If you are a business owner in the ecommerce space, you know trying to understand all of the terms and acronyms in the industry can be overwhelming. That’s why we’ve created this comprehensive list of ecommerce terminology to help you.
With this glossary, we'll have you deciphering the lingo like a pro in no time. We've taken the time to explain each term in plain language so anybody can understand it.
Introduction to ecommerce
Ecommerce, or electronic commerce, refers to any business transaction that takes place online. The most common examples of ecommerce activities include buying and selling goods, services, or digital products through the internet. It can involve retail companies facilitating sales to customers, businesses selling their products and services to other businesses, and consumers exchanging goods with other consumers.
Types of ecommerce
Business to administration (B2A): Business to administration refers to a business model where a private company or organization provides goods or services to government agencies, departments, or other public institutions. B2A transactions typically involve the delivery of services that are necessary for the functioning of government, such as tax administration, public procurement, social security, or health care.
B2B (business to business): B2B refers to a type of business model where a company sells its products or services to other businesses rather than to individual consumers. It involves a complex supply chain with businesses typically purchasing goods and services in bulk for use in their own operations or to resell to their own customers.
B2C (business to consumer): B2C refers to a type of business model in which a company sells products or services directly to individual consumers. B2C businesses typically operate through online or physical retail channels such as online stores, brick-and-mortar shops, or direct sales.
Consumer to administration (C2A): Consumer to administration refers to a business model where individuals or consumers interact directly with government agencies, departments, or other public institutions to access information, services, or to provide feedback. C2A transactions can take various forms, including online portals, mobile apps, or other types of electronic communication.
C2C (consumer to consumer): Consumer to consumer business refers to a type of commerce where individuals can buy and sell products or services directly to other individuals using an online platform or marketplace. This type of business model typically involves a third-party platform that facilitates transactions between buyers and sellers, and may offer features such as payment processing, dispute resolution, and messaging capabilities.
D2C (direct to consumer): D2C refers to a business model where a company sells its products or services directly to consumers, bypassing traditional retail channels. This means that the company controls the entire supply chain, from manufacturing to distribution, and has a direct relationship with the end customer.
Dropshipping: Dropshipping is a retail fulfillment method where an online store does not keep the products it sells in stock. Instead, when a customer places an order on the online store, the store purchases the product from a third-party supplier and has it shipped directly to the customer. As a result, the online store never handles the product physically.
O2O (online to offline): O2O refers to a business model that combines both online and offline channels to create a seamless customer experience. In an O2O business, customers can use online platforms or mobile apps to search for, order, and pay for products or services, which are then fulfilled in physical locations such as stores or service centers.
O2O (offline to online): O2O also refers to the opposite flow of online to offline commerce. In this side of the business model, offline channels are integrated with online channels to create a cohesive and convenient customer experience. Customers can use offline channels such as in-store or on-site visits to discover and engage with a business, which then leads to online engagement through websites, social media, or mobile apps.
Marketplace: Marketplace commerce refers to a type of ecommerce model where businesses or individuals can buy and sell goods or services on an online marketplace platform. Marketplace platforms provide a centralized location for buyers and sellers to connect and transact without the need for a traditional brick-and-mortar store. Marketplace commerce platforms can be general, offering a wide range of products.
Mobile commerce (M-commerce): Mobile commerce refers to buying and selling goods and services through mobile devices such as smartphones or tablets. M-commerce transactions can take various forms, including online purchases made through mobile-optimized websites or mobile apps, as well as transactions made online through mobile payment systems.
Omnichannel: Omnichannel refers to a retail strategy that aims to provide customers with a seamless and integrated shopping experience across multiple channels and touchpoints. Omnichannel retail is focused on providing a consistent and cohesive experience for customers, regardless of how they choose to interact with a brand, whether it is through online, mobile, or physical channels. Sephora is a great example of omnichannel ecommerce. Shoppers can choose to buy from physical stores or online store that can be accessed on phone, computer or tablet. The reward points for loyal customers or past purchase history or any other information is seamlessly organized across different shopping channels.
