Whether you've worked in brick-and-mortar stores and want to try online sales or are entering sales for the first time ever, you may have come across ecommerce terms that are new to you.
This ecommerce glossary provides definitions and additional information about terms you might have found while learning the basics of ecommerce.
Most of the ecommerce terminology we'll discuss focuses on what you need to do before you can really think about ecommerce marketing. However, some marketing terms will appear because they affect your business planeven in the earliest stages.
Now, let's dig into these 36 ecommerce terms to help you on your journey to running your online business.
1. Affiliate Marketing
When a website links to another brand's products (often in a blog post or similar) in exchange for a commission, this is affiliate marketing.
If you engage in affiliate marketing on your site, you must include a disclaimer letting your readers know you make money off purchases they make via your links.
Authorization occurs when an online purchase asks a credit card company to approve a transaction. The process involves ensuring a card has sufficient funds, is valid, and is being used legally.
3. Average Order Value (AOV)
Average order value (AOV) is the average amount customers spend at your store, determined by dividing revenue by the number of orders.
AOV = Revenue / # of Orders
4. Bundling/Product Bundling
When you group relevant products as a single package, usually for a lower price than the products would cost separately, you are bundling your products.
5. Business to Business (B2B)
Business to business (B2B) sales occur when one business sells items or services to another business.
6. Business to Consumer (B2C)
Business to consumer (B2C) sales involve selling items to individuals, not businesses.
7. Call to Action (CTA)
More often called a CTA, a call to action is when you ask or tell a customer or member of your audience to do something. Examples include "buy now," "contact us," or "learn more," often with a button to click.
Conversion is the process of getting a visitor to become a buyer. They go through the conversion or sales funnel, in which they go through the four stages of awareness, interest, desire, and action (i.e., becoming aware of your brand through making a purchase).
The number of people who make purchases divided by the number of visits to your site is your conversion rate.
Conversion rate = Purchases / Site Visitors
A cookie is a snippet of code in web browsers that tells a website when visitors arrive on the site and what they do while the're visiting. They help ecommerce companies see:
- How a visitor got to your page.
- What the visitor did on your page.
- How many times they visited your site over a certain period.
- Overall demographics of visitors.
- Which sites people stay on vs. which they quickly leave.
10. Customer Acquisition Cost (CAC)
Getting customers to show up in your store costs money, and the amount it costs is called customer acquisition cost (CAC). You divide the amount you spent on marketing by the number of people who purchased to determine your CAC.
CAC = (sales + marketing expenses) / (total customers acquired)
11. Customer Lifetime Value (CLV)
CLV, or customer lifetime value, is the amount you can reasonably anticipate an individual will spend at your store over every purchase they ever make from you.
CLV = ([customer’s profit contribution per year] x [total years as a customer]) – CAC
12. Content Management System (CMS)
A CMS, short for content management system, allows you to create, monitor, and alter content on your website. You don't need to be a web designer or coding expert to use a CMS.
13. Customer Relationship Management (CRM)
A type of software, customer relationship management (CRM) helps you build and maintain relationships with users from their first visit through all their subsequent purchases.
Cross-selling involves linking from one product's page to another. The second product should be relevant and potentially improve the customer's enjoyment of or success with the first.
For example, let’s say you manage WinstonsDogs.com, an online brand that sells hot dog supplies. Your domain is:
[winstonsdogs] + [.com ]
[Domain name]+[domain name extension]
With dropshipping, a third party fulfills your orders, while you acquire and facilitate orders for customers. This means you don't need to store your products.
After your site makes a sale, the fulfillment process begins. It begins with receiving sale confirmation and ends with the item being packaged and shipped.
Also called a payment gateway, a gateway processes credit card transactions. It transfers the data from the bank or credit card provider, allowing the transaction to occur. This is different from a merchant account provider as it could be considered a middleman between the funds and the merchant account provider.
