Ecommerce Glossary: 75+ Terms You Must Know in 2020

E-Commerce Glossary Cover

This is the complete ecommerce glossary for ecommerce sellers in 2020.

Whether you are just starting out or are a long-established seller in the ecommerce industry.

This A-Z dictionary explains the meaning of the most common (and uncommon) ecommerce terms and phrases you need to know when selling products or services online.

ABCDEF
GHIJKL
MNOPQR
STUVWX
YZ

A

Above the fold

Above the fold describes the visible screen estate of an ecommerce website a user sees without scrolling. It is also often referred to as “above the scroll“.

As most visitors spend less than 15 seconds on a website, it is crucial for shop owners to place the most important information above the fold. That way, potential customers can see the information they are looking for without the need to scroll down.

A/B Testing

A/B testing describes the experiment of evaluating the performance of two variants A and B (also known as split testing).

Ecommerce A/B testing refers to assessing the performance of two different versions of a landing page based on pre-defined key performance indicators: 50% of customers are presented with landing page A, while the other half are presented with landing page B. The better performing version will then be used to make further enhancements to improve conversion and sales.

A-to-Z Guarantee

The A-to-Z Guarantee is Amazon’s customer protection scheme that covers the on-time delivery and condition of items sold by third-party sellers.

If items arrive in a damaged condition or are not delivered by the merchant in the first place, Amazon will refund the customer.

Amazon API

Amazon’s Product Advertising API is a web service application programming interface (short: API) that enables programmers to access Amazon’s product catalogue data. It enables sellers and vendors to streamline the management of their inventory and product catalogue.

Amazon Brand Registry

Brand Registry is a programme designed to protect brands and their intellectual properties on Amazon. It enables vendors and sellers with registered trademarks to accurately represent their brands and to enrol for processes that address infringement on Amazon’s marketplace.

Amazon Standard Identification Number (ASIN)

Amazon’s Standard Identification Number (ASIN) is a unique 10-character alphanumeric identifier for a product on Amazon (for example B07ZB5C3ZM).

It is linked to an unique SKU/EAN/ISBN code and used as a reference to manage catalogue attributes, prices and inventory of a product.

Average Selling Price (ASP)

The average selling price (ASP) refers to the price a good or commodity is typically being sold for across distribution channels or markets. The ASP differs from the recommended retail price (RRP), as it reflects the actual price a product has been sold for.


B

Basket Building

Basket building refers to the strategy of encouraging customers to build their virtual shopping cart. The more items a customer checks out with, the lower are typically the relative shipping and handling costs to fulfil the order.

Below the fold

Below the fold describes the content of an (ecommerce) website a user can only see when scrolling down the page. It usually contains more detailed information about a product or service, compared to the immediately visible above the fold area.

Bounce Rate

The Bounce Rate is the percentage of visitors that leave an online shop after only viewing one page or product without making a purchase.

Brick and Mortar

Brick and Mortar refers to the physical stores of retailers, typically found on street-sides in cities and areas with a high density in population.

Examples of brick and mortar retailers are Tesco, Walmart, or Sainsbury’s.

Business to Business (B2B)

The term Business to Business ecommerce refers to the sale of goods between two businesses via an online shop or marketplace.

Business to Consumer (B2C)

The term Business to Consumer ecommerce refers to the sale of a product between a business and a consumer for personal use. The financial transaction takes place over the Internet.

Bundling

Bundling is the process of pairing two or more products together and selling them to consumers as a combined package.

It is mostly used as a pricing strategy to increase sales by creating a higher ASP offer that decreases variable cost components such as shipping costs at the same time.

An example of a product bundle would be to sell a cutting board together with a set of kitchen knives.

Buy Box

The term Buy Box refers to the area on the Amazon product detail page where customers can choose to add products to their shopping cart.

The buy box area allows customers to make a wide range of choices: Purchasing products with a 1-click-option, selecting the seller to buy the product from, subscribing to buy replenishable products on a recurring basis, etc.

See also: Lost Buy Box


C

Call-to-Action

A call-to-action (CTA) stands for a specific instruction towards a user to trigger a certain response or behaviour. Examples of CTA’s constitute ‘Get Started’, ‘Learn More’, or ‘Join The Newsletter’ buttons on a website.

Chargebacks

A chargeback (also: reversal) is the return of a credit card charge to the customer.

