70+ E-commerce Terminologies for Beginners: Simplifying E-commerce

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. 

E-commerce Terminologies for beginners

List of E-commerce Terminologies for Beginners and Their Full Form and Meaning

Full-Form / MeaningFull Form / Meaning
AOVAverage Order Value – Average spend per order on your online store
B2BBusiness to Business – Transactions between businesses
B2CBusiness to Consumer – Selling products directly to individual customers
CACCustomer Acquisition Cost – Cost to acquire a new customer
CLTVCustomer Lifetime Value – Total revenue from a customer relationship
CPCCost Per Click – Amount paid for an ad each time it’s clicked
CPMCost Per Thousand (Mille) Impressions – Ad cost per 1,000 impressions
CROConversion Rate Optimization – Improving website conversion rates
CRMCustomer Relationship Management – Managing interactions with customers
CTRPay Per Click Advertising – Digital ads on a cost-per-click basis
DSODays Sales Outstanding – Average number of days for a receivable to be paid
IRTItem Response Theory – Model to improve relevance in recommendations
KPIKey Performance Indicator – Metrics to gauge performance objectives
LTVLifetime Value – Total revenue expected from a customer relationship
PLAProduct Listing Ads – Shopping ads shown for user searches
PMFProduct Market Fit – When a product resonates with a specific market
PPCClickthrough Rate – Clicks divided by the number of impressions for an ad
ROASReturn on Ad Spend – Revenue generated per amount spent on ads
SEMSearch Engine Marketing – Getting website traffic via search engines
SEOSearch Engine Optimization – Improving ranking in organic search engine results
SKUStock Keeping Unit – Identifier code for product variations
SLAService-level Agreement – Commitment to customer service standards
SMBSmall Medium Business – Companies with less than 1000 employees
SMSShort Message Service – Text messages to mobile phones
UIUser Interface – Visual part of a website or app that users interact with
UPCUniversal Product Code – Barcodes used to track trade items in stores
UXUser Experience – Interaction and perception of users to a system
VCVenture Capital – Investing funding for startup companies
VASValue-Added Services – Extra services beyond core offerings
VOIPVoice Over Internet Protocol – Phone service provided over the internet
APIApplication Programming Interface – Enables software communication
CDNContent Delivery Network – Distributes site content globally
CHDCustom Header Development – Unique site design elements
COGSCost of Goods Sold – Total cost to produce products sold
CVVCard Verification Value code – 3-4 digit code on payment cards
DAUDaily Active Users – Number of daily site visitors
EBITEarnings Before Interest and Taxes – Company profitability metric
GAAPGenerally Accepted accounting Principles – Standard accounting guidelines
OOSOut of Stock – When inventory count falls to zero
PLMProduct Lifecycle Management – Overseeing a product’s lifecycle
QPSQueries per Second – Number of database queries able to process per second
RFDRepeat First Delivery – Percentage of repeat purchases from new customers
SORSorry Out of Stock – “Sorry, this item is currently out of stock” page messaging
TAMTotal Addressable Market – Maximum demand if 100% market share
TATTurnaround Time – Time taken to complete a customer request
UAUrgency Annotation – Visual elements communicating inventory scarcity
VFRVariable Fraud Rate – Percentage of orders declined as fraudulent
WISWarehouse Inventory System – Inventory tracking technology
XMLExtensible Markup Language – Sets rules for encoding documents
YOYYear over Year – Comparison of results to previous years
ZMOTZero Moment of Truth – When a user researches a brand for first time
CACCustomer Acquisition Cost – Cost to acquire a new customer
CAPConversion Attribution Platform – Analyzes ad contribution to conversions
CBOCampaign Budget Optimization – Automatically sets the ideal campaign budget on Facebook Ads
COGSCost of Goods Sold – Total cost to produce products sold
CPCCost Per Click – Amount paid for an ad each time it’s clicked
CPICost Per Impression – Amount paid for an ad per 1000 impressions
CPLCost Per Lead – Amount paid for each lead generation through ads
CPMCost Per Thousand (Mille) Impressions – Ad cost per 1,000 impressions
CPSCost Per Sale – Amount paid for each sale generated through ads
CRConversion Rate – Percentage of store visitors that complete a target action
CROConversion Rate Optimization – Improving website conversion rates
CRMCustomer Relationship Management – Managing interactions with customers
CTACall-to-Action – Text prompting website visitors to take action
CTRClickthrough Rate – Clicks divided by number of impressions for an ad
DAUDaily Active Users – Number of daily site visitors
DSODays Sales Outstanding – Average number of days for a receivable to be paid
EATExpertise, Authoritativeness, Trustworthiness – Google ranking factors
EBITEarnings Before Interest and Taxes – Company profitability metric
EMDExact Match Domain – Domain name matching key search term
ESPEmail Service Provider – Companies providing email marketing services
E-commerce Terminologies for Beginners

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.

You will also love to read:  What Age Can You Start Dropshipping? - A Complete Guide

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:

Navigating Marketing Terminologies

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
You will also love to read:  How to Dropship Luxury Products - A Beginner's GUIDE

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
You will also love to read:  How To Dropship On TikTok Shop: Crush It Dropshipping On TikTok

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.

Hello, I’m Samuel, and I’ve been in the dropshipping business for the past 9 years. Over the years, I’ve had the privilege of helping many novice dropshippers grow their businesses. Based on my experience, I’ve launched this blog to share my insights and knowledge with the dropshipper community.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.