Every industry has its own language that an outsider will not understand. If you're new to eCommerce and stuck wondering what everyone is talking about, learning the lingo is an entry point to the inner circle.
Roll up those sleeves and start building your vocabulary. This beginners guide to ecommerce terms will help you navigate all the jargon, abbreviations, and technical terminology you can expect to hear in your eCommerce journey. Don’t worry, we won't test you on these vocabulary terms, but you’ll need to know them to become a successful online seller.
The business end of eCommerce, although not the most exciting, is arguably the most important. You’ll need to know these terms to determine what your eCommerce business will look like.
A security feature used in electronic payment processing to verify if the billing address provided by the user matches the address on the credit card statement.
This works by comparing the numerical sections of the billing address that the customer enters at checkout with the address stored by the credit card issuer.
Average order value (AOV) is a metric used in eCommerce that represents the average amount of money customers spend on each order over a defined period of time. It's calculated by dividing the total revenue generated from all orders by the number of orders.
Let's say an online business sells clothing and accessories. If they make 100 sales in a day with a total revenue of $10,000, then the average order value would be $100. This means that on average, each customer spends $100 per order.
AOV is an important metric as it helps businesses measure the effectiveness of their pricing strategies, marketing strategies, and cross-selling/upselling tactics.
The traditional take on Commerce — selling items in a physical store. Brick-and-mortar stores have a physical presence, such as a storefront or office building, where customers can browse and purchase products, interact with sales representatives, and experience the brand in a tangible way.
Examples of brick-and-mortar stores include department stores, grocery stores, and restaurants.
Business-to-business is a type of commerce where businesses sell products or services to other businesses. It could involve a manufacturer selling to a wholesaler, or a wholesaler selling to a retailer. For instance, a company may partner with another business to provide the raw materials needed to manufacture a product.
Microsoft is an example of a B2B because it sells technology to businesses all over the world.
In contrast to B2B, business-to-customer (B2C) is a business model where retailer or middleman purchases products and sells them to consumers. This type of method applies to most retailers and department stores.
An example of B2C commerce is when a customer purchases a pair of shoes from an online store such as Amazon or a brick-and-mortar store like Nike. In this transaction, the business (Amazon or Nike) is selling the shoes directly to the individual customer (the end-user) for their personal use.
Customer Acquisition Cost (CAC) is a metric that measures the total cost a business incurs to acquire potential customers. This metric helps determine the effectiveness of a business's marketing and sales efforts.
You can calculate CAC by dividing the overall cost of sales and marketing activities by the total number of new customers obtained during a specific period.
This metric determines the total amount of revenue an eCommerce business is expected to make over the course of its relationship with a customer. CLV considers factors such as the customer's spending patterns, purchase frequency, and retention rates.
By understanding the CLV of their customers, businesses are able to calculate the total worth of acquiring and retaining a customer over an extended period.
In eCommerce, customer relationship management (CRM) refers to a strategy or approach that businesses use to manage their relationships and interactions with customers and potential customers. It involves collecting and analyzing customer data and using that information to enhance customer retention and drive sales growth.
Direct-to-consumer (DTC) is a type of business model where a brand or manufacturer sells its products or services directly to the end user or consumer without the help of traditional retail channels. D2C businesses leverage various digital channels such as social media, email marketing, and their own website to reach and sell directly to potential customers.
The D2C model eliminates the need for intermediaries such as wholesalers, retailers, or distributors, allowing them to have better control over their product, brand image, pricing, customer data, and messaging.
A good example of this is a handmade merchant.
It is a measurable value or metric that helps businesses evaluate how effective they are in achieving their key business objectives. KPIs can be used to track progress toward specific goals, identify areas for improvement, and monitor the success of different initiatives or strategies.
Examples of KPIs include conversion rates, website traffic, newsletter subscribers, and employee productivity.
A marketplace is any website, application, wholesale directory, or any eCommerce site where online retailers and customers meet to sell and buy products. Amazon, eBay, Walmart Marketplace, and Alibaba are some examples of the online marketplace.
Short for mobile commerce, mCommerce refers to the buying and selling of goods and services through mobile devices such as smartphones and tablets. This includes transactions that take place via mobile sites, mobile apps, and mobile wallets.
mCommerce has become increasingly popular in recent years due to the widespread use of mobile devices and the convenience they offer for shopping on the go.
Examples of mCommerce include using a mobile app to order food delivery, purchasing clothing through a mobile-optimized website, or using a mobile wallet to pay for a ride-share service.
This is the process of selling products or services through multiple sales channels, such as its own ecommerce store, marketplaces, social media, brick-and-mortar stores, and other ecommerce platforms.
Adopting a multichannel selling strategy allows businesses to tap into a larger customer base and provide customers with more options to purchase their products. By using marketing strategies and leveraging multiple sales channels, businesses can diversify their revenue streams and lessen their dependence on a single channel.
An omnichannel eCommerce approach provides customers with a seamless and integrated shopping experience across multiple channels, such as online stores or social media channels.
