Whether you’re a new online entrepreneur or just looking up some new ecommerce term you’ve just heard, you’ve come to the right place!
Understanding the terms of ecommerce right helps you navigate your way through this fast-evolving industry with more ease and less stress.
This ecommerce glossary presents you with a comprehensive and updated list of ecommerce terminology, including the basic ecommerce business terms that every professional and digital marketer should thoroughly understand.
Simply click on the terminology you want below, and you’re good to go!
(I suggest inserting a linked list of terms here, like a Table of Contents, shown in 4 columns, so it looks shorter on the Subscribers page and the reader doesn’t have to scroll through to the end)
Also known as split testing, this is a method of experimenting with two different versions of copy or any other marketing variable to see which one performs better with the target audience.
For example, you want to test which Call-To-Action (CTA) to use on your business website’s Home Page. So, you show one version of the CTA to half of the target audience sample and the second version of the CTA to the other half of the target audience sample. The CTA version that generates the higher conversion rate is the one that you use on the Home Page.
Abandoned cart recovery
This involves identifying visitors to your store who added items to a shopping cart but never completed the checkout process. Then bring them back to complete it.
You do this by reminding them through push notifications or email and incentivizing their complete checkout.
Address Verification Service (AVS)
This service is provided by credit card processors to online businesses to identify suspicious card transactions and prevent fraud. The Address Verification Service (AVS) compares the billing address submitted by card users with their billing address on record at their issuing bank.
This is when a business markets its products and services through partners or affiliates, who then recommend the business’s products and services on their own platforms.
The affiliates earn commissions from their referrals who purchase from the business. Anyone who generates huge interest and an online following can become an affiliate marketer – from popular bloggers and vloggers and news websites.
To make this work, an ecommerce retailer provides an online influencer with a trackable link to use when they mention the retailer and its products, services, and offers. When a reader or viewer of the influencer clicks on this link, they are taken to the retailer’s website page related to these products, services, and offers. If the reader or viewer buys from the retailer from this link, the retailer then pays the influencer a percentage of the final sale.
Application Programming Interface (API)
This is a set of rules that allows two software applications to interact and exchange data with each other. Application Programming Interfaces (API) are often used to create apps and add-ons to existing software. When you use your Facebook or Google account to log into your bank account online, you’re using an API.
This is an email marketing application that involves sending out electronic newsletters to the verified email addresses of your subscribers on your email list. Get Response and Campaign Monitor are examples of autoresponders.
Average Order Value (AOV)
This metric measures the average amount that customers spend per transaction with a business. It is computed by dividing the total revenue the business made during a specific time period (daily, weekly, monthly, quarterly, yearly) by the number of customer orders during the same time period.
For example, if your online retail store generated $100,000 in sales revenue in one month, with total customer orders of 800, then your AOV for the month is $125. This means that, on average, each customer ordered $125 worth of goods from your business.
AOV is a key performance indicator (KPI) that you can use to understand your customers’ purchasing habits better.
Customer benefits are what the customer gets from consuming or using a particular product or service. Benefits are often intangible and address customer pain points.
Air travel, for example, should give passengers the basic benefits of comfortable, safe, and speedy travel.
This is the Friday after the U.S. Thanksgiving holiday when many physical and online stores sell their items at heavily discounted prices to let go of overstock inventory and prepare for the Christmas season. Black Friday sales also provide online retailers the opportunity to reach new markets and expand globally.
Originally an online diary – “web log” – by individuals, a blog is now a regularly updated web page or website with content that provides informational and educational material to readers.
Typically written informally, blogs have become a key part of content marketing. If written effectively, blogs help businesses rank high in search results, driving organic traffic to their websites and boosting revenue potential.
When you launch a business with little or no capital and grow it using only your own resources without investor funding, you are bootstrapping.
The term came from a phrase used in the 18th and 19th centuries which means “to pull oneself up by one’s bootstraps,” although it originally indicated an impossible task. Today, it means making something out of nothing as a self-starter.