Chargebacks are initiated by the card company or bank following a dispute from the card owner as part of customer protection schemes. They protect customers from fraudulent charges. If claimed, the buyer is reimbursed in full.

Merchants can be subject to penalty charges if they fail to prove the validity of the original credit card charge to a customer.

Churn Rate

The churn rate, also known as attrition rate, describes the rate at which customers typically stop making repeated purchases from a seller within a given time frame.

The Churn Rate Formula:

Customer Churn Rate = (Lost Customers ÷ Acquired Customers) x 100%

Conversion Rate

The rate (expressed in %) at which a consumer completes a desired action. In Ecommerce, it typically measures how many users of an online shop convert into buying customers.

It is being calculated as (Number of Converted Users ÷ Number of Total Users) x 100

Example: (5 ÷ 120) x 100 = 4.17%

Cookies

An HTTP cookie (also called web cookie, online cookie, or browser cookie) is a data piece that allows online shops to mark, track and recognize their visitors.

Due to their small size, cookies are the most common method of tracking users across different websites. This allows online shops to personalize the customer journey, based on the stored user settings and preferences.

Cost of Goods Sold (COGS)

The Cost of Goods Sold (COGS) refers to the direct production costs of the goods sold by a company. In simple terms, it describes how much it costs to produce a product that is being sold.

COGS include direct raw material and labour expenses, but exclude indirect cost components, such as marketing expenses and shipping fees.

Cost Price

The cost price is the price at which a product is bought by a merchant or retailer.

Example: The selling price of a washing machine is €700. The retailer bought this washing machine from the manufacturer at a cost price of €400.

Customer Lifetime Value (CLV)

The Customer Lifetime Value (CLV) describes the expected monetary value of a customer to a business during their lifetime.

The CLV helps businesses to evaluate, whether customer acquisition and marketing costs will amortise over the lifespan of the customer relationship.

Customer Relationship Management (CRM)

Customer Relationship Management (CRM) refers to the practices, strategies and technologies a company uses to manage and organise its interactions with potential and existing buyers throughout the customer lifecycle.

It is used to improve existent customer relationships and customer retention rates to drive mid- and long-term sales growth.

Customer Reviews

A customer review is an evaluation of a product or service, published by a customer who experienced or used the product or service. Customer reviews usually evaluate and describe the functionality, ease of use and perceived value-for-money ratio of a product or service.

Customer Returns

Customer returns describe purchased items that are being returned by consumers. Depending on the country, retailers are legally obliged to offer customers the opportunity to return items within a certain period of time after the purchase.


D

Direct Import

Direct Import refers to the act of buying products directly from a manufacturer in a foreign country. It removes the need for a middleman to import the goods for sale and the dependency on local suppliers.

At a large scale, a direct import supply chain setup can significantly reduce operational costs and cost prices of the imported products.

Dropshipping

Dropshipping is a retail fulfillment method where a retailer or seller transfers its customer’s orders to a third party to process and ship the products.


E

Ecommerce

Ecommerce encompasses all commercial transactions conducted electronically using the Internet. In simple terms, it refers to buying and selling products or services online.

Email Marketing

Email marketing is the use of email to promote a product or service to consumers. It is used as a cost-effective marketing tool to build and develop relationships with (potential) customers and to drive repeat sales over time.


F

Fulfillment by Amazon (FBA)

Fulfillment by Amazon describes an ecommerce service in which sellers store their inventory in Amazon’s fulfillment centers. When customers purchase a product, Amazon picks, prepares and ships the order directly to the customer.

Sellers benefit from the FBA program, as Amazon handles the entire customer order fulfillment, tracking and return process for them. Fees and requirements differ per product category.

Fulfillment Center (FC)

A fulfillment center is a warehouse where customer orders are received, processed and fulfilled from. This term is predominantly used by Amazon and abbreviated as ’FC’.


G

Glance View

A glance view describes the number of impressions on a product detail page on Amazon. It is a metric used to quantify how many visitors have viewed a product page or product advertisement.

Gross Profit

The gross profit describes the total revenue minus cost of goods sold (COGS). It reflects the profit before operating expenses and is described as an absolute number in the local currency.

The gross profit (€) can also be expressed as a margin (%). To do that, we have to simply divide the above equation (total revenue minus the cost of goods sold) by the total revenue.

