Don’t know a payment gateway from a point of sale system? Or what dropshipping is? In this ecommerce glossary, you’ll find easy-to-understand definitions of all the key ecommerce terminology you’ll encounter when you start selling online.
Abandoned cart recovery
Abandoned cart recovery is where you identify visitors to your store who went part-way through a purchase, and try to convince them to complete it. Depending on your chosen store builder, you will be able to automatically or manually email those visitors, encouraging them to complete their transaction (this usually involves providing them with a promo code as an incentive to do so).
Web accessibility refers to a practice of designing websites and other online tools in a way that ensures people with disabilities can use them.
Address Verification Service (AVS)
The Address Verification Service (AVS) is a tool provided by credit card processors to online retailers in order to identify suspicious credit card transactions and prevent fraud. The AVS checks the billing address submitted by card users with their billing addresses on record at the issuing bank.
This is an arrangement in which a business pays commission to an external website owner for sales generated from its referrals. Typically, referrals are generated via ‘affiliate links’ — hyperlinks containing tracking code. When clicks on these links lead to sales, a commission is paid out.
Application Programming Interface (API)
An Application Programming Interface (‘API’) is a set of rules that let two software applications interact and exchange data with each other. APIs are often used by developers to create apps and add-ons for existing software.
Autoresponders are e-newsletters that are sent automatically to your subscribers on your email list, triggered based on rules and time intervals that you define. Many email marketing apps (AWeber, GetResponse and Campaign Monitor etc.) provide autoresponder functionality.
Average order value (AOV)
Average order value (also known as ‘AOV’) is the average amount that a customer spends in your online store. To calculate it, you divide the total revenue made during a certain time period by the number of orders made during that period.
For example, if you were running an ecommerce store, you could do an A/B test on a product page by showing 50% of users one version of it, and the other 50% a different one. The version generating the most sales over a defined period would be the ‘winner’ and you could then use that design going forward, knowing that it’s likely to bring in more revenue.
Black Friday is the day following the US Thanksgiving holiday. On this day, many online stores (and indeed their physical counterparts) sell goods at heavily discounted prices.
A blog is a regularly updated website or web page. Originally associated with individuals, and written in an informal or conversational style, blogs have now become a key part of content marketing and can now have many contributors, formats and writing styles.
Blog posts matter in ecommerce because if they contain well-written and interesting content, they have have power to rank highly in search results, thus driving organic traffic to stores, and ultimately, sales.
Bootstrapping refers to a situation in which an entrepreneur starts a company with little or no capital and grows it using only his or her own resources (i.e., as opposed to relying on investors to provide funding).
B2B (Business to Business)
B2B stands for ‘business to business’ — if you are a B2B enterprise, you market and sell your products to other businesses.
B2C (Business to Consumer)
B2B stands for ‘business to consumer’ — if you are a B2C enterprise, you market and sell your products to consumers (i.e., you target individuals, not businesses).
Bounce rate refers to the percentage of visitors who visit a website but leave without taking further any action on that site (for example, clicking a link to view another page on that site).
Bundling is a sales strategy which involves creating a package of multiple products and then selling it at a discount price. Product bundles generally conist of complementary or similar items, and can increase average order value.
Brick and mortar store
A brick and mortar store is a physical retail outlet that customers can visit in order to purchase products.
Buyer personas are profiles of potential customers for your products. Although fictional in nature, they are based on market research.
Buyer personas describe who your ‘ideal’ customers are, what their lives are like, the challenges they face and how they make decisions; this information can inform your product range, your store content and your marketing approach.
Call to action (CTA)
A call-to-action (also known as a ‘CTA’) is a message that prompts a user to immediately take a specific action — for example, “buy now,” “add to cart” or “contact us.”
Cart abandonment rate
Cart abandonment rate refers to the percentage of shoppers who add items to their shopping cart but abandon the cart before completing their purchase.
You calculate it by dividing the number of completed transactions by the overall number of orders started, subtracting this number from 1, and multiplying this figure by 100, i.e.,
(1 – (Completed Purchases / Total Orders)) x 100.
A chargeback is a reversal of a completed credit card transaction — it usually takes place when a customer disputes a charge and the merchant’s bank refunds the original payment made.
The checkout process refers to the steps a customer takes when making an online purchase. It starts when the customer clicks a ‘buy now’ call to action, and ends on the order confirmation page. Generally speaking the most successful checkout processes involve a minimum number of steps.
Clickthrough rate (CTR)
Clickthrough rate is the percentage of people who click on a link they view. It is calculated by dividing the total number of link impressions by the number of times that the link is clicked.