Social commerce: Social commerce refers to the use of social media platforms and networks to facilitate online transactions and promote ecommerce. Social commerce enables businesses to reach customers on social media and leverage the power of social networks to increase sales and build brand awareness.
Subscription-based: A subscription-based business is a business model where customers pay a recurring fee or subscription in exchange for access to products or services. Subscription-based businesses can take many forms, including software-as-a-service (SaaS) platforms, online media and content providers, ecommerce businesses, and more. In a subscription-based business model, customers typically sign up for a recurring payment plan that allows them to access a product or service over a specified period.
Payment methods for ecommerce
When it comes to payment methods for ecommerce, it's important to understand which options your customers will most likely use to purchase products or services. Different ecommerce stores have different payment methods available and it’s important to select the right mix of payment gateways so online shoppers have a safe, easy, and convenient way to pay. The most popular payment solutions for modern online stores include:
ACH payments (automated clearing house): ACH transfers involve direct bank transfers where customers link their bank account information (name on account, routing number) with the merchant’s website in order to securely transfer money from their accounts.
Digital wallets: Digital wallets, also known as e-wallets, are electronic devices or software applications that allow users to securely store and manage their payment information, including credit and debit card details, and bank account information. They are used for making electronic transactions, including online purchases, in-store purchases using mobile devices, and peer-to-peer transfers.
Payment gateway: A payment gateway is a software application that allows merchants to accept electronic payments, such as credit cards, debit cards, and e-wallets, through their online store or website. A payment gateway acts as a bridge between the merchant's website and the payment processor, which processes the payment and transfers the funds to the merchant's account.
Payment processor: A payment processor is a third-party financial company that facilitates the transaction of electronic payments between the buyer, seller, and the issuing bank or credit card company. Payment processors are responsible for securely transmitting payment information between the buyer and seller, verifying the transaction, and processing the payment.
Amazon Pay: Amazon Pay is an online payment processing service developed by Amazon.com. It was first launched in 2007 and is available on the Amazon.com website and through various third-party websites and mobile apps. Users can store their payment and shipping information in their Amazon account, making it easy to check out and make purchases on other websites.
Apple Pay: Apple Pay is a mobile payment and digital wallet service developed by Apple Inc. It was first introduced in 2014 and is available on iPhones, iPads, and Apple Watches. Apple Pay allows users to store their credit and debit card information on their Apple devices and use them to make contactless payments in stores and online.
Google Wallet: Google Wallet is a digital wallet and mobile payment system developed by Google. It was first launched in 2011 and is available on Android devices and through the Google Wallet website. Google Wallet allows users to store their credit and debit card information on their Google account and use them to make purchases and send money to others.
PayPal: PayPal is a widely used online payment system that allows individuals and businesses to send and receive payments electronically. It was founded in December 1998 and is headquartered in San Jose, California, USA.
Samsung Pay: Samsung Pay is a mobile payment and digital wallet service developed by Samsung Electronics. It was first launched in 2015 and is available on Samsung Galaxy smartphones, smartwatches, and other compatible devices.
Stripe: Stripe is a technology company that provides software tools and infrastructure for online payment processing. It was founded in 2010 and is headquartered in San Francisco, California, USA. Stripe offers a suite of payment processing tools and APIs that enable businesses to accept and manage online payments.
Square: Square is a payment processing company that provides software and hardware tools for businesses to accept and manage payments. It was founded in 2009 by Jack Dorsey and Jim McKelvey and is headquartered in San Francisco, California, USA. Square offers a range of payment processing solutions, including credit and debit card processing, mobile payments, and online payments.