Example:

Total Revenue: €500

Cost of Goods Sold: €300

Resulting Gross Profit (€): €500 – €300 = €200

Resulting Gross Margin (%): (€500 – €300) ÷ €500 x 100 = 40%


H

Headless

Headless ecommerce refers to the technical separation of the front- and back-end of an ecommerce platform. In other words, the content presentation layer (the customer touchpoint) is decoupled from back-end critical ecommerce processes, such as inventory management and payment processing.

The headless ecommerce setup allows businesses to adapt to technical changes over time. Changes to the front- or back-end system do not affect each other, as they are run independently.


I

Inventory

The quantity or value of the stock position of a manufacturer or retailer. Inventory can describe the number of sellable products or the number of raw materials that are later being used in the manufacturing process.


J

Just in Time Manufacturing

Just-in-time-manufacturing (JIT) is a production method in which products and their components are only being produced when they are ordered by customers. As such, just-in-time manufacturing removes the need to store large amounts of unsold stock in warehouses as excess inventory.


K

Key Performance Indicator (KPI)

A Key Performance Indicator (KPI) defines a measurable value that allows businesses to track and analyse their performance over a certain period of time. It enables organisations to evaluate their success at reaching targets. KPIs could measure for example the conversion rate of a product, as well as its sales and profit developments.

Keywords

Keywords describe the terms used by customers to search for products online. In ecommerce, keywords often describe the product attributes, use cases and functionalities. An example list of keywords would be ‘bottle’, ‘adjustable’, ‘portable’, …


L

Landing Page

A landing page is a web page that serves the sole purpose of persuading visitors to take a desired action. It is specifically designed to either drive engagement or sales (e.g., encouraging visitors to sign up to a newsletter or to make a purchase).

License Plate Receive (LPR)

License Plate Receive (LPR) describes the receiving process of items in an Amazon Fulfillment Center by scanning the barcode of an outside package. LPR eliminates the need to scan each individual item and reduces the time to receive items in the warehouse.

Logistics

Logistics refers to the procurement, maintenance and transportation of raw materials, products, facilities and personnel within an organisation.

It differs from the term ‘supply chain management’, as it only refers to processes inside a business.

While the term supply chain management refers to the overlapping collaboration between multiple organisations to deliver and transport products to the end customer.

Lost Buy Box (LBB)

Lost Buy Box is a term mainly used by Amazon vendors and sellers. It describes the ratio an available item appeared on a product detail page on Amazon but was not featured to get directly added to a customer’s cart when pressing the “buy” button.

The Lost Buy Box Ratio (%) is calculated as Glance Views with Lost Buy Box * 100 / Total Glance Views.

Buy Box Logic Amazon

For a product to be featured in the Amazon Buy Box, the offer needs to be:

  • Available: The product needs to be available to ship to customers immediately.
  • Valuable: The offer needs to add value, i.e., offer the best price for the product compared to other sellers.
  • Convenient: Offers with a fast track option and benefits for Prime members tend to win the buy box more often

M

Margin

In ecommerce, the term margin refers to the difference between the seller‘s cost of acquiring a product and the selling price. Margins are expressed as percentages (%) of net sales revenues.

Reading recommendation: The complete guide to profit margins.

See also: Gross Profit, Net Profit

Online Marketplace

An online marketplace (also: ecommerce marketplace) is an ecommerce platform with multiple third-party merchants selling goods or services, whereas transactions are processed by the marketplace owner.

Minimum Order Value (MOV)

The Minimum Order Value (MOV) describes the smallest dollar value that may be ordered in one delivery or purchasing order.

Example:

MOV of 30 USD.

Product Cost Price per unit: 10€.

A minimum of three units must be ordered to reach the minimum order value.

Minimum Order Quantity (MOQ)

The Minimum Order Quantity (MOQ) describes the smallest number of products that may be ordered in one delivery or purchasing order.

Mix-Effect

The mix-effect describes a profitability change within a product portfolio of a merchant or retailer, driven by a change of the sold product mix.

A change in the product mix affects sales and profits even if the average selling price remains unchanged.

N

Net Profit

Also referred to as bottom-line, net earnings or net income. Net profit describes the total revenue minus the total expenses of a company. Total expenses include operating costs, taxes, stock dividends, interest, etc.

Net profit is a profitability measure that reflects how much of the generated revenue exceeds the expenses associated with running an ecommerce business.

