO GROUP sales lines have their own dedicated online shops and integrate these closely with their stationary retail. See also multichannel retailing.

Organisational Form The form through which a trading company operates its business on the market. The distinguishing characteristics of various organ-isational forms include the clientele, the location, the form of distribution, the assortment, the company’s size, the number of locations and the company’s basic strategy. In principle, a differentiation is made between stationary and non-stationary (itinerant) retail. Forms of stationary or over-the-counter selling include: specialty stores, specialty centres, department stores, hypermarkets (German “SB-Warenhäuser”), supermarkets (German “Supermärkte”), super-stores (German “Verbrauchermärkte”) and discounters. Non-stationary organ-isational forms are mail-order business and e-commerce.

Outlet Chain The totality of all locations where a company is present with its outlets. METRO GROUP’s sales network covers a total of about 2,200 locations in 32 countries.

© METRO AG 2012

141

Glossary → Panel

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

p

Packaging Recycling Reuse of packaging material. Packaging (e.g. trans-port packaging, retail packaging and external product packaging) is subject to the German Packaging Ordinance (VerpackV). Retail packaging is defined as the pack a product is sold in, which is disposed of by the consumer. This includes packaging provided by the trade and retail industry, caterers and other service providers that enable or help merchandise to be presented to the consumer (service packaging) and disposable plates etc.. Requirements introduced on 1 January 1993 obliged producers and retailers to take back all retail packaging from the consumer free of charge and to reuse or recycle it outside the public waste disposal system. Alternatively, producers and retail-ers could be exempted from this return obligation by participating in a system that satisfactorily guaranteed regular, nationwide collection of used retail packaging at or near the private final consumer’s home. Duales System Deutschland GmbH (Green Dot) is such a system. On 1 April 2009, it became obligatory for retail packaging to be licensed under such a system. Companies can claim back heir licence fee if they can prove that retail packaging was collected at the point of sale and recycled at the company’s own expense. However, businesses are still obliged to take back transport packaging and external packaging free of charge. In addition, METRO GROUP has estab-lished its own efficient management system for packaging and recyclable material which considers the individual requirements of the sales brands and is oriented toward the principles of sustainability. The retail and whole-sale group has stepped up its use of returnable packaging and at the same time increased recycling rates for paper, compostable waste and plastics. The Group’s environmentally relevant services are organised by METRO PROPERTIES. See also environmental management.

Panel A term borrowed from empirical market and social research. Regular survey of a group of persons, households or companies by a market research institute. The panel participants are interviewed over an extended period of time concerning certain habits and observations and present a representa-tive picture of a certain group of persons. Main types of panel surveys are the retail panel and the consumer panel. The results of a panel survey allow retailing companies to track market trends. Panel surveys also provide these companies with valuable information for future, target group-specific customer marketing activities.


142 Glossary → Payback → Price La

Payback The leading German loyalty programme. 80 percent of the population are aware of the scheme and its partners generate annual sales of some 15.2 billion euros incentivised by the card. Members hold a customer card which they present at the cash register with every purchase, and receive a propor-tionate amount of bonus points in return. Once a customer has collected a certain number of points, he or she can exchange them for a shopping voucher, choose from a selection of attractive premiums, receive a cash payment, donate the points or swap them for air miles. Moreover, Payback customers also benefit from special promotions and made-to-measure product offers. With its targeted and integrated marketing and individualised customer communication, the Payback programme is a powerful tool for improving customer retention. METRO GROUP took on a pioneering role in trade and retail when its Real and Galeria Kaufhof sales brands deployed the Payback system with great success. See also loyalty card.

Permanent Low-Price Assortment A range of articles with permanent dis-count prices that are marketed, for example, through advertising. In contrast, special offers are used only in limited, short-term marketing campaigns.

Picking Assembly of merchandise based on a predetermined amount and configuration and its preparation for delivery. The picker’s work is always based on an order. This contains the number and name of the merchandise and its article and warehouse site number. The warehouse employee who works through the order is the picker. The merchandise can be picked according to the following principles:• by customer (e.g. a sales lines),• by order,• by individual merchandise group.

Point of Sale (PoS) Also referred to as Point of Purchase (PoP). Literally, this means the place where the sale takes place. When referring to stationary retail, PoS normally describes the selling space. The merchandise presentation at the PoS has become increasingly important in the past few years because this is where customers make their unpremeditated buying decisions.

Price Index Statistical measure of price changes within a defined period of time referring to the base year. The most important price index is the cost of living index (see consumer price index). This index expresses the average price changes for the goods collected in a basket of consumer goods. Here, consumers provide

© METRO AG 2012

143

Glossary → Process

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

the respective values. In contrast, retailers provide the respective values for the index of retail prices, which shows the development of retail prices.

Price Labelling Information about the price of merchandise that is located on the product itself or on the shelf. Price labelling is either done by the producer in the form of a non-binding price recommendation, which is printed directly on the product, or by the retailer e.g. on the shelf. In trade and retail, price labelling enables consumers to quickly compare goods and must there-fore comply with the regulations related to price honesty and transparency. In Germany, price labelling in retail is prescribed, substantiated and defined by the Price Indication Ordinance of 14 March 1985. At METRO Cash & Carry, price labelling is carried out by means of Electronic Shelf Labels that are linked to the checkout system by radio. See also electronic shelf labelling.

Price-Performance Ratio The price-performance ratio describes the rela-tionship between the costs and the utility of merchandise or a service: Price-performance ratio = costs ÷ utility. The utility can be ascertained by evaluating individual criteria (e.g. taste, service, etc.) according to a points system that also allows for a weighting of criteria. As every customer assigns different importance to different criteria, the individual utility and thus the price-performance ratio will vary from customer to customer.

Private Labels/Own-Brand Products These are brand products that are created and trademarked by a retailing company. From a consumer’s point of view, private labels/own-brand products of a retailing company serve as alternatives to brand products from industry because they offer an attractive price-performance ratio. From the retailer’s point of view, private labels/own-brand products are a way to rise above the competition and to improve a company’s trade margins. Because retailers can influence the products, their cost and their manufacture, the ratio between the purchasing price and the sale price is more favourable for them than with producers’ brands and the profit margin is therefore greater. METRO GROUP offers numerous own-brand products in its sales lines.

Process A sequence of logically interlinked activities which generate per-formance or change an object (transformation). A process has a defined start (trigger, input) and a defined end (result, value, output). In trade and retail, examples of processes are procurement or supply sequences. The processes of METRO GROUP are aligned to a sustained positive earnings development.


144 Glossary → Process Optimisation → Profitab e Growth

Process Optimisation The improvement of internal and external business processes, for example supply chains, with a view to achieving a sustained efficiency increase with a bottom-line effect. As a result of the heavy price pres-sure in the retail industry, trading and retailing companies have made the optimisation of process chains one of their top priorities: in the interest of the customers and the trade sector in general, they are continuously seeking new ways of optimising processes. The deployment of advanced technologies plays an important role. An innovative technology allowing considerable efficiency gains in the logistics processes inherent in trade and retail is Radio Frequency Identification (RFID).

Procurement The purchasing of goods, services, rights, financial and other resources at a previously negotiated price.

Procurement Logistics A logistics concept according to which merchandise is pooled and collected from the producer and delivered to the respective stores or warehouses. This means that there is no need for any interim storage. The supply chain along which merchandise and information travels from producer to store is therefore simplified. Pooling logistics services can result in significant service and cost advantages. Within METRO GROUP, METRO LOGISTICS organises the collection of merchandise from the producers on behalf of all sales lines in Germany. In other countries, some sales lines use the system autonomously. Another logistics concept that METRO GROUP applies is known as cross-docking.