Comparison shopping engine (CSE)
Also known as price comparison websites, comparison shopping engines are sites that consumers can use to find multiple retailers selling the product they want to buy. They can then compare the prices available from each of these retailers and opt for the one that best suits their budgets.
Well-known comparison shopping engines include Google Shopping, Amazon and the eBay Commerce Network.
Content management system (CMS)
A content management system (‘CMS’) is the software that allows a website owner to create, edit or publish content.
A conversion happens when a visitor to your website takes an action that you want them to — for example, signs up to your mailing list or buys a product.
A conversion funnel refers to the different stages in a customer’s journey through an online store. It starts with the customer first becoming aware of a product (at the ‘top of the funnel’) and ends when they buy it. The conversion funnel is often broken down into four key steps: awareness, interest, desire and action.
Cloud-based ecommerce platform
A cloud-based ecommerce platform runs on its own servers, and you don’t have to buy web hosting or install any software to use it — you access it through a web browser. Typically, cloud-based ecommerce platforms are ‘all-in-one’ affairs that give you all the key features you need to create and maintain a website. Popular cloud-based ecommerce apps include BigCommerce and Shopify.
The conversion rate is the percentage of visitors to a website who complete a desired action (product purchase, mailing list sign-up etc.).
Conversion rate optimization (CRO)
Conversion rate optimization (CRO) involves changing aspects of a website in order to increase the likelihood of visitors completing a purchase. CRO can involve use of A/B testing, website heatmaps, abandoned cart recovery and online customer surveys.
Cookies are small files that a website puts on a user’s computer. They allow that site to identify or track your device, browser preferences and online activity.
From an ecommerce point of view cookies are typically used to assist digital marketing efforts. For example, they allow website owners to retarget store visitors who viewed their products with online ads; or automatically trigger emails to be sent when a user accesses a particular page on a website.
Cost per acquisition (CPA)
Cost per Acquisition (CPA for short) is a metric that measures the cost of a customer taking an action that leads to a conversion. A conversion can refer to several actions: for example, a sale, the capture of an email address, a download or an app install.
Cross selling is the process of selling related or complementary products to somebody who has previously bought an item from your online store.
CSS (Cascading Style Sheets)
CSS stands for ‘Cascading Style Sheets’. It’s the code used to define the aesthetics of a web page (i.e., what fonts, colors and page layouts are used).
A Comma Separated Values (CSV) file is a text file in which data is separated by commas. Spreadsheet applications like Excel are used to open and edit them — and CSV files are typically used to store data in a spreadsheet-type format.
In an ecommerce context, CSV files are usually used to import or export product data into and out of online store building apps.
A customer journey refers to the steps taken by customers between their initial interest in a product and their purchase of it. Online merchants typically try to shape these ‘steps’ as much as they can, through use of tools like online adverts, autoresponders, a customized checkout process and abandoned cart savers.
Customer Lifetime Value (CLV)
Customer lifetime value is an estimate of the total worth of a customer to a business over the entirety of his/her relationship with that business — i.e., the expected profit a company can hope to gain from an individual customer.
Customer Relationship Management (CRM)
Customer Relationship Management — usually shortened to CRM — refers to technology that is used to manage interactions with customers and potential customers (for example, Salesforce, Capsule or Nimble). A CRM system helps organisations generate leads, convert them into new customers and develop the customer relationship further.
Discount codes (also known as promo codes or coupon codes) are used to activate discounts or special offers on an online store. They can be generated either by the store owner or by software.
A domain name is the web address that your website or online store is located at — yourstorename.com etc.
Dropshipping is a method of selling goods where you don’t manufacture, purchase, store or deliver any products yourself. Instead, you take orders for products via an online store, and pass them onto a supplier. The supplier then sends the goods to the customer and charges you a fee for doing so.
The advantage of this business model is that the barriers to entry are low; the disadvantage is that its low-cost, low-risk nature makes competition very fierce.
Dwell time is the amount of time between the moment a user clicks on a search result and the point at which they return to the search engine results. Content that generates a higher dwell time can be rewarded with preferential treatment by search engines.
Ecommerce refers to the practice of buying and selling products (either physical or digital) online. (It should not be confused with ‘e-business,’ which refers to the general practice of running an online business).
Email marketing involves the promotion of your products and services to an email mailing list. It typically generates one of the highest return on investments by comparison to other marketing strategies.
Faceted navigation (sometimes referred to as ‘faceted search’) is a type of navigation that is often found on online stores containing a lot of products. It helps users narrow down what they’re looking for by providing filters relating to the products being browsed (for example, an online shoe store might provide a faceted navigation system with filters for size, color and material).