This metric measures the percentage of visitors who visit a website, then leave without performing any action, such as clicking a link on a page.
It is computed by dividing the total number of one-page visits by the total number of webpage or website visits during a specified time period, then multiplying the quotient by 100.
The bounce rate tells you how engaged your visitors are when they arrive at your business’ home page or specific pages. If the visitors are highly engaged, they’re more likely to hang out for a while and explore other pages on the website. If they’re not, it’s likely that your business’ web pages have issues with content, copy, layout, and user experience, which you need to fix.
A brand is a concept, product, or service that has a unique and immediately identifiable identity that distinguishes it from others in the same industry. It’s easily communicated and marketed. It goes beyond the name of the product or service but captures the identity and unique value it delivers to its customers.
A strong brand increases sales not just for a particular product but for all the products being sold by the same business. Popular examples of strong brands with their brand messages are Apple (premium quality, exclusivity, attention to detail), Coca-Cola (refresh the world and make a difference), Disney (“Entertainment with Heart”), and Nike (“Just Do It”).
This means a physical store. The term “brick and mortar” is an expression derived from the traditional building materials that go into constructing a building. Today, physical stores need not necessarily be made of brick and mortar.
This is a sales technique that involves selling multiple products or services in one package or “bundling” them. Usually, the products or services included in the package end up lower priced when compared to their individual prices if bought separately.
Bundling is one way to increase the perceived value of your products and services and improve your customer’s experience with your brand. They also help increase your Average Order Value (AOV).
Bundling is often used for product awareness, to dispose of dead stock, and during gift-giving occasions.
This is a business model where a business sells to other businesses, typically along the industry supply chain. For example, if you are a baking ingredients supplier to bakeries, you are operating under the business-to-business (B2B) model.
This is a business model where a business sells to consumers. If you are a baking ingredients supply store that caters mainly to individual home bakers, then you are operating under the business-to-consumer (B2C) model.
It’s different from a direct-to-consumer (D2C) business in the sense that you sell many products through multiple channels (such as other retailers), while a D2C business mainly sells its own products through its own direct channels.
This is a fictional profile of your ideal customer (if you’re just starting out) or typical customer (if you’ve been in business for a while). You have to have a clear idea of whom you want to sell to or who you’re actually selling to communicate with them more effectively.
Creating a buyer persona involves research and analysis of real customers, their demographic, and emotive or psychological profiles. This helps you accurately pinpoint your customers’ buying habits, communication preferences, goals, motivations, and pain points.
These are specific sentences inserted in all marketing communication content and messages telling audiences to do something next. Examples are sentences asking them to click on an offer, sign up for a newsletter, subscribe to a service, purchase a product, or even just contact the business.
If done right, these CTAs move audiences along their customer journey with your brand. It is recommended that all marketing communication and messages should always have a CTA to keep your audiences engaged with your brand. Otherwise, your audiences will simply leave after viewing your content.
Cart abandonment rate**
The shopping cart or basked abandonment rate is the percentage of shoppers who add items to their cart but leave it and don’t check out. It is computed by dividing the number of completed purchases by the number of shopping carts created, then subtracting the quotient from 1 and multiplying it by 100.
A high cart abandonment rate means a lot of opportunities lost for turning shoppers into paying customers. There are proven strategies to reduce cart abandonment rates.
This process involves the several steps a customer takes to complete their online purchase. It begins when the customer clicks the “Check Out” button or a similar link and ends with the order confirmation page or email.
In between these, it often involves asking the customer to review their order, providing their billing and shipping information, and entering their payment details in a secure form. Fewer and easier steps in the checkout process typically lead to lower cart abandonment rates.
This is the percentage of existing customers who do not repurchase from your business. Usually, you need enough time to be reasonably confident a customer won’t return to calculate your churn rate. A high churn rate means a high rate of lost customers.