The goal of this approach is to enable customers to interact with a brand in a consistent manner, regardless of where they purchase from. Customers can browse products online, make a purchase in-store, and track their order status through a mobile app.
An example of omnichannel commerce is Starbucks. Customers can place an order using the Starbucks mobile app, pay for their order online, and pick it up in-store without waiting in line.
A payment service provider (PSP) is a company that provides merchants and businesses with the technology and infrastructure needed to accept and process electronic payments from customers. This includes credit card payments, bank transfers, and digital wallet payments. PSPs typically offer a range of services, such as payment processing, fraud detection and prevention, transaction processing, reporting, and security features, to ensure that transactions are secure and efficient.
Examples of PSPs include PayPal, Stripe, Braintree, and Square. By using a PSP, businesses can simplify the payment process for their customers and reduce the complexity and costs associated with managing electronic payments on their own.
A shopping cart within a website is the hub where customers store their pre-purchased items before completing a sale. A Shopping Cart Platform allows sellers to host their brand, display products, and sell to customers online all in one place. You can create your very own shopping cart with our website builder.
Social commerce is the process of selling products or services directly through a social media platform, such as Facebook and Instagram. This type of commerce involves integrating eCommerce functionality into social media platforms, allowing users to browse and purchase products without having to leave the social media platform.
There are millions of products being sold online. Not only is it difficult to decide which one fits your business model, but where are those items being stored? Here are some product and inventory terms you should keep in mind:
In eCommerce, an audit refers to the process of reviewing and evaluating the performance, operations, and financial records of an online store to identify underlying issues and areas for improvement. You can conduct an audit manually or hire an outside agent to do it for you.
These are products that you need to create or assemble and require specific materials. For example, manufacturers build bicycles before selling them to customers.
A discount code, also known as a promo code or coupon code, is a unique code that customers can use during checkout to receive a discount on their purchases. Discount codes are often provided by businesses as part of their marketing strategy to incentivize customers to buy. The discount can be a percentage off the total price or a fixed amount off the purchase.
Discount codes can be found through various marketing channels, such as email newsletters, social media, or advertising campaigns. Customers can then apply the discount code during the checkout process on a web page or in a physical store to avail of the discount.
For example, a retailer sent a promotional email to customers offering them free shipping using the discount code "FREESHIP" while making a purchase on their online store. So when the customer enters the code on the checkout page before making the payment, there's no additional fee for shipping.
This practice requires merchants to keep detailed records of product stock either manually or automated. It involves tracking inventory levels, orders, sales, and deliveries to ensure that there's always enough inventory to meet customer demand while avoiding overstocking or stockouts. It helps eCommerce businesses prepare for busy seasons or predict future trends.
A niche refers to a specific and focused area of a larger market. It's a specialized segment of the market that caters to the specific needs or preferences of a particular group of customers.
For example, a niche market could be vegan cosmetics, which caters specifically to consumers looking for cruelty-free and animal-free cosmetic products. By targeting a niche market, a business can stand out from competitors and build a loyal customer base.
Every online marketplace requires a product identifier. It helps online shop owners ensure that products are accurately tracked, inventoried, and sold. These identifiers are a series of numeric or alphanumeric digits. Below are the most commonly used:
Universal Product Code (UPC)
Stock Keeping Unit (SKU)
Amazon Standard Identification Number (ASIN)
Manufacturer Part Number (MPN)
Global Trade Item Number (GTIN)
An extension of inventory management, product syncing is a process of automatically updating product information and stock levels across multiple sales channels, warehouses, marketplaces, and your eCommerce store in real-time.
Software as a Service (SaaS) — also known as cloud-based software — is a digital product that’s sold on a subscription basis. In this model, the provider hosts and manages the servers, databases, and application code. An example of this is Microsoft Office and all the features included in the service.
Choosing a product to sell is just one step in the ecommerce journey, your next move is to find where to buy those products. Product sourcing is the act of searching for materials or your specific product to sell online. Here are some popular methods to find your products:
Dropshipping is a retail fulfillment method where a business takes customer orders but does not keep the products in stock. Instead, when a customer places an order, the business purchases the product from a third-party supplier who then ships the product directly to the customer. The business acts as an intermediary between the customer and the supplier, promoting the products, providing an online storefront, and building customer relationships.
Dropshipping can be an attractive option for entrepreneurs and small businesses as it requires minimal investment and flexibility in terms of product selection and sales channels. However, it also comes with its own set of challenges, such as low-profit margins, supplier errors, and handling customer complaints.
Private labeling is another popular model where an online seller purchases products from a manufacturer and can customize that product to match their brand. A private label contract states that only one online merchant can sell the product as its own.
This eCommerce business model consists of retailers sourcing products from other retailers. For example, thrift shoppers and resellers adopt the arbitrage model. They buy products that are on clearance, on discount, or in limited supply, and then sell them for a higher price on online marketplaces such as Amazon, eBay, or Etsy.
