40 eCommerce Terms That You Should Know

By Stephen Paul Samynathan on April 29, 2021

Every business and industry has its language. eCommerce is no different.

For you to understand your eCommerce business, it is important to understand the right terms. So that you can proceed to effectively promote and market your business successfully.

This will help you to speak the same language to work together with both people inside your business and suppliers or contractors you work with.

These terms will also provide a better understanding of your business at the moment and how you can achieve better growth.

To that end, here’s a quick guide to some of the terms that will help you thrive in eCommerce:

A/B testing (or split testing)

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A/B split testing

A/B testing or split testing is the process where we compare two versions of the same page to help determine the more effective strategy. We would change certain elements like button or image or text then show each version to different group visitors during the same period to learn which version will help to improve the conversion rate.

Affiliate marketing

A marketing strategy in which your eCommerce business partners with another person or organization ( called affiliate) who will then promote and endorse your products to eventually send customers to your website. The sales are tracked via affiliate links from one website to another. Typically, each sale will result in the affiliate receiving some fees from the promotion.

Average order value

Average order value (AOV) is the average money amount spent each time a customer orders on your website or mobile app. Here is how you can calculate your average order value.

Average Order Value = Revenue / Number of Orders Taken

Billing address

Billing address is the address that is connected to a specific payment like a credit or debit card. It is used to verify the authorized use of such a card. This is also where documents like invoice are addressed to.

Bounce rate

The percentage of visitors who leave the website after viewing a single page.

Bundling (or product bundling)

Grouping together related services or products as a package or solution. Bundles are often offered at a reduced price compared to the total amount of each separate product or service mainly to encourage conversion.

Business to business (B2B)

The transaction that happens where another business is your customer or you are engaging another service or product from another business.

Business to consumer (B2C)

Transaction between business and consumer.

Buyers Persona

Buyer personas are a semi-fictional portrayal of prospective customer based on real data of your existing customer and market research of a similar group of people. To build this persona, it is important to consider their behavioural patterncustomer journeydemographicsgoals etc.

This portrayal helps you to focus your time on more qualified prospects thus increasing the chance of conversion.

Call to action (CTA)

CTA stands for call to action. It is part of a webpage or piece of content that encourages the audience to take a certain action. For example, "sign up now", "learn more now", and "get free access now"

The more descriptive the text in the CTA, the higher chance of the visitor performing the action. Other aspects that might influence CTA success rate, is colour, image placement, the shape of the button, etc.

Cart abandonment rate

Cart abandonment rate is the number of visitors who left the site or app after adding items to their cart but didn't complete their purchase.

Here’s how to calculate cart abandonment rate in two steps

Formula:Cart Abandonment Rate = (1 – (Completed transactions / Initiated sales)) * 100

It is important to ensure this rate is low as it reflects on potential quality sales that we are missing out on.

Conversion

Happiness. Well to be precise, it is when your visitor becomes your customer.

Conversion Funnel

A conversion funnel is a way to think of the customer journey and conversion path of potential customers into paying customers.

We refer to it as a funnel because the number of visitors drops at every stage. At the final stage where purchase happens, there is a decreased number compared to the start of the buying process.

Conversion Path

Conversion Path is a process to convert an unknown website visitor into a known lead. An example of this process would be:

  1. Visitor arrives on the landing page
  2. Browser through pages/content
  3. Clicks on the CTA
  4. Purchase the item

This is quite a simplified version whereby in real-life conversion path can be longer and more complex.

Conversion rate

Conversion rate is the percentage of visitors who become paying customers.

Here’s how to calculate conversion rates:

Conversion Rate = [Paying Customers] / [Unique Visitors to Your Site]

Conversion rate optimization (CRO)

CRO comprises of steps that we take to improve conversion. It can include improving the eCommerce website’s layout, content and design, landing pages and improving the ad copy.

Cross-selling

Cross-selling is the process where we offer an extra product or service that complement or enhance a product that is being sold.