Example:

Total Revenue: €500

Cost of Good Sold: €300

Operating Expenses (Taxes, Salaries, Stock Holding Costs, etc.): €100

Net Profit: €100


O

Omnichannel

The term omnichannel commerce describes a multichannel approach aiming to create a seamless customer experience across multiple touchpoints along the customer journey.

In plain English: The experience for a customer is the same across channels. For example, if a customer finds a product in a physical bricks-and-mortar store, chances are that they are looking up the item in the retailer’s mobile app or online store. An omnichannel approach ensures that communication, prices and marketing offers are aligned across channels.

Therefore, the omnichannel approach spans from the product research process and customer acquisition phase up to the aftermarket sales phase. This means that an omnichannel approach involves multiple departments of a company to ensure that communication and standards are aligned across functions.

Out of Stock (OOS) Rate

The Out of stock (OOS) rate, also referred to as stockout rate, describes the number of items that are not available for customers to purchase when they seek to place an order.

Manufacturers calculate the OOS rate (%) as the number of products out of stock * 100 / total number of products.

Marketplaces such as Amazon use additional KPIs to calculate their replenishable out of stock rate. They typically use traffic data to define the stockout rate of a product:
Glance Views with OOS Message on Detail Page * 100 / Total Glance Views.

The resulting dollar amount of lost sales due to missing availability can be calculated based on the typical conversion rate of the product’s landing page.


P

Private Label

The term Private Label refers to products that are being sold by a retailer under its own brand but produced by a third-party manufacturer.

They are typically positioned at a lower price point and as a direct rivalling alternative to products from national or international brands.

Purchase Order (PO)

A purchase order (PO) is a commercial document between a buyer and a supplier. It outlines the details about the product, quantity, cost price, delivery date, etc. a buyer agrees to purchase from the supplier.

Each PO has a unique identifier associated with it. This allows both parties to track the delivery of goods and to match invoices against each purchase order.

What details are listed on a purchase order?

  • Product EAN or SKU
  • Product name
  • Quantity purchased
  • Price per unit (cost price)
  • Volume discounts
  • Delivery date
  • Delivery location
  • Billing address
  • Payment terms

Q

Qualified Lead

A qualified lead is a prospect (consumer) who has expressed interest in a product or service and meets a set of pre-defined criteria. These criteria are often set by the marketing & sales department of a company.


R

Recommended Retail Price (RRP)

The Recommended Retail Price (RRP) constitutes the officially suggested selling price of a product by the manufacturer to a retailer.

Revenue

Also often referred to as top line or gross income figure. Revenue describes the generated income from sales of goods or services as part of the main operations of an ecommerce business.


S

SAAS

SAAS, or Software as a Service, describes the delivery of a service over the Internet on a hosted application. In other words, the ecommerce software runs on the servers of the provider. This way, users don’t have to download, install and maintain the (ecommerce) software themselves.

Examples of popular ecommerce SAAS platforms are Shopify or BigCommerce.

Search Engine Optimization (SEO)

Search Engine Optimization (SEO) is the practice of improving the organic search rank of a website to drive visibility and traffic from search engine result pages.

Seller (Amazon)

A seller is a third party merchant that offers its products via the Amazon marketplace. Sellers can either utilize their own supply chain processes or take part in Amazon’s FBA program to deliver products to customers.

Sponsored Products

The term Sponsored Products is used by Amazon Advertising to describe featured advertising placements on the search result and product detail pages on Amazon. Sponsored Ads aim to drive conversion and visibility to products being sold on the Amazon marketplace.

Vendors and sellers can bid for the maximum amount they are willing to pay for when a shopper clicks on the advertisement.

Stock Keeping Unit (SKU)

A stock-keeping unit (SKU) is a scannable bar code that is assigned to a distinct product. It allows retailers and suppliers to track the movement and levels of inventory in their warehouses.

The SKU consists of an alphanumerical combination of typically (but not limited to) eight digits. It contains the attributes of the product’s manufacturer, size, colour, description, price, etc.

Supply Chain Management

Supply chain management is the management of the flow of goods and services along the transformation process of raw materials into the final product.

It involves a system of different organisations, people, processes and resources to move a product from the raw material producer to the manufacturer, retailer and end customer.