The churn rate is calculated by dividing the total number of lost customers by the total number of customers at the start of a specific time period selected.
Click-Through Rate (CTR)
This metric indicates the ratio of customers who click on a link in an email, organic search result or push notification message to the number of times the page it links to is viewed (page impressions).
CTR is calculated by dividing the number of page impressions by the number of total clicks and multiplying the quotient by 100. CTRs are an often-used metric in assessing a marketing or advertising campaign’s effectiveness.
Cloud-based ecommerce platform
These are online ecommerce platforms that run their own servers in the cloud, which is a distributed collection of servers that host software and infrastructure accessed over the internet.
Many ecommerce shops set up their businesses in cloud-based platforms like BigCommerce and Shopify, so they don’t have to buy web hosting or install software themselves anymore. Instead, they can focus on running their businesses.
Comparison Shopping Engines (CSE)
Also known as price comparison websites, Comparison Shopping Engines (CSEs) are websites that consumers can use to browse a product offered by different retailers. Google Shopping is an example.
This is a type of marketing that involves the creation of relevant, useful, and shareable online content to attract, entertain, and educate a clearly defined audience.
Content marketing does not explicitly promote a brand or sell its products and services. Instead, it stimulates audience interest, answers their questions and addresses their problems, and develops their trust in a brand. It’s an effective tool for qualified lead generation, which later on can result in better conversions and more sales for the business.
Content Management System (CMS)
This is a software that lets ecommerce businesses upload, edit, manage, and publish the contents of their online store. This often involves the business’ product catalogs as well as its other digital assets, such as products and other images. Examples of CMS are Magento, Shopify, and WooCommerce.
This is what takes place when a website visitor performs a desired action your business intended for them to make. Typically, these actions are part of a series that leads to a purchase until the actual purchase.
These actions can include filling out a form, signing up for a webinar, adding to a shopping cart, and completing the checkout process. In effect, the visitors were “converted” from one phase of their customer journey to the next phase.
Also known as the purchase funnel or the sales funnel, the conversion funnel is a map of a customer’s journey from being a prospective customer to an actual paying one. The five main phases are awareness, interest, desire, conversion, and re-engagement.
This metric shows the percentage of website visitors who complete an action intended by your business for them to complete, usually by following your Calls-To-Action (CTAs).
It is calculated by dividing the total number of conversions by either the total number of leads, the total number of unique visitors, or the total number of website sessions and multiplying the quotient by 100.
Conversion Rate Optimization (CRO)
This is the process of improving an ecommerce site to increase its conversion rates. There are proven tactical approaches to significantly increase ecommerce conversion rates for maximum CRO.
These approaches typically involve optimizing website design and speed, offering omnichannel services, having the right payment options, providing fast checkout and free shipping, live streaming, and personalization.
Cost Per Acquisition (CPA)
This is a metric that measures the cost of moving a customer to take an action that leads to a conversion.
This is a sales technique that involves recommending related-- often complementary-- additional items to a customer based on the initial items they are buying. If effective, this increases the overall value of a customer’s order.
For example, cross-selling happens when you encourage a customer who just bought a new phone from your online shop to also get a protective case for it.
This is the process of attracting new customers to your business. In ecommerce, this is typically indicated by traffic to your website.
The important thing is to drive the right traffic or the target customers who actually convert. This process involves moving prospective customers along their customer journey with your brand, from making them aware to developing customer loyalty.
This is the path that your target customers go through when they visit your website, regardless of the devices and browsers they use.
The path involves the customers’ experiences with your brand from the moment they first became aware of your products or services, to the moment they make a purchase, to when they come back to make repeat purchases.
The customer journey is defined by identifying a series of touchpoints or points of interaction that your customers have with your brand. The key is to ensure positive customer experiences at each of these touchpoints.
Customer journey mapping
This is a visual presentation of every interaction or touchpoint that a customer has with your business. It includes not only positive interaction points and the customer’s motivations but also potential points of friction.