Producer’s Brand A brand created by a manufacturing company to identify articles and thereby set them apart from other products on the market. See brand product.

Product Recall The term product recall is used to describe any action by a manufacturer or retailer in which specific products are recalled due to defects or safety risks. The public is informed via mass media about the exact designa-tion of the product and buyers are called upon to return their purchase to the shop where they bought it or to the manufacturer. Product recalls are intended to protect customers from possible damage or injury caused by defective merchandise. Otherwise, demands for damages might be claimed which can be financially damaging and cause irreparable harm to a company’s image.

Production Goods Unlike consumer goods, production goods are goods that are used by producers for their manufacturing process. Thus, they are involved

© METRO AG 2012

145

Glossary → Purchasing Cooperative

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

in the generation of economic value added. Production goods can be both consumable goods (e.g. varnish) or consumer durables (e.g. machines).

Profitable Growth The central target of a value-oriented corporate strategy. Profitable growth is devised to boost not only sales volume but also the profitability of a company. There are various profitability parameters. The (net) return on sales, for example, describes the ratio of earnings after interest and taxes to net sales.

Purchase The acquisition of goods and services in exchange for money, either by the consumer in a retail store or by the retailer in the sourcing markets. Purchasing and selling are typical activities of a trading and retailing company.

Purchase Contract A mutual agreement governed by the law of obligations pursuant to the provision of the German Civil Code (BGB), which is concluded with every buying or selling transaction. The seller undertakes to surrender to the buyer an object and transfer the right of ownership. The buyer under-takes to pay the agreed purchase price and take possession of the object. Legally speaking, a purchase contract is concluded with every retail trans-action. The customer takes possession of the merchandise. Ownership rights are transferred to the buyer upon payment at the checkout counter. The sales receipt is proof that the purchase contract has been concluded.

Purchase Price Also called ordering price or prime cost. The price invoiced by the supplier to the trading company for goods and services. The purchase price often includes additional services such as product labelling and shelf filling or the provision of sales staff. See also landed price.

Purchasing The buying of merchandise. The department in a company responsible for the sourcing of goods and services also bears this name. Category management and purchasing are handled by the same team at METRO GROUP.

Purchasing Cooperative An association of independent medium sized retailers that constitutes a purchasing pool in the legal form of a registered cooperative. The aim is to achieve higher procurement volumes by pooling demand and thus pushing through more favourable prices with suppliers. Purchasing cooperatives increasingly provide additional services to their members such as advice on the range of goods offered or concerted adver-


146 Glossary → Pure Play → Qual y Se

tising and sales promotion activities. Examples of purchasing cooperatives in German food retailing are the cooperatives Edeka and Rewe.

Pure Play Also known as a pure player. A generic term for companies that focus on a single, narrowly defined line of business. The US drinks group Coca-Cola is a classic example. In e-commerce, a pure play is a company that only sells its products online and does not operate its own bricks-and-mortar stores. The advantages of this concept are low acquisition and operating costs. The leading online retailer Redcoon, which the METRO GROUP sales lines Media-Saturn took over in March 2011, is an example of an Internet pure play.

Q

QR Code Quick Response code. QR codes are two-dimensional codes which were developed in 1994 to label modules and components for logistical purposes in automotive production. The QR code is square-shaped and consists of white and black markings in which information is stored. Square blocks in three of the four corners provide orientation. The data is protected by an error-correcting code, meaning that the image can still be read even if up to 30 percent of the code is not properly scanned. QR codes can be read using smartphones, tablet PCs or notebooks equipped with a camera and the corresponding software. As a result, QR codes are now used for a wide range of consumer-oriented applications, such as additional product information.

QS Qualität und Sicherheit GmbH A voluntary initiative of German trade and retail, the food industry and the agriculture industry for food quality assurance that was established in 2001. It is composed of representatives of associations and institutions from the areas of agriculture, the animal feed industry, slaugh-terhouses and carving firms, meat processors and the food retail industry. Its function is to organise the QA system that provides certified quality assurance for food. A monitoring and sanction system includes all steps in the food chain. merchandise from the QA system receives a QA seal. The seal was introduced at first for meat products. Since 2004, it has also been used for fruit, vegetables and potatoes.

Quality Assurance (QA) A system for planning, managing and monitoring all measures designed to create and maintain a defined quality standard

© METRO AG 2012

147

Glossary → Quality Seal

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

related to processes or goods. Trade and retail primarily use quality assur-ance to safe-guard the quality of merchandise bought from suppliers and sold to customers. METRO GROUP’s utmost priority is to continuously improve the quality standards of the range offered and the safety of food. The Group maintains a particularly efficient quality assurance system with some 500 quality assurance operatives worldwide. Organisational and technical measures ensure that services and products comply with Group-wide, clearly defined quality requirements. Among other things, quality assurance covers food and the raw materials used for production (raw materials control), producers’ and suppliers’ processes, proper merchan-dise transport, the integrity of the cold chain, compliance with quality stand-ards and hygiene in METRO GROUP’s facilities. In 2009, an end-to-end tracking system for food was also introduced, from field to fork. The Group also proactively pursues the continuous optimisation of quality standards in the food sector and their international recognition. Together with other German retailers, METRO GROUP has developed the International Food Standard (IFS) for supplier audits. It is based on the HACCP rules (Hazard Analysis and Critical Control Points), a procedure acknowledged in the food sector that identifies weaknesses in the production process and eliminates them through suitable measures.

Quality Seal A word and/or graphic symbol used to guarantee certain prop-erties, including quality characteristics, of merchandise or services. The particular demands are laid down by RAL (stands for Reichsausschuss für Lieferbedingungen, established in 1925) – Deutsches Institut für Güte-sicherung und Kennzeichnung e.V. (German Committee for Conditions of Supply) – in a recognition procedure that is carried out jointly with manu-facturers and suppliers, trade and retail and consumers, testing institutes and government agencies. RAL awards quality seals to quality communities that it recognises. These are associations of manufacturers and suppliers in the legal form of a registered association. The quality communities, in turn, grant the right to use a quality seal on request to manufacturers and service providers who voluntarily commit themselves to comply with certain quality and test conditions. Currently, there are more than 170 RAL quality seals covering thousands of products in Germany. Well known quality seals include the “DLG-Siegel” awarded by the German Agricultural Society and the “Deutsche Markenbutter” seal (German branded butter). The latter is not granted by quality societies, but by the state. The quality seal is based on statutory provisions such as the German Butter Directive.