Your inventory is the products you have in stock right now. So, if you're out of something, it is not part of your inventory.
If you sell digital products like MP3s, videos, or documents, your inventory doesn't need to be replenished. Those items don't exist in physical form and generally can't "sell out."
20. Landing Page
A landing page is where a customer ends up after clicking a link. This doesn't have to be your homepage.
21. Listing Fee
If you sell through third-party sites and not your own, you may be charged a listing fee. This can be a flat fee, a percentage of your sales, or a combination of the two.
22. Merchant Account Provider
Companies accepting credit or debit cards, online or otherwise, are required to have merchant account providers. When a card is run, the provider temporarily holds the money and ultimately deposits the amount into the business' account.
Unlike a gateway, the merchant account provider doesn't contact the credit card company or bank itself — the payment gateway does that for the provider.
Metrics are important data like revenue, traffic, user engagement, search engine rankings, or demographics. Many platforms provide metrics for users, though you can also use third parties to give you more robust and accurate data reporting.
24. Payment Card Industry (PCI) Compliance
Accepting credit cards means you automatically collect data about the purchaser; PCI compliance means following the laws and regulations about storing and protecting that data.
25. Payment Service Provider (PSP)
A payment service provider (PSP) allows you to accept electronic payments, including credit and debit cards and digital wallets (e.g., Google Pay).
26. Point of Sales (POS)
If you've previously only worked in physical stores, you may think of point of sale (POS) systems as registers. While that is hardware related to a point of sale, POS in the online world more often refers to a software system that performs transactions, manages inventories, sends digital receipts, and more.
27. Return on Investment (ROI)
Your ROI (return on investment) is the amount of money you make compared to how much you spent. In other words, it states how profitable your company is at a given moment.
28. Search Engine Optimization (SEO)
Search engine optimization, or SEO, is the process of setting your site up for success on search engines like Google, Bing Search, and DuckDuckGo. This involves ensuring you use the right keywords while providing valuable content.
29. Search Engine Results Page (SERP)
Search engine results pages (SERPs) are the pages of results you see when you use a search engine. Your goal is to use ecommcerce SEO effectively enough to end up on the first page (or close to it), either with your homepage or individual pages on your site.
30. Shopping Cart
An online shopping cart lists items a customer has selected for purchase. Whether an item in a cart is considered "on hold" for a customer varies by platform.
31. Abandoned Shopping Cart
An abandoned shopping cart is a cart in which potential customers have placed items, then left the site without completing the purchase. Some sites, particularly larger online retailers, leave items in a customer's cart indefinitely (assuming they don't sell out). Others only allow items to stay in a cart for a few hours, days, or weeks.
A platform may allow your business to send emails or notifications to customers if they abandon their carts or when their abandoned carts are about to expire.
32. Software as a Service (SaaS)
Software as a service, otherwise known as SaaS, is essentially a third-party developer that maintains their proprietary software and lets you store and access your data from anywhere. On top of the features that come with their software, SaaS companies provide automatic updates and integration with other external digital services and software.
Experts often urge startups and small companies to use SaaS, as this software allows ecommerce stores and products to go live quickly with a low risk of investing in custom solutions.
33. Third Party Payment Processor
A type of merchant services provider, third-party payment processors allow you to take electronic payments without having a merchant account through a bank. Common third-party payment processors include PayPal, Stripe, and Square.
Traffic is the number of visits to your website, regardless of how long they stay there or if they make purchases. This metric can be expressed as either unique visitors, sessions, or pageviews.
A transaction is the sale of a product or service, online or elsewhere.
Upselling occurs when, right before someone checks out, you suggest an upgrade or addition to their current cart, usually for a comparatively small additional cost.
If you're ready to jump in now that you understand some of the many ecommerce terms, StoreBuilder by Nexcess is here to help. Remember the ecommerce term "CTA" from earlier? Here's a real-life example — which we'd love you to click on:
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