Mapping helps you understand your customers’ experiences with your brand, so you can maximize positive touchpoints and minimize friction points in your marketing strategy.
Customer Lifetime Value (CLV)
This is the estimated total worth to your business of a customer across your entire relationship with them. It’s measured in terms of the expected net profit your business earns from each individual customer.
This helps a business identify and retain the customers who will ultimately generate the most value for the business in the long term.
This is a collection of quantitative data to identify your target customers. It often involves demographic data such as age, sex, location, and purchase history.
The customer profile is used as an element of building the buyer persona and acts as a guide for strategizing your marketing to reach your ideal customers.
Customer Relationship Management (CRM)**
This is a software technology used to manage interactions with potential and actual customers. A Customer Relationship Management (CRM) system such as Freshsales and Salesforce helps businesses generate and convert leads by using the tool to develop positive customer relationships.
This is the process of keeping your existing customers and encouraging them to return again. This involves nurturing and developing good relationships with them so that they become loyal customers.
Customer retention frequently costs less than customer acquisition. It also translates to more profits than new customers.
These are written opinions that customers have of your business’s products and services for other people to read. There are third-party review providers such as Trustpilot.
Potential customers use customer reviews to understand how your products and services work and to consider whether it’s worth their investment engaging with your business.
Customer reviews attract potential customers’ attention and grab online visibility in search engine rankings.
This is the process used by online businesses to make sure that the information provided by their customers is correct and that the customers are who they say they are.
For businesses, customer verification helps reduce the costs arising from erroneous information and the risk of fraud or theft. For consumers, it helps protect them from fraudulent activities done by other users.
This is the Monday after Black Friday, when stores offer huge discounts on their products, so they can divest themselves of old inventory and prepare for the Christmas holiday season.
Digital Asset Management (DAM) system
This is the “single source of truth” (SSOT) for ecommerce digital assets. It is a platform that allows anyone with authorized access in the same organization to upload, tag, and categorize digital assets such as data, images, and videos, so the assets can be jointly managed from a single location.
DAM can be found in third-party online DAM platforms, basic content management systems (CMSs), ecommerce systems, product information management (PIM) systems, and stand-alone vendor systems.
This is when an ecommerce business seamlessly integrates with a delivery provider such as FedEx and the United Postal Services (UPS). This lets customers receive real-time updates on their orders’ delivery progress. If done efficiently, It adds to a positive user experience.
Direct-to-consumer (DTC or D2C)
This is a business model that involves businesses selling products directly to consumers through their own websites and other direct channels, such as physical stores. This eliminates the need for third-party retailers and wholesalers.
Apple is one of the most popular examples of a D2C brand.
Also known as promo codes and coupon codes, a discount code is used to activate discounts or special offers in an online store. The codes can be generated manually or by using the software.
This is a sales technique used to motivate potential customers to buy a product or service by providing them with a specific code to use upon checkout. It’s often used to attract new customers or encourage existing ones to buy again, especially during low seasons.
A domain is the web address where your online store is located, such as youronlinestore.com. When clicked, it leads to the Home Page of your website.
This is a retail fulfillment method that involves retail ecommerce stores not owning the inventory or stock they sell on their websites. Instead, they partner with third-party manufacturers or suppliers who ship the ordered items once they’ve been purchased from the retail ecommerce store’s website. The supplier then charges the retailer a fee for doing this.
This is the amount of time a user spends on a website, from the time they click on a search result to the time they return to the search engine results page.
If a user clicks on a link to your website and spends a lot of dwell time on your site before going back to the search engine results page, your website will likely be rewarded with preferential treatment from search engines.
Coined from the terms “electronic commerce,” ecommerce is the process of buying and selling physical or digital products electronically or via the internet. It often refers to online retail but may also refer to a specific transaction type, such as transferring funds or buying a book from Amazon.