148 Glossary → Radio Fr quency Identification (RFID) → Raw Materials Control

r

Radio Frequency Identification (RFID) An innovative technology for wireless data transmission based on electromagnetic alternating fields. The core of the technology is a so-called RFID transponder, a thin label that contains a pro-grammable chip and an associated miniature antenna. The chip stores the Electronic Product Code (EPC). RFID transponders can be detected by a reader without visual contact. The transmission range is up to one metre, in logistics applications it is up to 10 metres. In order to read the information stored on the integrated chip, the reader emits electromagnetic radio waves that are received by the antenna on the transponder. Through this electronic connection, the electronic product code can be read even without direct visual contact. The transponder is supplied with energy through the radio frequency field of the reader and does not need its own energy source. In trade and retail operations, transport and merchandise packaging as well as sales units and products may be equipped with RFID transponders. Readers are often installed in RFID portals at the entrance and exit of stores or warehouses. Store shelves (see smart shelf) may also be equipped with readers. RFID creates critical momentum for opti-mising the process chain, and thus constitutes an efficient alternative to the barcode. Within the scope of the METRO GROUP Future Store Initiative, the company is testing the practical use of RFID in the Future Store. Moreover, the partners of METRO GROUP may test the technology under real conditions at the METRO GROUP Innovation Centre in Neuss, Germany. In November 2004, METRO GROUP became the first retailing company worldwide to employ RFID successively along the entire process chain. To date, the Group has RFID- equipped incoming goods portals at around 400 locations throughout Europe. In total, roughly three million pallets are annually delivered with the help of RFID.

Range Offered The totality of the goods for sale in a store presented at the Point of Sale (PoS). The range of goods offered may vary depending on the merchandising concept. It comprises the quantity, quality and selection of prod-ucts as well as the kind of presentation. See also merchandise and assortment.

Rate of Stockturn A parameter indicating how often the stock of inventory of a trading company as a whole or in part is sold (turned over) within a determined period of time. It may be ascertained for an article, a category or the entire assortment, but also for entire industry sectors. Based on the rate of stockturn, it is possible to find out how long an article remains on stock on average until it is sold. The rate of stockturn is calculated by dividing the turnover of the mer-

© METRO AG 2012

149

Glossary → Real Drive

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

chandise within the given period by the average inventory of the merchan-dise in the same period. This parameter is the basis for optimising logistical processes which determine what quantities of an article have to be ware-housed permanently. The objective is to decrease the storage time of the merchandise in order to reduce the warehouse space required.

Raw Materials Control Monitoring of the quality of raw materials used for the manufacture of products. Raw materials are base materials incorporated into the product in the production process. Raw materials are, for example, ingredients and additives (food additives). Ingredients of a frozen dish are e.g. different kinds of greens or meat. Producers use additives to impart certain properties to the food. Food colourants, preservatives and sweet-eners are additives. They are identified by E-numbers. The food suppliers of METRO GROUP undergo regular random checks during the whole period of cooperation. Commissioned by METRO GROUP, neutral institutes analyse the ingredients (raw materials) and the safety of the food supplied at regular intervals using generally recognised rules and specifications of the quality assurance of the Group. See also food safety.

Reaction Management A concept for the prevention and mastering of quality incidents in trade, part of quality assurance systems. The quality assurance system of METRO GROUP is based on preventing risks in the food and nonfood area. It ensures that only impeccable and high quality food and nonfood items enter the Group’s stores. If a substandard food or nonfood product enters circulation despite all of these precautions, the international reaction management of METRO GROUP identifies and elim-inates the deficient items at the earliest possible stage. These efficient assurance systems enable the retail and wholesale company to react immediately. The mere suspicion that a product is defective is reason enough for METRO GROUP to recall the respective articles from all stores selectively, fast and, if necessary, worldwide. The Group always informs consumers and the public early on and comprehensively.

Real Drive An element of multichannel retailing concept used by the Real sales lines, which combines online sales of food with a collection store. Customers can select the goods they wish to purchase at the website www.real-drive.de. Two hours later, the merchandise is ready for collection from a Real Drive store. Customers just need to present their order number and pay for their shopping either in cash or with a debit or credit card. Real Drive is all about saving time. Germany’s first drive-in food store, which is


150 Glossary → Real Future Store → Reta l Industry

set up as a pilot project, is located in Isernhagen-Altwarmbüchen near Hanover. It was nominated as a “Selected Landmark 2011” as part of the nation-branding initiative “Germany – Land of Ideas”. In October 2011, the second Real Drive was established in Cologne-Porz.

Real Future Store Future store

Receipt Written confirmation of the purchase of merchandise or the provision of a service. In retailing, the sales slip is the receipt. It confirms payment of the purchase price and the transfer of ownership rights of an article from a trading company to the customer. Frequently, the sales slip in combination with a warranty card also serves as the document entitling customers to lodge complaints about defective merchandise. Today, receipts produced electron-ically at the checkout also serve as communication tools for informing cus-tomers on points acquired when using the customer card or for advertising messages. The receipts printed at Galeria Kaufhof GmbH, for example, show the number of points credited to the customers’ Payback account for their purchase.

Recommended Retail Price The recommended retail price (RRP) is the price recommended by the manufacturer for resale to the customer by the retailer. The RRP is a sign of the manufacturer’s knowledge of its product’s competi-tiveness. In addition, the RRP offers manufacturers a means with which they position the brand. The retail price is one of the manufacturer’s key factors in relation to customers when establishing a brand. In retail, the RRP is merely one of several mechanisms on which pricing is based.

Request For Proposal (RFP) During an online request for proposal, tenders will be collected from various suppliers (preselected in advance according to certain criteria). During a request for proposal, the purchaser is able to get a quick overview of the market situation and current market prices. It is also convenient for suppliers, because they can send their tenders to the purchasers online – all they need is an Internet connection. After the results of the RFP have been collected, a decision can be made regarding further negotiations. The final decision will be made either during an online auction or a traditional face-to-face negotiation.

Retail Brand A company brand with a distinct profile. Today, a clear brand profile is critical to the success of a trading and retailing company. A sales brand of METRO GROUP, for example, achieves the status of retail brand if it

© METRO AG 2012

151

Glossary → Retention Period

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

• meets all fundamental expectations of customers when shopping (“quality execution”),

• positions itself as distinct from its competitors through a special, efficient service and value strategy (“retail excellence”),

• communicates its identity as a brand.

Retail Industry Retail in a functional sense: procurement of merchandise from suppliers and sales to the consumer. In the institutional sense, the term describes companies that sell goods to consumers. In accordance with this definition, METRO GROUP’s sales brands Real, Media Markt, Saturn and Galeria Kaufhof are part of the retail industry. Compare with wholesale industry.

Retail Panel A panel based on regular surveys of an identical and represen-tative group of individuals, households or companies. The main categories of panel surveys in the trading sector are the retail panel and the consumer panel. Retail panels, for example, track the quantities and value of goods sold, the quantities and prices of goods bought as well as advertising and sales promotion activities. In general, market research institutes are com-missioned to carry out such studies. Retail panels may show how much favour individual products or brands find with the customer. They may also show whether the products were sold at regular prices or at a discount.

Retail-Relevant Buying Power Buying power is defined as the net amount of money available to private households during a set period of time. The retail-relevant buying power is the available net income plus loans and withdrawals from savings; new savings, debt redemption and the cost of housing, insur-ance and private old age provisions as well as expenses for motor vehicles, fuels and repairs must be deducted. What remains is the share of private consumers’ buying power that is potentially available for retail spending. Retail-relevant buying power is a planning parameter for the strategic positioning of retailing companies.

Retention Period The time a customer spends in a store. The upmarket product-oriented single-line retail and department stores attempt to increase the retention period of customers in their stores. To this end, they develop attractive and varied product presentations, programmes to guide custom-ers through the store and special service and relaxation zones, such as coffee bars. Hypermarkets (German “SB-Warenhaus”), superstores (German “Verbrauchermärkte”) and discounters normally design their selling space


152 Glossary → Return Or en ation → SA2 Wor dsync

in a way to enable customers to buy quickly and comfortably. The customer finds the product, is quickly guided through the store by means of a customer guidance system, can pay promptly and leave the store.