A flash sale occurs when an online store offers significant discounts or promotions on its products or services for a very short period of time, (often for just a few hours or a day). The aim of this type of sale is to create a sense of urgency among consumers to buy immediately, thereby boosting sales volumes.
Flash sales can be a powerful tool for clearing out excess inventory, attracting new customers or increasing revenue during slow sales periods.
Fulfillment is the process of getting products ordered via an online store delivered to a customer. It typically involves inventory management, packing products and shipping.
Fulfillment by Amazon (FBA)
Fulfillment by Amazon (FBA) is a service that allows sellers to store their products in Amazon’s fulfillment centers and have them delivered by the company. When a customer buys an Amazon FBA product, the company packs and ships the order on behalf of the seller (and charges the seller for doing so).
Google Analytics is a free tool that lets you measure traffic to your site, and examine the kind of interactions that take place on it.
HTML (Hypertext Markup Language)
HTML stands for Hypertext Markup Language — the code used to create web pages. ‘Hypertext’ refers to the hyperlinks that an HTML page contains, and ‘markup language’ refers to the way tags are used to define page layout and content.
Inbound marketing is a way to ‘pull’ people towards your online business by creating engaging, highly shareable content — rather than relying on online advertising spend or public relations (PR) to ‘push’ potential customers towards it. The main advantage of an inbound marketing strategy is that it can be carried out for little or no cost (initially, at least).
Inventory refers to the goods that an online merchant sells. Another phrase used to describe inventory is ‘stock.’
Keywords are words or phrases that are entered into search engines by people searching for particular content, products or services. Ecommerce website owners typically try to identify the keywords people are using to search for products, and add these keywords to their site content.
Keyword research is the process of identifying search phrases that people enter into Google (and other search engines) when searching for specific information, products or services. Once you know what the relevant keywords for your business area are, you can optimize your site around these phrases.
In order to perform keyword research, you need a dedicated keyword research tool like Semrush or Ahrefs.
KPI (Key Performance Indicator)
KPI stands for ‘Key Performance Indicator’ — a measurable value used to evaluate how successful a person or organization is at meeting a specific goal. In an ecommerce context, a KPI could involve hitting a number of online sales per month, or ensuring that a certain number of people visited a website each month.
A landing page is a web page that has been designed with a very particular purpose in mind — for example, email address capture or the promotion of a specific product. Also known as ‘squeeze pages,’ landing pages are often used in conjunction with online marketing campaigns involving use of PPC or social ads.
A ‘lead’ is a consumer or organization that has expressed interest in a business’s product or service. In an online or ecommerce context, leads are typically captured via mailing list signup forms.
A ‘lead magnet’ refers to a compelling offer that encourages potential buyers to share their contact details with a business. Typically, something attractive or beneficial like a free e-book, discount coupon, webinar or exclusive content is offered in exchange for an email address.
Logistics is the process of planning and organizing to make sure that resources are in the places where they are needed. In ecommerce, this generally means ensuring that the processes involved with transporting inventory and shipping orders are robust.
An online marketplace typically refers to an ecommerce site where multiple merchants sell products. Examples of popular online marketplaces include Amazon, eBay and Etsy.
These platforms differ from ‘standalone’ store builders like Wix and Shopify because transactions are processed by the marketplace (rather than the merchants selling on them); and in the case of some online marketplaces (especially Amazon), fulfillment is handled by the marketplace owner too.
Online store builder
An online store builder is a browser-based app that lets you create your own online store and list your products on it. (Shopify and Squarespace are examples of popular online store builders.)
Margin is the profit percentage of a sale, after the cost of goods, labor and other expenses have been deducted. This metric in is used in ecommerce to measure the level of profitability of a product sale or product line.
Organic traffic refers to visits to a website that originate from ‘natural’ search results rather than adverts. To generate organic traffic, you need to perform search engine optimization (SEO).
A payment gateway is a piece of software used to process credit card payments. Some ecommerce solutions have a built-in payment gateway; others require you to connect a third-party payment gateway to your store in order to sell online.
The ‘Payment Card Industry Data Security Standard’ (PCI DSS) is a set of security standards designed to ensure that all online retailers that accept, process, store or transmit credit card information do so securely. When an online store is PCI compliant, this means that the store adheres to those standards and that online payments are highly secure.
A plugin is a piece of software that is available as an add-on for a website building or ecommerce platform. Plugins typically add extra functionality to a website, or integrate it with other applications. Examples of popular ecommerce plugins include Ecwid and WooCommerce.
(Note: the phrase ‘plugin’ is generally associated with WordPress. Some ecommerce platforms, including Wix and Shopify, refer to plugins as ‘apps,’ but the principle is the same.).