For example, when you are purchasing a burger, the shop suggests you purchase fries together. The fries are complimentary to the burger.

Customer lifetime value (CLV)

Customer lifetime value is how much revenue a customer will bring to your business throughout their entire time as a paying customer.

If you want to read further on CLV, Google has excellent detailed explanation here

Direct to Consumer (D2C)

D2C is when manufacturers and CPG brands sell directly to end-consumers. This strategy simplifies the conventional process by removing wholesaler, retailer and distributor.

More and more brands are embracing D2C.

Discount code (or coupon)

Personalized or publicly-released code usually a short series of numbers and/or letters. By keying in this code at checkout, online shoppers might get special offers or discounts.

Dropshipping

Dropshipping is a retail fulfilment method where a store doesn't keep stock of the products it sells. Drop shippers work with wholesale suppliers for the delivery of products by passing shipping information about each customer order.

Email marketing

Marketing your products and services to a targeted audience via email. Based on statistics, email marketing has one of the highest ROIs when compared to other marketing channels.

Fulfilment

Fulfilment is the entire process of delivering an order to the customer after they order it online.

Inventory

Inventory is the products that we have in the eCommerce store that we are looking to sell.

Intelligent Product Recommendation Systems

With the use of technology and data, we recommend products to a customer based on the likelihood of purchase. We get the likelihood through data of similar customers and also information of the past purchase of product or service.

As your online store grows, having a recommendation system will be of great help to increase sales further.

Landing page

A landing page is a single webpage on a site where a visitor arrives after clicking a link, often from an email. These pages are usually there to guide visitors to other pages where more detailed information of product or service can be found.

Mobile commerce (m-commerce)

Mobile commerce is when we use wireless handheld devices such as smartphones and tablets to buy and sell products and services online.

Omnichannel

Omnichannel is a multichannel approach to ensure customers have a smooth shopping experience. Regardless of whether they're shopping online from a desktop or mobile device, or via a physical store.

When using this approach we would need to ensure there's integration between distribution, promotion and communication channels on the back end of our business.

Online To Offline

Online-to-offline (O2O) commerce is a strategy that attracts potential customers via online channels to make purchases in physical stores.

Outsource

When we use third-party vendors to support specific business needs.

Payment gateway

Payment gateway is a merchant service provided by an e-commerce application service provider. They authorize credit card or direct payments processing for eCommerce businesses as well as physical stores

Point-of-sale (POS) system

POS is software for online stores to manage inventory, process payments, and send receipts. For physical stores, it is usually a combination of software and hardware like a cash register.

Profit margin

Profit margin is the difference between what a retailer spends on his product (cost) and how much it earns on each sale of the product.

Recurring payment

Type of transaction where customer authorizes an online store to automatically charge a credit card for regular delivery of products or services.

Sales Funnel

The sales funnel is the process through which companies lead customers when purchasing products.

Shipping

Transfer of a product from the seller to a customer’s delivery address.

Shopping cart

Virtual representation of a physical cart that lists all items that a customer has identified to buy on your website.

Stock keeping unit (SKU)

SKU is a unique code of alphanumeric identification for each product or service in your inventory.

Transaction

Transaction is an instance of buying or selling something.

Upselling

Upselling is when you offer customers an opportunity to upgrade their purchase or to buy a more expensive version of the same product.

Remember the fries and burger example from earlier. Upselling would like upgrading your meal from a regular set to a large set.

Summary

If you ready to grow your business through eCommerce, we have prepared exclusive guide on 5 Ways to Grow Your eCommerce Business here

We hope all these terms help you to better understand how the eCommerce business works and sets you up on a successful journey.

Article written by Stephen Paul Samynathan
Co-founder of Specflux Solution, he builds IT products that work. He is also running Ipoh based website design agency with his partner. If not working on client's project, he's a part of a vibrant IT community in Ipoh locally known as Digital Perak.

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