Return Orientation A corporate strategy geared towards maximising returns. Return describes the annual total income from the capital employed by a trading company.

Revenue Also sales. Income from all goods and services sold by a company during a set period of time. The trading and retailing sector normally sells food and nonfood products. Sales are measured in terms of quantity (quantity turnover) or in terms of a monetary unit such as euros (revenue on a value basis). Discounts granted to buyers or income from deposits are not included. The revenue of a trading company is not only measured for certain periods (day, week, month, season, year) but also for outlets, departments or individual merchandise groups and articles.

Revenue Size Categories Classification measure used for statistical purposes. Based on their annual revenues, companies of an industry sector are classified into different revenue size categories. The German Federal Statistical Office in Wiesbaden distinguishes between the following five revenue size categories for retailers (excluding automotive sector and filling stations). The figures in brackets show the share of total German retail revenues for the specific revenue size category. (Source: Federal Statistical Office, 2010)I. Below €1 million (12.4%)II. €1 million to €2 million (7.1%)III. €2 million to €5 million (9.5%)IV. €5 million to €10 million (7.9%)V. €10 million and above (63.2%)About 1 percent of the companies generate almost two-thirds of the total sales in Germany.

© METRO AG 2012

153

Glossary → Sales Channel

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

s

SA2 Worldsync SA2 Worldsync is a leading provider of integrated data management solutions for trade and retail. With its expertise in global data synchronisation (GDS), product information management (PIM) and Elec-tronic Data Interchange (EDI), SA2 Worldsync enables retailing, wholesale and industrial companies to efficiently map and execute key product, master and transaction data processes. Worldwide, some 6,800 companies in 20 different countries use solutions and services from SA2 Worldsync, including 50 of the world’s largest retailers. Retail customers such as AEON, Ahold, Auchan, Best Buy, Casino, COOP and METRO GROUP as well as suppliers including Dr. Oetker, Mars, SCA Hygiene and Sony utilise SA2 Worldsync to realise the professional exchange of article master data on the basis of international GDSN standards.

Sales The quantity of goods sold by a company during a set period of time. In trading and retailing, the term “sales” describes the volume of merchandise sold. The monetary value of the quantity sold is described as revenue. It is the result of quantity multiplied by price. In a broader sense, the term “sales” is used in the retail industry to cover all activities geared to the sale of merchan-dise to customers. Sales policy tools include, for example, sales promoting marketing campaigns such as special offers and specific marketing events. See also merchandising.

Sales Brand Self-contained market identity, independent of the parent brand, which a distribution company uses to promote and sell its prod-ucts. For instance, the sales brands Media Markt and Saturn operate independently of each other.

Sales Channel Also referred to as distribution channel or marketing channel. The sales channel is the route chosen by producers and trading companies to sell or distribute merchandise. Sales channels for manufacturers of branded products include direct selling through own-brand stores, department stores, specialty stores and discounters in stationary retail or mail-order business and Internet shopping portals in non-stationary retail. A trading and retailing company chooses and prioritises sales channels in the context of its sales routing policy. The following factors determine the selection of sales channels:• the product,• the target group,


154 Glossary → Sales Format → Seasonal Sal

• the company’s own market position,• the company’s competitive environment.

Sales Format The way in which a company markets its products. This covers various merchandising concepts such as single-line retail and cash+carry. Sales formats can be geared towards a particular target group and focus on various sales channels. For example, stationary retail offers different opportunities to the pure play format, which is used by companies such as the online retailer Redcoon. Permanently improving sales formats can enhance sales brands and attract new customers.

Sales Line An entity of a trading and retailing company that operates outlets or stores with a specific merchandising concept. At METRO GROUP, for example, four sales lines with specific merchandising concepts are independently active in their markets and comprise wholesaling, various forms of food and consumer goods retail as well as specialty stores in growth-relevant fields like electrical appliances.

Sales Tax Generally referred to as value added tax (VAT). Consumption tax levied on goods and services. Besides the wage tax, it is the most important source of income for the public sector in Germany. Sales tax is levied on sales at every stage of the value chain, from the raw materials supplier through the producer, wholesaler and retailer to the consumer. The system is set up in such a way that in the end only the consumer is charged with value added or sales tax. Goods and services used in the production process are tax neutral. The value added or sales tax collected by a trading company on merchandise sold would normally have to be fully remitted to the tax office. However, the trading company can deduct the turnover tax charged to it separately by its suppliers from the value added tax it collects (pursuant to §15 UStG [German VAT Act]: input tax deduction). If the difference is positive, the trading company must remit the difference to the tax office. If the difference is negative, the tax office will refund the difference amount as input tax to the trading company.

Scanner An electro-optical device by means of which signs, images and characters may be read into a computer. The main function of a scanner in stores is to read the barcode without manual input. The scanner senses the signs by means of a light beam and converts them into electrical signals. A merchandise management system connected to the scanner transforms the data contained in the barcode into information, for example product names or prices. Scanners simplify and accelerate the checkout process in retail stores and the input of the products for merchandise management.

© METRO AG 2012

155

Glossary → Selling Space Productivity

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

Seasonal Sale A clearance sale of merchandise at reduced prices, typically within a determined period of time (end of season sales such as the summer and winter sales). Until the summer of 2003, summer and winter sales in Germany were only allowed for a period of 12 workdays during which re-tailers were allowed to sell textiles, clothing, shoes, leather goods and sports articles at reduced prices. These sales constituted an exception to the general prohibition against organising special events. With the amendment of Germany’s Unfair Competition Law (UWG) in July 2004, these limitations were abolished. As a result, retailing companies are now able to determine the most convenient time to clear their stocks by offering merchandise at reduced prices.

Self-Checkout A fully automatic checkout counter at which customers can pay for merchandise in the absence of checkout personnel. The customers scan the products, place them in a bag and pay at the automatic checkout. They may pay cash or by EC/credit card. METRO GROUP was one of the first retailers in Europe to use Self-Checkouts at its Future Store. Today, Self-Checkouts are used at numerous Real hypermarkets and Saturn consumer electronics stores. Another version of this technology is the Express Self-Checkout, where shopping is scanned at one terminal and payment is made at another. First, the customers scan the barcodes on their purchases or asks a member of staff to scan them. Then they receive a slip, which they take to the payment terminal. There, they choose whether to pay by cash or card. As there are more payment terminals than Express Self-Checkouts with article scanners, customers can pay at their own speed, without feeling pressurised by the next customer waiting in the queue. This system also guarantees greater privacy, for example when entering a PIN. If customers have used their Mobile Shopping Assistant (see also mobile shopping) to log the items, they can go straight to the pay station near the Express Self-Checkouts.

Self-Service Selling mode in the retail and wholesale industry in which cus-tomers find and select the desired merchandise in the store and bring it to the checkout without the assistance of store personnel. Self-service is prac-ticed in cash+carry, at hypermarkets and at discounters. Specialty stores and department stores also have areas where the customers serve themselves. See also Self-Checkout.

Selling Space Productivity Also referred to as space performance or area productivity. It describes the turnover of a trading company in relation to the selling space or the store space. As a business management parameter, sell-ing space productivity is expressed in sales per square metre. On the basis


156 Glossary → Serial Shipping Container Code (SSCC) → Shopl ting

of selling space productivity, a trading company steers internal processes such as procurement, staff manpower planning or visual merchandising.

