So you want to get into the world of e-commerce but feel overwhelmed by all the fancy terminologies being thrown around?
Don’t worry, I’ve been there myself.
When I first started with online sales, I would hear words like conversion rates, PPC, and LTV and wonder what on earth people were talking about. It was like they were speaking a foreign language.
- E-commerce has its own unique vocabulary that can seem confusing at first.
- But once you understand the key terms, it all starts to make more sense.
In this beginner’s guide, I’ll break down the most important e-commerce terminologies in simple, everyday language.
Consider me your translator for all those complex-sounding concepts.
I aim to simplify the key E-commerce terminologies so you can confidently navigate the e-commerce landscape.
Ready to master some new vocabulary? Let’s dive in.
Article Contents
- 1 List of E-commerce Terminologies for Beginners and Their Full Form and Meaning
- 2 Decoding Key E-commerce Metrics
- 3 Navigating Marketing Terminologies
- 4 Understanding Sales Terminologies
- 5 Simplifying Logistics Terminologies
- 6 Making Sense of Data Jargon
- 7 Conclusion
- 8 FAQs on E-commerce Terminologies for Beginners
List of E-commerce Terminologies for Beginners and Their Full Form and Meaning
| Full-Form / Meaning | Full Form / Meaning |
| AOV | Average Order Value – Average spend per order on your online store |
| B2B | Business to Business – Transactions between businesses |
| B2C | Business to Consumer – Selling products directly to individual customers |
| CAC | Customer Acquisition Cost – Cost to acquire a new customer |
| CLTV | Customer Lifetime Value – Total revenue from a customer relationship |
| CPC | Cost Per Click – Amount paid for an ad each time it’s clicked |
| CPM | Cost Per Thousand (Mille) Impressions – Ad cost per 1,000 impressions |
| CRO | Conversion Rate Optimization – Improving website conversion rates |
| CRM | Customer Relationship Management – Managing interactions with customers |
| CTR | Pay Per Click Advertising – Digital ads on a cost-per-click basis |
| DSO | Days Sales Outstanding – Average number of days for a receivable to be paid |
| IRT | Item Response Theory – Model to improve relevance in recommendations |
| KPI | Key Performance Indicator – Metrics to gauge performance objectives |
| LTV | Lifetime Value – Total revenue expected from a customer relationship |
| PLA | Product Listing Ads – Shopping ads shown for user searches |
| PMF | Product Market Fit – When a product resonates with a specific market |
| PPC | Clickthrough Rate – Clicks divided by the number of impressions for an ad |
| ROAS | Return on Ad Spend – Revenue generated per amount spent on ads |
| SEM | Search Engine Marketing – Getting website traffic via search engines |
| SEO | Search Engine Optimization – Improving ranking in organic search engine results |
| SKU | Stock Keeping Unit – Identifier code for product variations |
| SLA | Service-level Agreement – Commitment to customer service standards |
| SMB | Small Medium Business – Companies with less than 1000 employees |
| SMS | Short Message Service – Text messages to mobile phones |
| UI | User Interface – Visual part of a website or app that users interact with |
| UPC | Universal Product Code – Barcodes used to track trade items in stores |
| UX | User Experience – Interaction and perception of users to a system |
| VC | Venture Capital – Investing funding for startup companies |
| VAS | Value-Added Services – Extra services beyond core offerings |
| VOIP | Voice Over Internet Protocol – Phone service provided over the internet |
| API | Application Programming Interface – Enables software communication |
| CDN | Content Delivery Network – Distributes site content globally |
| CHD | Custom Header Development – Unique site design elements |
| COGS | Cost of Goods Sold – Total cost to produce products sold |
| CVV | Card Verification Value code – 3-4 digit code on payment cards |
| DAU | Daily Active Users – Number of daily site visitors |
| EBIT | Earnings Before Interest and Taxes – Company profitability metric |
| GAAP | Generally Accepted accounting Principles – Standard accounting guidelines |
| OOS | Out of Stock – When inventory count falls to zero |
| PLM | Product Lifecycle Management – Overseeing a product’s lifecycle |
| QPS | Queries per Second – Number of database queries able to process per second |
| RFD | Repeat First Delivery – Percentage of repeat purchases from new customers |
| SOR | Sorry Out of Stock – “Sorry, this item is currently out of stock” page messaging |
| TAM | Total Addressable Market – Maximum demand if 100% market share |
| TAT | Turnaround Time – Time taken to complete a customer request |
| UA | Urgency Annotation – Visual elements communicating inventory scarcity |
| VFR | Variable Fraud Rate – Percentage of orders declined as fraudulent |
| WIS | Warehouse Inventory System – Inventory tracking technology |
