Understanding E-commerce Terminology: A Glossary

Stepping into the world of e-commerce can feel like learning a new language. AOV, B2B, CVR, SEO, PPC, API... the acronyms and jargon fly thick and fast. Feeling lost in translation? You're not alone. Understanding the key terminology is crucial for navigating the industry, communicating effectively with partners, analyzing performance, and making informed decisions for your online store.

Think of this as your foundational phrasebook. Knowing these terms empowers you to grasp strategic concepts, evaluate software features, interpret analytics reports, and engage confidently in discussions about growing your online business. Without a shared understanding of the language, you risk miscommunication, confusion, and missed opportunities.

This curated e-commerce terminology glossary breaks down some of the most essential and frequently encountered terms across different facets of online retail – from basic concepts to marketing, operations, and finance. Let's decode the language of e-commerce together.

Foundational E-commerce Concepts

• E-commerce (Electronic Commerce): The buying and selling of goods or services using the internet, and the transfer of money and data to execute these transactions.
• B2B (Business-to-Business): E-commerce transactions conducted between two businesses (e.g., a wholesaler selling to a retailer).
• B2C (Business-to-Consumer): E-commerce transactions conducted between a business and individual consumers (the most common model for online retail).
• D2C (Direct-to-Consumer): A model where brands sell directly to their end customers via their own e-commerce store, bypassing traditional retailers or wholesalers.
• Marketplace: An online platform (like Amazon, eBay, Etsy) where multiple third-party sellers list products for sale. Online Retail HQ also features a Marketplace for buying and selling online stores.
• SKU (Stock Keeping Unit): A unique alphanumeric code assigned to a specific product to track inventory. Each variation (size, color) typically has its own SKU.
• Dropshipping: A retail fulfillment method where a store doesn't keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party (manufacturer or wholesaler) and has it shipped directly to the customer.
• Omnichannel: A multi-channel sales approach that provides the customer with a seamless shopping experience, whether they're shopping online from a desktop or mobile device, by telephone, or in a brick-and-mortar store.

Marketing & Sales Terminology

• SEO (Search Engine Optimization): The practice of increasing the quantity and quality of traffic to your website through organic (non-paid) search engine results. [Internal Link: Blog post about E-commerce SEO Basics]
• PPC (Pay-Per-Click): An internet advertising model where advertisers pay a fee each time one of their ads is clicked. Google Ads and social media ads often use this model.
• SEM (Search Engine Marketing): A broader term encompassing both SEO and PPC activities aimed at increasing search engine visibility.
• CTR (Click-Through Rate): The ratio of users who click on a specific link (e.g., an ad, an email link) to the total number of users who view the page, email, or advertisement. Formula: $(Clicks / Impressions) * 100\%$.
• Conversion Rate (CVR): The percentage of website visitors who complete a desired goal (a conversion), such as making a purchase. Formula: $(Conversions / Total Visitors) * 100\%$.
• CTA (Call to Action): An instruction to the audience designed to provoke an immediate response, usually using an imperative verb such as "Shop Now," "Learn More," or "Add to Cart."
• Landing Page: A standalone web page, created specifically for a marketing or advertising campaign, where a visitor "lands" after clicking a link.
• Affiliate Marketing: A performance-based marketing strategy where a business rewards affiliates (external partners) for each visitor or customer brought in by the affiliate's own marketing efforts.
• CRM (Customer Relationship Management): Software and strategies used to manage and analyze customer interactions and data throughout the customer lifecycle, aiming to improve relationships, assist in retention, and drive sales growth.

Operations & Logistics Terminology

• Inventory Management: The process of efficiently overseeing the constant flow of units into and out of an existing inventory. It includes ordering, storing, and tracking goods.
• Fulfillment: The entire process from point of sale inquiry to delivery of a product to the customer. Includes order receiving, processing, picking, packing, and shipping.
• 3PL (Third-Party Logistics): Outsourcing e-commerce logistics processes, including inventory management, warehousing, and fulfillment, to a third-party company.
• Shipping Carrier: The company that physically transports goods from the seller to the buyer (e.g., FedEx, UPS, DHL, USPS).
• Tracking Number: A unique number assigned to a shipment used to monitor its progress from dispatch to delivery.
• Reverse Logistics: The process of managing product returns, including receiving returned items, inspecting them, and handling refunds, exchanges, or restocking.

Financial & Metrics Terminology

• AOV (Average Order Value): The average dollar amount spent each time a customer places an order on a website or mobile app. Formula: $Total Revenue / Number of Orders$.
• CAC (Customer Acquisition Cost): The total cost related to acquiring a new customer. Formula: $Total Marketing & Sales Spend / Number of New Customers Acquired$.
• CLTV or LTV (Customer Lifetime Value): A prediction of the net profit attributed to the entire future relationship with a customer. Helps determine how much investing in acquiring and retaining customers is worthwhile.
• Gross Margin: The difference between revenue and Cost of Goods Sold (COGS), divided by revenue. Expressed as a percentage. Formula: $((Revenue - COGS) / Revenue) * 100\%$.
• COGS (Cost of Goods Sold): The direct costs attributable to the production or purchase of the goods sold by a company. Includes material costs and direct labor costs.
• Payment Gateway: A merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for online businesses. Examples: Stripe, PayPal.
• Chargeback: A forced transaction reversal initiated by the cardholder's bank after a customer disputes a charge on their credit card statement.

Technology & Platform Terminology

• E-commerce Platform: Software that allows businesses to build and manage their online store, catalog, and sales. Examples: Shopify, WooCommerce, BigCommerce.
• API (Application Programming Interface): A set of definitions and protocols for building and integrating application software. APIs allow different software systems (e.g., your e-commerce platform and inventory management software) to communicate.
• Hosting: A service that provides the necessary technologies and services for a website or webpage to be viewed on the Internet.
• SSL Certificate (Secure Sockets Layer): A digital certificate that authenticates a website's identity and enables an encrypted connection, crucial for secure online transactions (look for "https" in the URL).
• Responsive Design: A web design approach that ensures web pages render well on a variety of devices and window or screen sizes (desktops, tablets, phones).

Speaking the Language of Success

This glossary provides a solid starting point, but the language of e-commerce is constantly evolving. Continuously learning and understanding these terms is essential for anyone serious about building and scaling an online retail business.

Familiarity with this e-commerce terminology glossary empowers you to navigate the industry landscape more effectively, communicate clearly with partners like Online Retail HQ, leverage tools and analytics confidently, and ultimately make smarter strategic decisions for your store's growth.

Ready to Put Your E-commerce Knowledge into Action?

Now that you're more familiar with the key terminology, are you ready to build, manage, or grow your online store? Understanding the language is the first step; successful execution is the next. Online Retail HQ offers a full suite of services, from custom store creation to ongoing management and marketing. Let our expertise help you translate knowledge into results. Contact us for a free consultation to discuss your project.

Synopsis

Decode the language of online retail with this essential e-commerce terminology glossary. Understand key terms in marketing, operations, finance, and technology to navigate the industry confidently.

Adjø,

Lars O. Horpestad
Author & CEO
Online Retail HQ
Email: lars@onlineretailhq.com