Serial Shipping Container Code (SSCC) Worldwide identification number for shipping and transport units such as pallets, boxes or goods transported on hangers, as is customary in the garment industry. The SSCC is a GS1 standard. It is composed of an international basic number that is issued by GS1 or one of its member organisations and the manufacturer’s serial numbers. With the SSCC, each shipping unit in the process chain can be identified. The number is contained in a barcode on the transport container and can be read with a scan-ner. Thanks to the SSCC, the route taken by the goods from the manufacturer through to the retailer can be traced at any time. The SSCC is particularly useful for the electronic exchange of data (Electronic Data Interchange, EDI) between the supplier and the retailer. The electronic transfer of the number accelerates the process of goods receipt storage management. METRO GROUP is using the SSCC for Electronic Data Interchange since 2003.

Services Used to describe goods whose production and consumption occur simultaneously. The classic example of a service is a visit to the hairdresser. The substance of a service is always nonmaterial: it can be neither stored nor transported.

Shelf Management A concept for optimising the refilling of shelf systems in stores. The functions of shelf management include, for example, the elaboration of shelf plans with product images, safeguarding the complete merchandise supply, sorting out and reducing fresh produce articles with expired best before dates or shortly before expiry.

Shop Loyalty Occurs when a customer visits the same store repeatedly or prefers to buy in a certain shop, for example a specialty store or chain store company. The reasons for such loyalty can include: an appealing product range, a good price-performance ratio, easy orientation in the store, a ple-asant atmosphere, good assistance or accessibility. Trading and retailing companies seek to increase shop loyalty by measures of customer retention such as the Payback programme, in which, among other companies, the METRO GROUP sales brands Real and Galeria Kaufhof participate.

Shop-in-Shop Concept A way to present partial assortments in retail. Such large-area centres as hypermarkets and department stores frequently inte-grate well known brand name manufacturers into their selling space under a

© METRO AG 2012

157

Glossary → Shopping Arcade

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

shop-in-shop arrangement. At the brand shops, the articles of a brand name manufacturer are bundled in one area, distinguishing them from the rest of the selling space by the merchandise carrier and the kind of mer-chandise presentation. Brand shops are typically managed by the brand name manufacturers themselves. Aside from brand shops, there are partial assortments defined by the retailing companies themselves such as “Books” or “Kid’s Corner” that are presented as a shop-in-shop. The purpose of the concept is to sharpen the profile of a brand and of the store. The depart-ment stores of METRO GROUP’s sales brand Galeria Kaufhof, for example, integrate upmarket brand shops of well-known brands such as Esprit or Betty Barclay in their selling space and thus demonstrate a high level of assortment competency.

Shoplifting The unlawful appropriation of merchandise by customers or staff. The annual loss of merchandise in the retailing sector is estimated at about one percent of the sector’s total sales. The use of an electronic anti-theft system (EAS) can help the retail trade reduce the theft rate.

Shopper Marketing Shopper marketing refers to the knowledge of the target customer’s behaviour as a shopper in a variety of channels or for-mats, and to the way in which this knowledge is used effectively for the benefit of all stakeholders (in other words manufacturers, retailers and consumers). Shopper marketing focuses on the shopping situations in which consumers find themselves within stores or shops, on consumers’ relationships with the product, and on in-store presentation. Ideally, shopper marketing forms part of a successfully integrated marketing strategy. In addition, shopper marketing is a decisive factor in the partnership between retailers and manufacturers. Common strategies oriented toward the interests of the consumer open up huge opportunities for creating customer retention. This is the basis for the long-term success of both business partners.

Shopping Arcade A network of retailers and service providers from a wide variety of industries arranged on a large area created by the architectural combination of two or more streets with high traffic and pedestrian density. Shopping arcades are covered. They are built at central locations in large and medium-sized cities. The purpose is to invite consumers to stroll and stay by virtue of a multifaceted offer of event shopping and restaurants (see also one-stop shopping). Examples: Galleria Vittorio Emanuele II in Milan, Passage Jouffroy in Paris, Burlington Arcade in London, Kö-Galerie in Düsseldorf.


158 Glossary → Shopping Behaviour → Single-line Reta l

Shopping Behaviour Customers’ buying habits. They are tracked by retailing companies and analysed with the aim of tailoring product portfolios and services to the individual needs of particular target groups. There are different aspects to shopping behaviour: • The qualitative aspect: What merchandise is bought?• The quantitative aspect: How many products are bought?• The local aspect: Which outlet is visited?• The personal aspect: Which family member does the shopping?• The time aspect: When is the shopping done, how often, and how long

does it take?As a rule, professional market research institutes track shopping behaviour and sell these data to retailing companies for their strategic planning. Major retailing and wholesale companies such as METRO GROUP also have their own data, which are stored at the Group’s data warehouse and processed to enable analysis. See also retail panel.

Shopping Centre Also specialty centre. A naturally evolved or planned local concentration of retailers and service providers of different kinds and sizes. Specially planned shopping centres can be found on the outskirts of cities as well as in city centres, although the trend is pointing toward an increasing focus on inner-city locations. Most main shopping centres are created in the context of urban redevelopment projects or the restructuring of existing areas, such as railway stations and department stores. In the case of green-field projects, investors may utilise abandoned industrial sites and closed military airports or barracks. Whether the site is referred to as a shopping centre or a specialty centre depends on the mix of sectors and the location. Specialty centres tend to be located on the outskirts of cities and are oriented towards the local supply of goods for everyday needs, whereas shopping centres are usually located in inner-city areas and characterised by companies from the textiles sector. METRO PROPERTIES, the Group’s real estate company, manages MEC METRO-ECE Centermanagement GmbH & Co. KG (MEC) as a joint venture with the Hamburg-based company ECE. MEC is a leading centre management company for specialty centres in Germany, and operates 38 shop-ping centres in partnership with over 3,000 tenants. METRO PROPERTIES also operates shopping centres in Poland and Turkey. These include Magnolia Park in Wroclaw and the Meydan Shopping Square in Istanbul, where METRO GROUP is represented with its sales brands Real, Media Markt and Saturn.

© METRO AG 2012

159

Glossary → Special Action

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

Single-line Retail A general term for specialty stores specialising in defined lines, areas or demand groups (demand). They distinguish themselves through a specific range of goods (for example sportswear and sporting goods) and by offering qualified advice through expert staff. Examples: textile specialty retailer, spirits specialty retailer. See also trade and retail.

Smart Budget Family A family with a limited available household income. Such families pay particularly close attention to special offers.

Smart Scales A weighing system for fruit and vegetables, equipped with a special camera and identification software. The scales automatically recog-nise the product on the basis of its colour and form, weigh it and then print out the price tag. The innovative technology for trade and retail was tested at the first METRO GROUP Future Store in Rheinberg. It is currently in use in the Real sales brand.

Smart Shelf A store shelf that uses Radio Frequency Identification (RFID) to automatically determine when a product has been removed or placed incorrectly. This advance is made possible by a special reader built into the shelf that can read the RFID transponders on the product packaging. The shelf automatically transmits the information to a central computer sys-tem. Thanks to this innovative technology, employees can restock the shelf in a timely manner and prevent impending stock-outs. This system can also automatically track the expiry dates of food. The smart shelf is used at the METRO GROUP Innovation Centre and the Real Future Store.