Point of sale (POS)
The phrase ‘Point of Sale’ (or ‘POS’ for short) typically refers to the process of accepting payments for goods sold in person at a physical location (retail outlet, market stall etc.). When an ecommerce platform provides POS functionality, this typically means that you can use a card reader and other selling hardware to accept payments for goods, with every sale being recorded automatically by your online store and your inventory levels being adjusted accordingly.
POS hardware typically includes card readers, cash registers, barcode scanners, tills and receipt printers; well-known providers of this hardware include Shopify and Square.
PPC stands for ‘pay per click’ and refers to a type of advertising where every time someone clicks on your advert, you pay a fee. Search engine advertising is one of the most popular forms of PPC, allowing advertisers to bid on search phrases, and place adverts above the search results for those phrases.
Print on demand
Print on demand is a way of making and selling products whereby an item is only produced (printed) when an order for it is received. Popular print-on-demand services include Printful, Printify and SPOD; these let merchants sell a wide range of print-on-demand products including books, clothing, wall art and stationery.
A product option is an attribute of a product — for example, size, color or material.
A product variant refers to an individual product that combines specific product options. For example, a large blue suede shoe would be one product variant; a small red leather one would be another and so on.
Real-time carrier shipping
Real-time carrier shipping is when the exact shipping rates that postal companies charge are automatically pulled into a checkout for an order. (These rates take the order weight, dimensions, and the customer’s shipping destination into account.)
This method of shipping allows ecommerce businesses to charge every customer the actual amount it will cost to ship an order, helping you to avoid any overcharging or undercharging.
Return on Investment (ROI)
Return on investment (ROI) is a metric used to evaluate the efficiency of an investment. It lets you establish how much money you ‘got back’ as a result of spending money on a particular business initiative.
The most common way to calculate ROI is to divide the income generated by a business investment by the cost of that investment, and multiplying the result by 100.
A sales channel is the type of platform you’re selling on — your own online store, a social media page, an online marketplace like eBay etc. Most professional ecommerce solutions let you sell on multiple sales channels.
A sales funnel is a set of steps that someone has to take in order to become your customer. In ecommerce, sales funnels are often designed via automation — for example, ads are shown to potential customers that point them to a mailing list sign-up page; once on the list, that lead receives automated communications that serve as a ‘customer journey’ that has as its final destination an online purchase.
Search engine optimization (SEO)
Search engine optimization refers to a series of steps you can take to improve your site’s position in search results. Typically SEO revolves around finding the right keywords to use on your site; creating high-quality, search-friendly content; and improving the speed and user experience of your website. This generally involves making use of dedicated SEO tools like Ahrefs and Semrush.
Related resource: SEO glossary
Segmentation involves separating potential customers into different groups based on different characteristics. This is typically done on the basis of demographics (age, sex, social group etc.) or behavior (i.e., past purchases, clicks, cart abandonment etc.).
SERP (Search engine results page)
SERP stands for ‘search engine results page.’ It’s the page of results that appears when you enter a search query into Google or another search engine.
A side hustle is any piece of work that you get paid for doing in addition to doing your main job. In ecommerce, it’s often understood as the process of setting up an online store or dropshipping business as a side project.
In ecommerce, a shopping cart is the online equivalent of a shopping basket that you might take around a supermarket. You add products to it, and pay for these at checkout.
SKU (Stock Keeping Unit)
‘SKU’ stands for ‘stock keeping unit’ and is a number that retailers use to differentiate products and track inventory levels. SKUs are typically used internally and should not be confused with a ‘UPC’ (Universal Product Code — see below for more information on these).
Split testing is the process of testing two or more variants of a newsletter, web page or process to see which drives the most conversions. When most effective version has been identified, this becomes the ‘default one’
SSL (Secure Sockets Layer)
SSL stands for ‘secure sockets layer’ – an online protocol that provides enhanced online security. A SSL certificate signifies that a secure connection to your site exists and that data sent and received by your website is encrypted. You can spot a site using SSL by the “https” prefix on its URL.
A transaction fee is a charge made by an ecommerce platform on a sale of a product. (It’s different from a credit card processing fee, because the fee applies regardless of how payment is made for goods).
Universal Product Code (UPC)
A Universal Product Code (‘UPC’ for short) is a unique code printed on retail product packaging to help with identifying a particular item. It consists of two parts: a machine-readable barcode and a unique 12-digit number.
Upselling is an attempt to persuade a customer buying something on your store to upgrade their existing product selection to a more expensive one. The customer gets exposed to other products that he or she perhaps had not considered, potentially generating more revenue for the store owner.