In Ecommerce, Supply Chain Management focuses on the processes involved to efficiently source a finished product from the manufacturer, storing (warehousing) it and to effectively deliver it to the end customer.


T

Topline

The top line of a company refers to a company’s revenue that is generated from sales of products to consumers. It is defined as sales volume x average selling price.

The ‘top line’ phrase comes from the fact that the revenue is being placed at the top of the income statement of a company.

Third-Party Seller (3P)

A 3P Amazon Seller sells products directly to consumers via the Amazon marketplace. They have a direct influence over the retail price and pay a variable commission per sold product.

The key difference between an Amazon Vendor (1P) and Seller (3P) is that vendors are selling their products to Amazon, while sellers directly offer their products to end customers on Amazon’s marketplace.


U

User Experience

In ecommerce, user experience (UX) encompasses the users’ beliefs, preferences, perceptions, physical and psychological responses that result from researching, buying and receiving a product along their customer journey.

The user experience starts with the search for a product and ends with the aftermarket sales and customer service in case of problems with the ordered product.

Unique Selling Proposition (USP)

The Unique Selling Proposition is the key unique differentiator of a company, service or brand to similar offers in the market segment.

A USP highlights the superior benefits of a product that are meaningful to consumers and create additional value compared to similar offers in the market segment.

Example: Amazon’s 1-Click Ordering lets customers check-out with a single click, compared to other online shops who require confirmation of payment methods and billing details.


V

Value Proposition

A value proposition refers to a promise of value that is being communicated and delivered to the customer.

Vendor (Amazon)

An Amazon Vendor is a person or business that sells its products directly to Amazon. The vendor often delivers straight into Amazon warehouses and once received, Amazon is the owner of the supplied goods and retails them independently.

Therefore, an Amazon vendor is different from Amazon sellers, which use Amazon as a marketplace to independently store and sell their products, but do not sell them to Amazon directly.

Amazon VendorAmazon Seller
TypeManufacturer or DistributorSeller or Retailer
CustomerAmazonAmazon Users
Product PriceSet by AmazonSet by seller
SupportVendor Manager Seller Account Manager
FeesCoop, Marketing Accruals, Volume Incentive Rebates, etc.£0.75 (per item sold) + additional fees
Customer SupportAmazonAmazon or Seller

Voice Commerce

Voice Commerce describes the utilization of voice recognition technology that enables consumers to purchase online merchandise or services.

If you want to increase your sales with voice commerce, take a look at our in-depth guide to voice commerce!


W

Wholesale

Wholesale refers to the practice of buying products in bulk (large quantities) at low prices, with the intention to re-sell them to other retailers.

Therefore, a wholesaler sits as the ‘middlemen’ between the manufacturer and the seller.

Wholesaling is often used by brands as a way to enter new markets or countries. It removes the time-consuming need to establish and maintain relationships with multiple retailers, as these have already been established by the wholesaler itself.

Warehouse

A warehouse is the location of a building in which raw materials or finished manufactured goods are being stored before they are distributed to retailers or sent to the end-customer.


X

X-Channel Management

Cross-Channel or Multi-Channel Management is the tactic of selling a product on multiple online marketplaces at the same time.

Rather than to selling only on the own website or one singular marketplace such as Amazon, a multi-channel approach diversifies the revenue source and increases the reach of the customer base.

XML Sitemap

XML Sitemaps provide search engines with a comprehensive list of the URLs on a site. They identify and types of data an ecommerce site offers and help search engines to understand the hierarchy, structure and recency of category, product and landing pages.


Y

Year-over-Year (YoY)

Describes the financial comparison of key performance indicators in successive years.

It is used to determine, whether the performance of a certain metric has improved, worsened or remained flat versus the comparable time period of the previous year.

Example: If the revenue base was €100K in January 2019 and €110K in January 2020, the metric has improved by 10% YoY.

Year-to-Date (YTD)

Describes the time period from the beginning of the current year (either calendar or fiscal year), up to the present day.

Example: YTD-November refers to the time period of 1 January up until the 30 November.


Z

Zero Inventories

Describes an inventory control mechanism that eliminates any waste due to built-up inventory levels. It only holds the required items on hand.


Have I forgotten anything?

This ecommerce glossary is constantly being updated and extended. If I have missed a term you would like me to include, simply leave a comment below.

Leave a Reply

Your email address will not be published. Required fields are marked *