Smart Shopper A customer who aims to buy quality goods at the lowest possible price, in contrast to the hybrid customer, whose shopping behaviour changes depending on the situation. The smart shopper is looking for the ideal price-performance ratio. He spends a lot of time making a decision and selectively makes use of special offers. The Internet and the common Euro-pean currency enable this group of consumers to make a quicker price comparison.

Special Action A sales policy instrument for the purpose of offering cus-tomers something special and thus enhancing customer frequency and customer retention. A special action in commerce is a special offer or the organisation of sales promotions to attract the public to the Point of Sale (PoS). A “2 for 1” action, for example, has this effect. Other typical special actions are competitions to win a prize which are advertised in the selling


160 Glossary → Special Offer → Stock o Inve

space or a fashion show with a champagne reception for key customers. Special actions are often organised by a store in cooperation with brand name manufacturers.

Special Offer A comparatively low or reduced price for a product which is highlighted by advertising. A special offer is normally limited in time. It is an instrument of sales policy and serves to promote sales.

Specialty Centre A retail store with a large retail area that offers a broad and frequently deep assortment from a particular merchandise area (examples: a clothing specialty centre, a shoe specialty centre), from a demand area (examples: a sports specialty centre, a baby specialty centre; see also demand) or a target group area (example: a centre for people who prefer furniture made of natural materials) in a well-designed setting. One characteristic feature of specialty centres is their large share of self-service assortments. Sufficient parking is often a key consideration in the choice of the location. City centre locations are preferred by some assortments (example: specialty chemist’s shops). With its Media Markt and Saturn sales brands, METRO GROUP is Europe’s leading operator of consumer electronics centres.

Specialty Store A retail store offering a one line or demand group-oriented assortment in varied selection and in different qualities and price ranges with supplementary services. For example, specialty stores for consumer electronics or office stationery. Examples of special services are an assembly service or a printing service for notepaper or business cards. Another char-acteristic of specialty stores is that they have well-trained, specialised person-nel to advise customers. See also specialty centre.

Stationary Retail A generic term for retailing facilities with a fixed location. Typical merchandising forms in stationary retail are the hypermarket (German “SB-Warenhaus”), the superstore (German “Verbrauchermarkt”), specialty retail, the specialty store, the department store, the supermarket (German “Super-markt”) and the discounter. Depending on the organisational form, stationary retail is characterised by personal customer service by trained store person-nel. In contrast, non-stationary retail is characterised by the use of mobile stalls, weekly markets and agent trade as merchandising platforms (see also itinerant retail). Mail-order business and e-commerce are also forms of non-stationary retail. The non-stationary retail system benefits from low rents and personnel expenses because it does not maintain outlets in real shopping districts. However, it has to rely on efficient logistics to ensure that the ordered

© METRO AG 2012

161

Glossary → Store Opening Times

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

merchandise is delivered to the customers quickly and reliably. The sales brands of METRO GROUP, METRO Cash & Carry, MAKRO Cash & Carry, Real, Media Markt, Saturn and Galeria Kaufhof, are stationary trading enterprises which in parts highly dovetail their online shops with their stationary business.

Stock of Inventory Also: warehouse stock. The sum of all available merchandise in a company or a division with regards to quantity and/or value. In trading and retailing companies, for example, the merchandise destined for retail in the warehouse of a store or a central interim storage facility. The stock of inventory is managed using purchasing planning as well as the control of the rate of stockturn. The stock of inventory has to be determined at the end of the business year (inventory) and evaluated (in-ventory evaluation).

Stock-Keeping Unit (SKU) An SKU is an article in a warehouse which can be unmistakably identified by an additional (e.g. Coca-Cola 2l #111). The SKU is an item in inventory registration and planning. Several SKUs may be allocated to one article if several varieties of such an item are on stock in place of a standard article or if the same article is on stock at several warehousing locations (central warehouse, regional warehouses, distribution warehouses, etc.).

Store Check A review of merchandise presentation and store layout with a view to attractiveness and convenience for customers. Store checks in commerce serve to set benchmarks. Market research institutes are fre-quently commissioned to assess the assortment and merchandising of the best in class. The results are used to determine the optimisation potential for a company’s own sales lines. Brand name manufacturers also carry out store checks in order to verify the quality of presentation and the environ-ment in which their products are offered.

Store Opening Times The period during which a store sells merchandise to customers. In Germany, store opening times are governed by the Shop Closing Hours Act. This law sets limits within which wholesalers and re-tailers may freely select their own store opening times from a business perspective. According to the Shop Closing Hours Act of 28 November 1956, which was last amended on 16 November 2006, points of sale for transactions with customers – e.g. supermarkets or department stores – may open from Monday to Saturday, from 0.00 a.m. until 12.00 p.m. On 24 December selling is allowed from 0.00 a.m. until 2.00 p.m. on workdays. There are different


162 Glossary → Supermarket → Supply Chain

regulations for Sunday trading in the various Federal States of Germany. In most cases, shops may open for four Sundays a year. Different provisions of the Shop Closing Hours Act apply to pharmacies, vending machines, railway stations, airports and petrol stations. The latter may be open round the clock on all days, but they may theoretically only sell fuel, spare parts and travellers’ necessaries.

Supermarket (German “Supermarkt”) A retail store with a selling space of 400 square metres and more offering food and luxury items, including fresh produce (fruit including subtropical fruit, greens, meat and dairy products) and complementary short-term merchandise from other industry sectors mainly in the self-service mode. The assortment of a supermarket comprises about 7,000 to 12,000 articles, the share of the space for nonfood (see also food) is usually limited to 25 percent of the overall selling space. Today, supermarkets have taken on the function of the neighbourhood store. If the selling space covers 1,500 square metres and more, the stores are referred to as superstores (German “Verbrauchermärkte”), and from 5,000 square metres as hypermarkets (German “SB-Warenhäuser”).

Superstore (German “Verbrauchermarkt”) Retail store with a floor space of at least 1,500 square metres that offers food as well as consumer durables and consumable goods for short- and medium term consumption, mainly for self-service. The assortment comprises between 21,000 and 40,000 articles, which is distinctly more than a normal supermarket or discounter.

Supplier A producer or wholesaler from whom a trading company buys mer-chandise. The supplier must ensure that the merchandise ordered by the tra-ding company is available in kind and quantity at the right place and at the right time. Food suppliers commissioned by METRO GROUP to produce trader’s brands (see also private labels) must undergo a strict testing procedure known as the supplier audit before taking up business relations. This procedure is part of METRO GROUP’s quality assurance.

Supplier Audit A strict testing procedure for suppliers who are commissioned by METRO GROUP to produce METRO’s own-brand products. In line with this testing procedure, they must furnish proof that they are permanently in a pos-ition to meet the high quality requirements of METRO GROUP. Not every pro-ducer or supplier seeking to enter into business relations with METRO GROUP is able to take these hurdles.

© METRO AG 2012

163

Glossary → Sustainability

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

Supply Chain Also stream of merchandise. The path that merchandise takes from the producer via a distributor or intermediate storage site to the retailer. The planning and monitoring of the supply chain are called logistics. Trade and retail strive to keep the supply chain as short as possible and to optimise the timeliness and quality of deliveries (for example, adherence to the cold chain). Lawmakers have also created clear requirements aimed at making the supply chain transparent: since 1 January 2005, the EU regulation 178/2002 has required the traceability of food and animal feed to be guaran-teed through all production, processing and sales steps. An innovative technology that considerably improves the efficiency of planning and mon-itoring the supply chain is Radio Frequency Identification (RFID). See also value added chain.