Shipping and logistics for ecommerce
Shipping is an essential component of successful ecommerce operations and affects a business’s reputation, costs, customer satisfaction, and bottom line. Accurate and timely delivery is critical for the success of an ecommerce business. To facilitate the seamless transport of goods to customers, businesses must understand the different steps of shipping, customs procedures, and logistics related to international or cross-border ecommerce.
It is important to be mindful of any relevant regulations or guidelines imposed by government organizations such as customs authorities. The following are some common terms associated with ecommerce shipping and logistics that may be helpful to understand the process better:
Dimensional weight: Dimensional weight is calculated based on the dimensions of your package. Companies use dimensional weight to calculate shipping costs, so it's important that you understand what's involved in the calculation. In general, dimensional weight takes into account both the size and weight of a package when calculating shipping rates. This means if packages have similar sizes but different weights, they may end up having different shipping costs.
Freight forwarding: Refers to a service provider who coordinates movement of freight from one destination to another using various carriers. Freight forwarders are intermediaries who specialize in arranging shipments for individuals or companies. They handle every aspect of the process, including storing products in warehouses, consolidating goods into larger shipments, coordinating customs paperwork, and transporting items via air, sea, rail, or road.
Fulfillment: Fulfillment is simply the process of getting a product or service from its point of origin into the hands of the customer. It includes all aspects related to receiving, processing and delivering orders, including receiving orders, managing inventory, packaging and shipping products.
Incoterm: Incoterms stand for “international commercial terms,” which are a set of rules published by the International Chamber of Commerce (ICC). These rules provide an internationally accepted framework for defining how goods should be transported from one party to another. Each term within the set of rules has its own unique definition, making them an invaluable resource for any business that deals with overseas customers or suppliers.
Inventory: It refers to the total amount of goods and materials a company has on hand, ready for sale or distribution.
Inventory management: Inventory management can be defined as the process used to keep track of products in an online store. This includes tracking product availability, storage capacity, stock levels, and other related data such as product costs or shipping information. It also involves forecasting future demand and ensuring appropriate amounts of stock are available to meet customer needs.
Inventory turnover rate: Inventory turnover rate, also known as stock turn or stock turns, is a key metric used to measure how quickly businesses move their inventory from the warehouse to customers. Put simply, it defines the number of times per year a company sells and replaces its entire inventory. A higher inventory turnover rate means more sales and increased cash flow—both vital components for any successful business.
Lead time: Lead time is an essential element of ecommerce businesses and a key term to understand. Lead time refers to the time it takes from when a customer places an order with your business until the product or service is delivered. It begins when you receive and accept the order and ends when you have fulfilled the customer’s request.
Logistics: Logistics refers to the physical movement of products from one destination to another. It involves planning out shipments for efficient delivery and ensuring orders reach customers on time and in full condition.
Logistics provider: A logistics provider is essentially a third-party company that specializes in managing supply chain operations for businesses. This includes everything from packaging, storage, and transportation, as well as tracking goods across different locations. Logistics providers help businesses save money by streamlining their delivery process through technology and resources such as warehouses, trucks, planes etc., making it simpler and more efficient than ever before.
Order tracking: Order tracking is the practice of keeping track of orders made through an online store or other electronic means. This involves monitoring deliveries, shipment statuses, and payment processing to ensure customers receive their orders in a timely manner and that payments are processed accurately.
Shipping cost: Shipping cost refers to the expenses associated with transporting goods from one location to another. This includes both the fees charged by carriers for handling and delivering parcels as well as any packaging materials used in the process.
Marketing and promotions for ecommerce
A business can't fully succeed without marketing and promotions. From building up a customer base to increasing sales growth, marketing and advertising measures can help your business reach a larger audience and grow over time. It’s important to understand the terminology associated with ecommerce marketing so you can make informed decisions about how to best address your company’s needs. Here’s a quick overview of some common terms used within the ecommerce marketing department:
Ad spend: The money used for advertising, including paid search engine advertising, banners or other display ads, sponsored listings in shopping sites like Google Shopping, and use of affiliates or influencers.