While retail arbitrage can be profitable, it also requires a significant amount of time and effort to research products, find deals, and manage inventory. It can also be competitive, as many others may also be searching for the same deals to resell for a profit.
White labeling is similar to private labeling but with small differences. In this model, a manufacturer can allow several merchants to rebrand their product packaging, but cannot customize the product itself. Online sellers can only rebrand it.
Wholesale is a business model where an online seller sources products from a wholesaler at a lower price, stores them in a storage facility, and then sells the products to consumers at a higher price to make a profit.
Once a customer purchases a product online, the fulfillment process is set in motion. You have to process and deliver your products to customers somehow. We list some of the ways you can fulfill customer orders and other important terms to remember:
Online merchants outsource storage facilities and distribution centers that fulfill a customer’s order. A good example of a 3PL is DHL Supply Chain. The company owns warehouses throughout the US, which they use to house, pick, pull, and ship products.
Reserved for Amazon sellers only, FBA is a third-party logistics facility that stores and ships items sold on the Amazon marketplace and other online stores. Merchants who participate in Amazon Prime also receive a “Prime” badge that’s displayed on product listings. It’s another way sellers can become more visible online.
Thinking of ourtsourcing your fulfillemnt? Don't miss our guide on What To Look For In A Fulfillment Provider.
An order is any item a customer purchases from a business. Sellers take the order information and send the requested item to the corresponding customer.
Once a customer places an order, the business will typically receive a notification of the order, which will include information such as the customer's name, shipping address, payment details, and the products or services ordered. The business will then begin the fulfillment process to prepare the order for delivery to the customer.
A packing slip is a printed document that consists of all order information, including the SKU, number of units, weight, and dimensions. The online seller attaches the packing slip to the outside of the package for the recipient to review upon receipt.
A pick list is a document online stores use to identify which product they will send to a customer. It's typically generated by an order management system or warehouse management system and provides instructions for warehouse staff on which items to pick and in what quantities.
A pick list may include information such as the order number, customer name, and shipping address, as well as details about each product, such as the SKU (stock-keeping unit) number, product description, and quantity required. It may also include additional instructions or notes for the warehouse staff, such as the location of the items in the warehouse or any special handling instructions.
Building your brand is not easy, but the best way to do it is by creating your own eCommerce website. It’s a great place to tell customers more about your company and the products you sell. Below are some of the terms you should know when developing your online store.
It’s the bane of every online merchant’s existence. Cart abandonment occurs when a customer chooses an item from your store but does not complete the desired action. Instead, the customer decided not to purchase the selected item.
In eCommerce, conversion refers to the percentage of website visitor who completes a desired action, such as buying a product, signing up for a newsletter, or filling out a form. It is a key metric used to measure the effectiveness of an e-commerce website or online marketing campaign.
You can calculate the conversion rate by dividing the number of conversions (i.e. desired actions taken) by the number of visitors to the website and multiplying the result by 100 to get a percentage. For example, if you had 10,000 visitors to your website during a month and 500 of them completed a purchase, then the conversion rate would be 5%.
Ready to tackle nailing conversion? Check out our guide on how to increase your eCommerce shopping cart conversion rate.
A lead refers to a potential customer who has shown interest in a product or service you offer by taking action. This interest can be demonstrated in various ways, such as subscribing to a newsletter, filling out a contact form, or adding items to their cart but does not complete the purchase. These are ways you can tell potential customers are interested in your products.
Lead generation is important in eCommerce because they represent potential revenue for the business. By capturing leads and nurturing them through targeted marketing and follow-up communications, businesses can increase their chances of converting those leads into paying customers.
A service provided to eCommerce businesses to allow credit card or direct payments from their website. For online retailers, payment gateways are necessary as they allow them to accept payments from customers all over the world, 24/7, without the need for manual processing or verification.
Payment gateways support various payment methods, including credit and debit cards, e-wallets, bank transfers, and more.
A product listing page (PLP) is a page on an eCommerce website that displays a list of products for sale. It's typically designed to showcase a range of products, allowing customers to quickly and easily browse and compare different products.
When you list a product (put an item up for sale online), the customer will be directed to your landing page when they click on your specific product.
Search engine results page (SERP) refers to the page that search engines (Google, Bing, etc.) display in response to a user's search query. It includes a list of web pages and other content that the search engine has determined to be the most relevant and useful to the user's search query.
The content on a SERP can include organic search results, which are web pages that the search engine has ranked based on their relevance and authority to the search query, as well as paid search results, which are advertisements placed by businesses to appear at the top or bottom of the SERP.
In the context of eCommerce, traffic refers to the number of visitors or users who access a website or online store. This can include visitors who arrive at the website through various means, such as search engine results, social media platforms, email marketing campaigns, online advertisements, or direct referrals from other websites.
Now that you know the basic eCommerce terms, you'll no longer feel out of the loop the next time you run into eCommerce jargon and you’ll be well on your way to becoming an expert online merchant. Take it a step further and start building a brand and opening up an online store.