Supply Chain Management Planning, steering and control of the route taken by the merchandise from the supplier to the customer. Stages on the route include the production sites of manufacturers, the central warehouse of the wholesaler or retailer and the department store or superstore. By applying Radio Frequency Identification (RFID), merchandise movements and account-ing entries can be registered and documented automatically.

Sustainability The guiding principle of national economies, organisations and companies seeking to meet current demand without adversely affecting the quality of life of future generations. The Commission of Inquiry of the 13th German Bundestag on the Protection of Mankind and of the Environment in 1998 identified three dimensions of sustainable development: ecology, economy and social issues (triple bottom line). The German term for sustain-ability was coined in the German forestry industry in the 18th century. The foresters only cut as much timber as would grow again in the woods. For the economy, sustainable action today means the recognition of an extended entrepreneurial responsibility for the needs of society and the environment. In its corporate strategy, which is geared towards long-term positive sales and earnings development, METRO GROUP sees sustainable business practices as an integrated approach. Sustainability in this regard means bringing economic growth targets in line with ecological and social require-ments, and influencing all processes relevant to sustainability. To do this, METRO GROUP has defined four clear areas of action along the entire value added chain: supply chain and products, energy and resource management, employees and social affairs, as well as social policies and stakeholder dialogue.


164 Glossary → Sy ems or Returnable Packaging → Test Market

Systems for Returnable Packaging Collection and reuse of packaging in the stores after it has been cleaned and refilled. These systems are developed by politicians and the economy. Their stated goal is to avoid waste, mainly beverage containers. The system centres around the intensive use of returnable containers (for example beverage bottles, bottle crates, yogurt jars). The sys-tem requires the appropriate infrastructure, including suitable collection, storage and cleaning systems. In order to motivate consumers to return the containers, stores charge a deposit, which is refunded as soon as the customer returns the packaging to the store.

t

Tare The weight of product packaging, such as the weight of an empty bottle or an empty box. By deducting the tare from the gross weight (gross), the net weight (net) is obtained, which means the actual weight of the product.

Target Group All existing and potential customers who are addressed by a company through a product, a sales format, a merchandising concept or a de-fined marketing activity. Market segmentation is the basis for determining target groups by relevant characteristics. The main problem is that target groups are unstable over time (dynamism), which means that the target group is constantly changing. Target groups can be defined by the following criteria:• sociodemographic characteristics (such as age, sex or education),• behaviour-oriented characteristics (such as intensive users or first buyers),• psychological characteristics (such as innovative or safety-oriented),• media-oriented characteristics (such as newspaper readers or Internet

users).The so-called Outfit Study of the Spiegel publishing group, for example, draws on sociodemographic as well as psychological characteristics in order to divide the population in Germany into target groups such as “the individualist” or “the conservative”. However, consumers of today do not always act in the same way, meaning that the process of dividing customers into customer groups or target groups involves an ever-increasing number of approaches, such as sentiment marketing, for example. Sentiment marketing takes account of the facts that consumers have a great many facets to their personalities and that they show different patterns of behaviour in different circumstances and situations.

© METRO AG 2012

165

Glossary → Trade and Retail Marketing

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

Test Market A regionally limited submarket or sales market in which trading companies test consumer acceptance before introducing new products, services, technologies or store types. Test markets must offer a representative mixture with respect to the population, the economy, the competitive situation and trade and retail structures. They should feature a clear local delimi-tation from the other catchment areas. From 2003 to 2007, METRO GROUP tested technologies for an exceptional shopping experience in the Future Store in Rheinberg before these were implemented across the country. In the spring of 2008, a new Future Store opened in Tönisvorst. A wide range of technologies and new range concepts are tested at this Real Future Store.

Theme Retail A way of designing stores and presenting merchandise that responds to consumers’ increasing leisure time and entertainment orien-tation. For example, companies such as department stores or specialty stores are increasingly using special lighting, colour, music or interactive elements – such as the opportunity to test a golf club right in the store – in order to create special theme worlds. The aim is to extend the retention period of customers in the store, to promote impulse buying and to strengthen customer loyalty through outstanding service. The various sales brands of METRO GROUP employ a theme-oriented presentation of merchandise in many parts of their stores.

Trade and Retail An activity by which a trading and retailing company pro-cures merchandise that it typically has not made or processed itself (com-modities) from other market participants (e.g. producers of consumer goods) and sells it to third parties (e.g. consumers). This process is also referred to as trade in the functional sense. In institutional terms, trade and retail refers to the entirety of all trading operations or trading companies, i.e. all those companies that conduct trade and retail business in accordance with the above definition.

Trade and Retail Marketing The specific marketing of trade and retail to boost sales of goods and services by using such tools as portfolio policy, price policy, sales area design and merchandise presentation as well as communi-cations (advertising, public relations, sales promotion, events). The sales volume of a merchandise category can be boosted by removing individual products from the category assortment, including new ones or reducing prices. Changes in shelf presentation or promotions at the Point of Sale (PoS)


166 Glossary → Trade Con rolling → Tradin -up Strate

may also increase sales. In most cases, various tools are combined in what is called a marketing mix. The sales lines of METRO GROUP employ trade and retail marketing mainly within the scope of category management.

Trade Controlling The target-oriented coordination of information to plan and monitor functional divisions of a trading company and to prepare management decisions. Key tasks include setting up and regularly updating the necessary information system, supplying the management with the relevant information and supporting the management in planning, monitoring and controlling with appropriately prepared and presented key data. A trading company obtains the relevant data for effective controlling from in-house material such as budget specifications (budgeting in retail) and from external sources of information such as official statistics or benchmarking results.

Trade Margin The difference between the purchase price or landed price and the selling price of the goods sold by a trading company. Every trading company strives to achieve a positive trade margin. This means it seeks to generate a profit from its sales that exceeds the cost of procurement and lost merchandise, for example from or spoilage.

Trade Research A research branch dealing with issues related to trade and commerce. For example, trade research aims to shed light on the position of a particular trading company vis-à-vis its suppliers, competitors and customers. It also examines structural changes within the industry. The economics depart-ments of some universities include a separate chair for trade research, such as the “Institut für Handelsforschung” (Institute for Trade Research) at the Uni-versity of Cologne. As a rule, major trading companies maintain close ties and a regular exchange of information with trade researchers. This ensures that trading companies put the theoretical conclusions from research and teaching into commercial practice. Conversely, practical knowledge gathered by the trading companies is fed back into the research institutes. METRO GROUP supports several trade research institutes.

Trader’s Brand Protected trademark issued by a large retail organisation. Retailers that “brand” certain products themselves (i.e. give them an unmis-takable outer appearance for marketing purposes) create a trader’s brand. The brand can have a name, a logo, a combination of both or a special packaging form or colour as its distinguishing mark. It is owned by the retailing company. Other terms frequently used for trader’s brands are private label/own-brand product. See also brand products.

© METRO AG 0 2

167

Glossary → TV Shopping

METRO-Handelslexikon 2012 / 2013

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

Trading-up Strategy A qualitative increase in the service range of a retail operation, for instance by broadening the product palette, raising the quality level, providing more extensive services and more appealing shop fixtures and furnishings.