| XML | Extensible Markup Language – Sets rules for encoding documents |
| YOY | Year over Year – Comparison of results to previous years |
| ZMOT | Zero Moment of Truth – When a user researches a brand for first time |
| CAC | Customer Acquisition Cost – Cost to acquire a new customer |
| CAP | Conversion Attribution Platform – Analyzes ad contribution to conversions |
| CBO | Campaign Budget Optimization – Automatically sets the ideal campaign budget on Facebook Ads |
| COGS | Cost of Goods Sold – Total cost to produce products sold |
| CPC | Cost Per Click – Amount paid for an ad each time it’s clicked |
| CPI | Cost Per Impression – Amount paid for an ad per 1000 impressions |
| CPL | Cost Per Lead – Amount paid for each lead generation through ads |
| CPM | Cost Per Thousand (Mille) Impressions – Ad cost per 1,000 impressions |
| CPS | Cost Per Sale – Amount paid for each sale generated through ads |
| CR | Conversion Rate – Percentage of store visitors that complete a target action |
| CRO | Conversion Rate Optimization – Improving website conversion rates |
| CRM | Customer Relationship Management – Managing interactions with customers |
| CTA | Call-to-Action – Text prompting website visitors to take action |
| CTR | Clickthrough Rate – Clicks divided by number of impressions for an ad |
| DAU | Daily Active Users – Number of daily site visitors |
| DSO | Days Sales Outstanding – Average number of days for a receivable to be paid |
| EAT | Expertise, Authoritativeness, Trustworthiness – Google ranking factors |
| EBIT | Earnings Before Interest and Taxes – Company profitability metric |
| EMD | Exact Match Domain – Domain name matching key search term |
| ESP | Email Service Provider – Companies providing email marketing services |
Decoding Key E-commerce Metrics
Now that you know the basics, let’s level up and break down some of the most important metrics and acronyms. These will give you key insights into how your online business is performing.
Conversion Rate
- Measures the percentage of website visitors that convert into customers
- Calculated by dividing total conversions by total visitors
- Shows how effective your site and ads are at driving business
A high conversion rate means more people are buying – a good thing.
Bounce Rate
- Percentage of visitors that leave your site after viewing only one page
- Often indicates website navigation issues or unengaging content
- Lower bounce rate = visitors are sticking around longer
Average Order Value (AOV)
- The average dollar amount from orders in your store
- Found by dividing total revenue by the number of orders
- Helps make decisions about inventory, pricing, promotions
Some other important metrics:
- ROAS (Return on Ad Spend) – Revenue earned per ad dollars spent
- CAC (Customer Acquisition Cost) – Cost to acquire a new customer
- LTV (Lifetime Value) – Revenue a customer will generate over a lifetime
- Churn rate – Percentage of customers lost per period
Also read my other posts:
Driving traffic and sales for your e-commerce store requires effective online marketing. Let’s decode some common terms you’ll encounter:
PPC Advertising
- PPC stands for pay-per-click advertising
- A model where you pay a fee when someone clicks your ads
- Helps get your site in front of motivated searchers
Retargeting
- Targets people who already visited you with ads across the web
- Reminds them to come back and complete a purchase
- Essentially follows them around (in a non-creepy way 👀)
Affiliate Marketing
- Other people promote your products to earn commission fees
- Leverages influencers/sites to expand reach
- Affiliates only paid when a sale occurs
Email Marketing
- Building and engaging an email subscriber list
- Sending promotions, content updates, surveys
- Measured by open rate, CTR, and conversions
Some other key terms:
- CPM – Advertising cost per 1,000 impressions
- Click-through rate (CTR) – Clicks divided by impressions
Understanding Sales Terminologies
Growing your e-commerce revenue relies on smart sales strategies:
Cart Abandonment
- When a shopper adds items to their cart but doesn’t complete checkout
- High abandonment rates mean you’re losing potential orders
- Email and retargeting help remind them to finish purchasing
Upselling
- Encouraging customers to purchase a superior, often more expensive version
- For example, upgrading from standard to premium membership
- Increases order value if done properly
Cross-selling
- Offering complementary products to what customers are buying
- Like suggesting fries when a customer orders a burger
- Bundles items for a better, rounded solution
Funnel Analysis
- Evaluates how well you move visitors through steps to become customers
- Stages include awareness, consideration, conversion
- Optimizes bottlenecks losing traffic
Simplifying Logistics Terminologies
Handling inventory, shipping, and business systems behind the scenes is vital for e-commerce success.