This is a browser-based application that lets you sell products online. Shopify, Squarespace, and Wix are examples of popular eCommerce platforms.
This is a type of marketing that involves nurturing connections with and promoting your products and services to an email list.
You essentially build your email list by asking your website, social media, and other online assets visitors to subscribe to it. You can also build it in strategic partnerships with other businesses or through online advertisements.
This is a filtering tool that lets users choose various combinations of attributes to narrow down their search for a product. Online stores with a lot of products typically have a faceted navigation system where users can perform a faceted search.
Features are the characteristics of a product that set it apart from similar items. It can be physical (such as color, size, and shape) or abstract (such as brand image, quality, and value).
Features are sometimes confused with benefits. However, while benefits are about what a customer gets from using a product, features are the very attributes of the product or service itself.
For example, if airline travelers benefit from the speed of air travel, it’s because of the features of airplanes that enable them to travel faster than land or sea transport vehicles.
Fulfillment is the process of completing an online order already paid for by the customer by delivering it to the customer on time. It involves inventory management, product packaging, and shipping in a timely manner.
A business can undertake order fulfillment in-house or through third-party service providers.
Fulfillment By Amazon (FBA)
This is an order fulfillment service by Amazon that lets sellers store their products in Amazon’s fulfillment centers and have them delivered by Amazon itself, when a customer purchases an Amazon Fulfillment By Amazon (FBA) product, Amazon packs and ships the order on behalf of the seller while charging the seller for the service.
Also known as “payment gateway,” a gateway is a platform that processes payments for online purchases. The gateway facilitates the transfer of data from the user’s bank to the store’s website for the payment transaction to be completed. PayPal, Amazon Pay, and Stripe are popular examples of payment gateways.
Headless commerce separates the front (digital storefront that customers view) from the backend (server) interfaces of ecommerce platforms, so ecommerce capabilities can be delivered across new channels in new environments.
“Headless” means there is no more frontend (viewer) element of a site’s architecture. Everywhere can be a seller’s storefront. Amazon’s headless infrastructure enables it to flexibly innovate faster than its competitors.
An impression is a metric that measures the number of digital views or engagements with a piece of content (such as an advertisement, digital post, or web page) within a specified time period. In online advertising, it’s called an “ad view,” or how many times the ad has been seen.
This is a type of marketing that specializes in “pulling” people into your business by creating relevant, engaging, and highly shareable content instead of “pushing” them through online advertising or public relations.
Inbound marketing content examples include blogs, e-books, podcasts, videos, webinars, and white papers.
These can be words or phrases that people type into search engines when they’re searching for particular content, products, or services.
Ecommerce site owners regularly study what keywords their target customers are using to search for products or services they offer. Then, they add these keywords to their site content, so their sites can be more easily found and ranked in results delivered by search engines to online users.
Also known as a squeeze page, a landing page is a webpage with a specific purpose. It can be to capture visitors’ email addresses or to promote a specific product or service, for example.
Landing pages are often used in online marketing campaigns that involve social ads and Pay-Per-Click (PPC) advertising.
A lead magnet is a compelling offer that motivates website visitors to share their contact details with a business. It typically comes as a free e-book or webinar, a discount coupon, or exclusive content offered in exchange for an email address.
This is a horizontal drop-down menu that displays a wide range of product categories all at once, so the user doesn’t need to scroll anymore. An example is global fashion retailer Boohoo’s mega menu:
Coined in 2017 by Alibaba co-founder Jack Ma, the term “new retail” is an integrated retail delivery model. It is where offline, online, logistics, and data converge to create a seamless shopping experience for customers.
It goes beyond the omnichannel approach (integrating all channels for a unified customer experience) in terms of innovation around experience and delivery, scale and speed of implementation, and the harnessing of new technology.
Pure play retailers (businesses that focus only on one channel or line of business, such as Timberland) and direct-to-consumer (D2C) companies such as Sephora have had a head start in implementing the New Retail model.