Traffic Light System A nutrition labelling system. Colour coding on the front of food packaging shows consumers the most important nutritional information per 100 grams. The system displays the levels of fat, saturated fatty acids, sugar and salt contained in the food. Green stands for low, amber indicates medium and red represents high levels. Taking fat as an example: green corresponds to contents of up to 3 grams, amber stands for 3 to 20 grams, and red indicates over 20 grams. Unlike real traffic lights, red does not mean “stop”: it is merely intended to show consumers that they should eat certain foods in moderation. The traffic light system was developed by the British Food Standards Agency (FSA). Its use is voluntary. The system has attracted a number of criticisms, including the lack of a scientific basis for establishing the thresholds and the fact that a healthy, balanced diet cannot be defined using individual foods. Germany’s Federal Ministry of Food, Agriculture and Consumer Protection (BMELV) therefore recommends that companies use the “1 plus 4” model for food labelling.

Transport Logistics All activities relating to the transport of articles and unit loads within the scope of merchandise flow management (logistics). By pooling logistics services, retailing companies may realise substantial service and cost advantages because the number of delivery processes at the loading ramps and the warehousing costs can be reduced. At METRO GROUP, METRO LOGISTICS is responsible for the logistics on behalf of all sales lines in Germany and the comprehensive international logistic activities.

Triple Bottom Line Traditionally, the bottom line refers to the financial result or profit generated by a company. By contrast, the triple bottom line expresses a company’s success in wider economic, social and ecological terms. It is a way of showing that a company acts sustainably and offers value added for investors, staff and the society as a whole. The triple bottom line is usually documented in a company’s annual report or sustainability report.

TV Shopping A method for selling goods to consumers in which at least the presentation of goods is done via television. A distinction is made here be-tween traditional and interactive TV shopping according to the level of inter-activity of the presentation. In traditional TV shopping, products are shown


168 Glossary → Uniform Code Council, UCC → Va ue Added

to the customer on the television through commercials or sales shows. These products can be ordered through a displayed telephone number or address. Interactive TV Shopping describes the part of teleshopping that takes place through interactive television. Interactive TV Shopping can only take place through analogue television when the TV is connected to the Internet with the help of a decoder and an online telephone connection.

u

Uniform Code Council, UCC New: GS1 US

Unique Selling Proposition (USP) A unique selling point that sets a product or brand apart and therefore gives it a competitive edge. Companies usually highlight their USP in communications so as to position their products/services as the best on the market. USPs could be a low price, a specific feature of the product or service, an exclusive image or the price-performance ratio.

United Nations Conference on Trade and Development (UN CTAD ) Standing conference of the United Nations since 1964. The 193 member states, which include Germany, work to strengthen the economy in developing countries and cautiously integrate them into the global trading system. The resolutions of UNCTAD have a recommendation character. In the Least Developed Countries report, which is published every two years, UNCTAD analyses the relationship between poverty, development and globalisation in developing countries such as Bangladesh, Ethiopia or Sudan. On this basis, UNCTAD delineates alternative strategies on how trade and retail can be used to reduce poverty in those countries.

Upselling Actively offering a product that is of better quality or more expensive than the one the customer originally requested – for example, suggesting champagne rather than prosecco. Successful upselling depends on advice that is tailored to the customer’s needs. Product demonstrations can be an effective tool. The aim of upselling is to further capitalise on existing sales potential. See also cross-selling.

© METRO AG 2012

169

Glossary → Visual Merchandising

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

v

Value Added In macroeconomic accounting, this term describes the real net output achieved in the individual economic sectors. In business manage-ment, value added expresses a company’s productive capacity. The value added of a trading company is measured by total net revenues from which the factor input is deducted. The factor input includes the performance of the upstream production stages (suppliers, logistics service providers, etc.) and, for example, expenses for personnel, IT and checkout systems.

Value Added Chain In trade and retail also supply chain. Describes the architecture of value added in different stages of activity. Each of them offers an opportunity for differentiation and makes a contribution to the relative cost position of a company in competition. In general, nine fields of activity are distinguished along the value added chain. • Primary fields of activity: input logistics, production (not applicable

to trading companies), output logistics, marketing and sales, service.• Supporting fields of activity: corporate infrastructure, personnel

management, technology management, procurement. Typical areas for optimising the value added chain of trading companies are logistics and procurement. By means of improved process flows in these areas, for example, the availability of merchandise can be improved, warehousing costs reduced or part of the procurement can be executed automatically on the basis of efficient merchandise management systems.

Value-Added Tax Sales tax

Value-Oriented Management A corporate policy which is designed to lastingly increase the economic value of a company. To this end, a trading company continuously improves its business processes such as procurement or merchandise management. The consequence of this process optimisation can be decreasing operating costs and/or increasing revenues.

Visual Merchandising Product presentation at the Point of Sale (PoS). The objective of visual merchandising is, on the one hand, to facilitate orientation and goods selection for customers. On the other hand, visual merchandising triggers buying impulses without requiring the activity of a shop assistant. Optical aids such as large ambiance posters or electronic advertising disp-lays (see also digital in-store communication) are deployed deliberately to


170 Glossary → Weighted Average Cost of Capital (WACC) → World Trade Organizat n (WTO)

arouse emotions or highlight the benefit of a product. At every sales line of METRO GROUP, a specialist team of visual merchandisers develops stand-ardised presentation concepts for the outlets and stores of the Group.

w

Weighted Average Cost of Capital (WACC) This approach is one of the stand-ard capital valuation methods and is used for company valuations. Company valuations can be particularly important, for instance, when a company is about to be sold or go public. The WACC describes the average weighted costs that a company must invest in capital. These consist of the average costs for debt capital (e.g. interest on a loan) and the average costs for equity capital (dividend payouts and taxes = imputed interest). The weighting of equity capital and debt capital in the WACC calculation is made in accordance with their proportion of the total capital of the company.

Wholesale Industry A trading form where, in contrast to retailing, the mer-chandise is not sold to consumers but to commercial resellers (see retail industry), downstream processors or commercial users (such as authorities or caterers). In institutional terms, the term wholesale industry also describes the entirety of all companies conducting wholesale. See also trade and retail and cash+carry.

Wholesale Store A location where a multitude of suppliers sell certain goods, essentially to commercial resellers (see retail industry), commercial consumers or large-scale buyers (e.g. market gardens). Wholesale stores typically trade in perishable produce such as fruit and vegetables, meat, fish and flowers. See also cash+carry, wholesale industry.

Wholesale Trade with Service The conventional form of wholesale trade (see wholesale industry). Unlike in cash+carry stores, merchandise is handed out by sales staff. Most wholesale fruit, vegetable and fish stores are organised on the service principle.

© METRO AG 2012

171

Glossary → World Trade Organization (WTO)

a

B

c

d

e

f

g

h

i

K

L

m

n

o

p

Q

r

s

t

u

v

w

Z

World Trade Organization (WTO) Special organisation of the United Nations, founded in 1995 as the successor organisation of GATT (General Agreement on Tariffs and Trade). In 1948, GATT came in force as an international agree-ment to dismantle customs and trade barriers and standardise customs and trade practices to facilitate economic relations among countries. The Fede-ral Republic of Germany signed this agreement in 1950. The WTO, based in Geneva, has more authority than GATT; it controls member states’ compli-ance with its rules, oversees their national trade policy and acts as a mediator in the event of trade conflicts between the member states. The WTO has comprehensive legislative, judicial and executive rights. The national mem-ber states must harmonise their national rules and bilateral agreements with WTO regulations. The WTO has 155 members. Its main bodies are the Conference of Ministers and the General Council.