Affiliate marketing: Affiliate marketing is a partnership between an ecommerce business and one or more affiliates. These affiliates are typically bloggers, social media influencers, or other content creators who promote the ecommerce business’s products to their audiences. In exchange for these promotions, the affiliates receive a commission on any sales that result from their efforts.
Buy button: A buy button is the call to action on an ecommerce website that prompts customers to complete their purchase by adding items to their shopping cart and proceeding through checkout.
Call to action (CTA): A call to action is meant to prompt a customer to take a specific action. This could be anything from clicking on a button or link, filling out a form, or making a purchase.
Click-through rate (CTR): CTR is a metric used to measure the effectiveness of your online marketing efforts. It's calculated by dividing the number of clicks on a specific link by the number of times that link was shown to potential customers.
Content marketing: In ecommerce, content marketing involves using various forms of content, such as blog posts, videos, social media posts, infographics etc., to educate and engage potential customers with the goal of driving sales. It focuses on creating and publishing valuable, relevant, and consistent content to attract and retain a clearly defined audience.
Conversion funnel: A conversion funnel is the series of steps a customer takes before completing a purchase on your website. These steps are designed to guide the customer through the buying process and ultimately lead them to make a purchase.
Conversion rate - The conversion rate determines the percentage of visitors to your online store who actually make a purchase. To calculate your conversion rate, divide the number of purchases by the total number of website visitors during a specific time period.
Cost-per-click (CPC): CPC is the amount advertisers pay for every click on their ads placed on search engines, social media platforms, or other websites.
Cross-sell: Cross-selling refers to offering additional products or services that complement what the customer has already purchased.
Email marketing: It is the practice of using emails to promote your ecommerce business. This can include everything from promotional messages about new products or sales events to informative newsletters that keep your customers up to date on industry trends and news. Additionally, email marketing can help you build relationships with your customers by providing them with personalized content and offers tailored specifically to their interests and preferences.
Impressions: Impressions refer to the number of times an ad or product listing has been viewed by potential customers. In other words, it measures how many people have seen your products or ads.
Influencer marketing: Influencer marketing is the process of collaborating with individuals who have a significant following on social media, blogs, or other online platforms to promote your products or services. By partnering with influencers in your niche, you can tap into their existing fan base and leverage their credibility to promote your brand.
Keyword: Keywords are words or phrases that people use to search for products or services on search engines like Google.
Landing page: A landing page is a specific webpage created to try to convert visitors into customers. It typically includes product images, descriptions, pricing information, and calls to action that encourage visitors to make a purchase.
Newsletter: Newsletters are regular emails sent to your subscribers that include updates, promotions, new products or services, and any other information relevant to your business.Search engine marketing (SEM): SEM is the process of optimizing your website through paid advertising and organic search results to increase visibility and bring in valuable leads.
Search engine optimization (SEO): Search engine optimization is the process of optimizing your website to rank higher in search engine results pages (SERPs). In simpler terms, it's about making sure your ecommerce website appears on the first page of Google when someone types in a relevant keyword related to your business.
Social media marketing: It is the practice of using social media platforms to promote products and services, increase brand awareness, and drive traffic to a website to generate sales.
Upsell: Upselling involves encouraging customers to buy a more expensive or premium version of the product they are currently looking at.
Customer relationship management (CRM) for ecommerce
Customer relationship management (CRM) for ecommerce is a set of technologies, processes, and practices that enable online retailers to collect, manage, and analyze customer data in order to cultivate better understanding of their customers. By gaining insight into customer behaviors, preferences, and buying patterns, companies can use this data to improve customer service, provide personalized offers, and create personalized experiences.
CRM software has many features designed to help businesses manage their customers’ data efficiently and effectively. Features such as segmentation enable businesses to target specific segments of their customers with customized offers or communications. Automated marketing campaigns allow them to deliver marketing messages at the right time with minimal effort. Analytics help businesses track customer engagement metrics such as website page views, average order values, and customer lifetime value (CLV).