Online Value Proposition (OVP)
An Online Value Proposition (OVP) is a proposal that reinforces a business’s core brand proposition, which is the unique value the business offers to its customers.
An OVP shows online visitors what they can get from the online services that they can’t get from you offline or from other competitors. It should answer the subconscious question on all site visitors’ minds, “Why should I do business with you online?”
A pain point is a persistent or recurring problem that frequently annoys or inconveniences customers. The four (4)main types of pain points are those that involve productivity, financial constraints, business process, and business support.
Payment Card Industry (PCI) compliance
The Payment Card Industry Data Security Standard (PCI DSS), or PCI for short, is a set of requirements and regulations to ensure that all companies that process, store, or transmit credit card information maintain a secure environment.
Any ecommerce merchant that accepts credit card payments must be PCI-compliant. PCI compliance is administered by the PCI Standards Council, formed in 2006 by the major credit card brands.
Pay-Per-Click (PPC) is a type of advertising that involves the advertiser’s paying a fee every time someone clicks on their advertisement.
Types of PPC advertising include affiliate marketing, Google Shopping ads, Gmail-sponsored ads, in-stream ads, local service advertising, online display advertising, paid search marketing, price comparison website advertising, retargeting PPC advertising, and social media advertising.
Product Information Management (PIM) system
This is a business application solution that provides a single location to collect, manage, and enrich your product information, create a product catalog, and distribute it to your ecommerce and sales channels.
Instead of doing manual entry and taking in data from several other systems, then pushing out the product information to your channels, a PIM lets you enter information only once and reduces potential data entry errors and inconsistencies.
Push notifications are small, clickable pop-up messages that nudge users to take action. They can either be transactional or marketing push notifications. Marketing push notifications may be web, mobile, desktop, or wearables push notifications.
Search Engine Optimization (SEO)
Search Engine Optimization (SEO) is a process to improve your website’s ranking position in search engine results.
Typically, SEO involves finding the right keywords to target and use on your site, creating quality and search-friendly content, and improving the speed and user experience of your website. It also includes using dedicated SEO tools like Ahrefs and SEMrush.
Market segmentation is organizing prospective buyers with common needs and who respond similarly to a marketing action into groups or segments. Typically, markets are segmented demographically, geographically, or behaviorally.
Segmentation helps businesses target different categories of consumers who perceive the full value of the products or services they offer differently.
Social proof is evidence from other people who have engaged with your business and used your products and services. Typically, this takes the form of ratings and reviews, as well as user-generated content where they appreciate your brand, product, or service.
Stock Keeping Unit (SKU)**
A Stock Keeping Unit (SKU) is a number that retailers use to differentiate their products from each other and to track inventory levels. SKUs are typically used internally and must not be confused with Universal Product Codes (UPCs).
Universal Product Code (UPC)
A Universal Product Code (UPC) is a unique-standardized code printed on a retail product package for identification of the product. It has two parts: a machine-readable barcode and a unique 12-digit number.
This is a sales technique that involves inviting a customer to purchase an upgraded, higher-priced version of a product and other add-ons to generate more revenue.
For example, if a customer is about to check out a mid-range phone from your store, you upsell by offering them an upgrade to a premium phone at a time-sensitive discount.
User experience (UX)
User experience involves all aspects of an end user’s interaction with a business, its services, and its products.
In ecommerce, user experience best practices typically involve intuitive navigation and strong search tools, high-quality product images and strong descriptions, clear and prominent Calls-To-Action (CTAs), streamlined checkout processes, and mobile-friendliness.
Also known as curated marketplaces, vertical marketplaces are carefully chosen marketplaces that enable tailored online shopping experiences for a base of online customers, with product data and consumer insights in terms of customer tastes and preferences.
An example is Airbnb, which focuses on renting out properties all over the world from an extensive pool of landlords and homeowners.
If there’s any new term you want to add to this continuously growing glossary, let us know!