Order Fulfillment
- The process of receiving, packaging, and shipping customer orders
- Speed, accuracy, and branding all play a role
- Can be handled in-house or outsourced to 3PLs
Third-Party Logistics (3PL)
- Companies that handle warehousing, shipping, etc for other businesses
- It allows you to focus on your core competencies
- Leverages 3PL infrastructure, technology, and expertise
Inventory Management
- Tracking stock items, levels, and turnover
- Ensures you have enough to meet demand without excessive waste
- Informs manufacturing and purchasing decisions
Some other key operations terms:
- POS – Point of sale software to handle transactions
- CRM – Manages overall customer relationships
- CMS – Content management system for your website
Making Sense of Data Jargon
Harnessing insights from website traffic and sales metrics is crucial for e-commerce.
Web Analytics
- Collecting and assessing data on visitors and behavior
- Key for optimizing site performance and conversions
- Tools like Google Analytics help track KPIs
Big Data
- Massive, constantly updated data from diverse sources
- Includes POS system, customer info, advertising channels
- Reveals trends and opportunities hidden in complexity
Business Intelligence (BI)
- Technology to organize and analyze big data sets
- It helps turn raw info into actionable insights
- Enables data-driven business decisions
A/B Testing
- Comparing two versions of a site, ad, email, etc.
- Shows that perform better by splitting the audience
- The “winning” variation remains live
Predictive Modeling
- Uses machine learning to forecast future outcomes
- Predicts which customers may churn, what they may buy, etc.
- Shapes marketing, product features, operations
Conclusion
I hope this beginner’s glossary helped decode key e-commerce terminologies for you. With these common terms simplified, you can confidently navigate online business discussions.
FAQs on E-commerce Terminologies for Beginners
What is SEO and how does it impact my e-commerce site?
SEO (search engine optimization) involves optimizing your website to rank higher in search engines like Google. High rankings bring targeted traffic to your products. On-site and off-site optimization are key SEO components.
What does open rate and delivery rate mean in email marketing?
The open rate shows how many subscribers opened an email campaign. Delivery rate tracks how many emails reached subscriber inboxes vs bouncing. Both metrics help gauge email effectiveness.
How can I speed up my website page load times?
Faster page speed leads to better user experience and SEO. Minify code, optimize images, remove unnecessary plugins, upgrade hosting, and leverage caching/CDNs to accelerate load times.
Why is a user-friendly web design important for conversions?
If your website makes it difficult for customers to navigate purchases, you will have higher bounce rates and lost sales. Ensure easy browsing with intuitive navigation, quality visuals, simple checkout, and convenient shopping cart.
What are some important omnichannel strategies?
Omnichannel retail coordinates experiences across bricks-and-mortar, desktop, mobile to align with changing customer buying behavior. Offer consistent messaging, prices, and services across channels.
The article on E-commerce Terminologies for Beginners has wrapped up. I hope you found it interesting. Thanks for your visit.