Analytics and reporting for ecommerce
To run a successful ecommerce business, you can't overlook analytics and reporting. This type of data-driven analysis provides businesses with valuable insights that can help inform decisions, monitor progress, and identify opportunities for improvement. Common analytics and reporting tasks include tracking website visitors, sales conversions, conversion rates, customer profiles, product reviews, and more.
The following is a comprehensive glossary of terms related to ecommerce analytics and reporting:
Analytics: At its core, analytics refers to the process of collecting and analyzing data to gain insights into performance. In an ecommerce context, this means tracking everything from website traffic to customer behavior patterns to sales metrics.
Analytics platform: This is essentially a software tool used to collect, process, and analyze data to gain valuable insights about customer behavior to understand their customers' purchasing patterns and identify trends that can be leveraged to improve sales or optimize marketing campaigns. Additionally, they allow real-time monitoring of website traffic, user engagement metrics, and other key performance indicators (KPIs).
Campaign tracking: Campaign tracking is tracking the organic vs. paid search metrics. Through the use of analytics tools, such as Google Analytics, you can track metrics like website traffic, click-through rates, conversions, and revenue generated.
Conversion rate optimization (CRO): CRO is the process of optimizing your website and marketing strategies to increase the percentage of visitors who convert into customers.
Divide and conquer testing/analysis: Divide and conquer testing/analysis is exactly what it sounds like—breaking down your testing process into smaller, more manageable parts. Instead of trying to test everything at once, divide and conquer testing allows you to focus on specific areas or features of your website.
Funnel analysis: The process of analyzing how users flow through various stages of buying. The most important step in funnel analysis is identifying the different stages in your customer journey. They could be in awareness stage (customers want to buy something but aren't sure of what exactly) interest stage (when they are confident what they want to buy), desire stage (they strongly desire a product and are close to buying it), or action stage (they make a payment and buy a product). It includes things like browsing products, adding items to a cart, entering payment information, and completing checkout.
Heat maps: Heat maps are a visual representation of user engagement which show how users interact with the content or interface in certain areas on the page or website while browsing or completing task flows. They use color coding to visually represent the areas of a webpage that get the most attention.
Key performance indicators (KPI): KPIs are a set of metrics that help you track the success of your online store; they're essential for making data-driven decisions. It includes things like conversion rate, average order value, customer acquisition cost, and lifetime value.
Split testing or A/B testing: A technique used in web testing where two versions (A & B) of something, like a landing page or call to action, are tested against each other for performance purposes. The most successful variation is selected as the “winner” for subsequent use on the webpage or overall website interface.
Transaction log files analysis: The process of analyzing transaction log files to detect patterns or anomalies in user behavior such as suspicious activity around payment information or system access attempts by malicious users or bots.
Security and compliance for ecommerce
Keeping customers' data safe, protecting yourself from fraud and meeting government regulations are integral components of trust with your customers. A comprehensive approach to security and compliance can help protect your online business from theft, fraud, data breaches, and other threats. Here are some key terms regarding security and compliance:
Data loss prevention (DLP): This refers to the prevention of unauthorized transfer or access of sensitive information from computer networks through encryption technology or policy enforcement tools such as firewalls and user training.
Encryption: Encryption is the process of encoding digital information so only authorized parties can access it. Information is encoded with cryptography so only people with a key can access it.
Fraud protection systems: When enabling digital payments in ecommerce applications, you must use technical controls like fraud protection systems which come in different forms such as IP monitoring and blocking, active monitoring and user activity tracking, and machine learning models.
Identity access management (IAM): To ensure corporate security, organizations need specific procedures in place for assigning privileges based on user roles. IAM provides methods for managing users’ access rights over various applications and systems within the organization’s IT infrastructure.
PCI/DSS compliance: Payment Card Industry Data Security Standard (PCI/DSS) compliance refers to the set of security standards designed to ensure appropriate measures are taken to secure sensitive payment information including transactions processed by payment processors such as credit and debit cards.
Secure Sockets Layer (SSL): This is an encryption protocol used for establishing an encrypted link between a web server and a browser. This link ensures all data passed between the two remains private and secure.
Two-factor authentication (2FA): An authentication process where users provide two separate credentials for identity confirmation such as something they have on their possession (mobile phone or ID card) plus something they know (passwords or PIN numbers).
General ecommerce terms:
Average order value (AOV): AOV is a metric that measures the average amount of money customers spend on each order placed on your website. This can be calculated by dividing the total revenue generated by the number of orders received within a specific timeframe.
Bounce rate: Bounce rate measures the percentage of visitors who leave your website after only viewing one page.
Bundling: Bundling involves combining two or more products into one package for sale at a discounted price.
Buyer persona: A buyer persona is a fictional representation of your ideal customer. By defining their characteristics, interests, behaviors, and pain points, you can tailor your messaging and offerings to resonate with them better.
Cart abandonment: This occurs when a customer adds items to their online shopping cart but doesn't complete the purchase.
Chargeback: This is a dispute made by a customer with their credit card company, which results in the reversal of a transaction.
Comparison shopping engines: These engines are specialized search tools that allow customers to compare prices and features of products across multiple retailers in one place.
Content management system (CMS): A CMS is software that allows you to create, manage, and publish digital content such as webpages, blog posts, images, videos, and more.
Customer journey: This is the path a customer takes from initial awareness to final purchase.
Customer lifetime value (CLV): It’s the measure of how much money a customer will spend on your products or services during their entire relationship with your brand.
Customer service: The support and assistance provided to customers.
DAM system: DAM stands for digital asset management. It’s a software solution that helps businesses organize, store, and retrieve their digital assets such as images, videos, audio files, documents, and more.
Delivery integration: Delivery integration is essentially the process of seamlessly integrating your delivery system into your ecommerce platform, making it easier for you to manage and track your orders.
Live chat: A feature that allows customers to chat with support representatives in real time.
Online value proposition (OVP): It's a statement that outlines what sets your business apart from the competition and why customers should choose you over others. It's a clear and concise description of the unique benefits you offer.
Personalization: This is the practice of tailoring a customer's experience based on their preferences and behavior.
PIM System: A PIM (product information management) system is a powerful tool that helps ecommerce businesses organize, manage, and optimize their product information. It centralizes all product data in one location, making it easy for multiple teams across different channels to access and update things.
Point of sale (POS): Point of sale is the place where a transaction occurs between a customer and a business. It includes not only the physical location where a purchase is made, such as in-store or online, but also the software and hardware used to process payments.
Responsive design: Designing websites that adjust to different screen sizes.
Return policy: A set of rules and guidelines for customers returning products.
User experience: The overall experience a customer has while using a website or app.
User experience (UX): This refers to the overall experience a user has when interacting with a website or application.
Virtual assistant: This is an AI-powered tool that can assist customers with product recommendations and customer service.
Wish list: This is a feature that allows customers to save items they are interested in purchasing for future reference.
Zero moment of truth (ZMOT): This refers to the moment when a customer researches a product online before making a purchase.
Conclusion
This ecommerce glossary can be an invaluable tool to help any business succeed in the world of digital commerce. With so much jargon and technical terminology, this complete list provides a great overview for anyone looking to learn the basics of ecommerce quickly. Understanding these terms is key to engaging with customers, building relationships, and ultimately driving sales. Whether you are a newcomer or an experienced veteran of the industry, everyone stands to benefit from having this comprehensive resource at their disposal.
Our ecommerce glossary will help you decode terms that you'll come across when you start selling online. Understanding them is key to engaging with customers, building relationships & driving sales.