The A to Z of e-commerce: Words every online seller needs to know
If you’re new to selling online, chances are that you’ve been mystified by a term or acronym that everyone seems to be using.
Whether you’re baffled by procurement or don’t know what PPC stands for, don’t panic. Simply consult our guide below for an A to Z of the need-to-know terms in e-commerce.
Here’s what we cover:
Content management system (CMS)
A is for…
A/B testing might sound complicated, but it just means testing out two different versions of a web page or piece of marketing collateral: a version A, and a version B.
The two versions might be completely different website themes, or the change might be as tiny as one word or a different-coloured button. You’ll then test both iterations on your customers.
If their experience is positive, aka views are high, then you can green-light the change. But if the experience has negative feedback, or low click-through, you can revert back to your other idea (or the drawing board).
When a potential customer fills a virtual shopping basket but decides to click that “X” button rather than completing the purchase, it’s referred to as abandonment.
If your online store has a high abandonment rate, it means your products are attractive but there’s something dissuading customers from making that final purchase, whether it be lack of payment options or a slow load time.
You can calculate cart abandonment rates by dividing the total number of successful transactions by the number of incomplete checkouts, subtracting that number from one, and multiplying that value by 100.
Think of affiliate marketing as marketing with a middleman.
Every e-commerce company will say their products are the best, but often what inspires customers to take the plunge are positive third-party reviews they can trust.
That might be their favourite YouTuber, a product comparison site, or a podcast. Whatever the platform, typically it will provide a clickable link to your site in return for a small percentage of the sale.
If, for example, you’re selling a range of collapsible coffee cups, you might collaborate with a popular sustainability-focused YouTuber to help promote them.
The YouTuber will include a review of your product in their video, and use an affiliate link in the description box to direct their viewers to go and buy the cup.
Often, there will be a discount code their viewers will apply at your checkout, making it easy to track the value that they generate.
In exchange for helping to sell your product, they will receive a percentage of the sales generated by their video, which can be anywhere from 5% to 30%.
You don’t have to liaise with the blogger or YouTuber directly. For example, if you sell your products on Amazon you can sign up to the Amazon Affiliates programme, which offers reviewers a lower commission of around 1% to 3%.
Reviewers can also receive a fee if only send views to your site, which is referred to as a Pay-Per-Click affiliate.
Analytics is a method of tracking your online activities, collecting data, and analysing it to make better-informed decisions for your business.
Using those insights, you can gain a better understanding of your customers and competitors, measure the effectiveness of your sales and marketing efforts, and tweak your strategy along the way.
Average order value (AOV)
This is the average amount spent every time you make a sale.
It’s a key benchmark of customer behaviour, and helps you measure the success of your digital marketing as well as your pricing structure.
To calculate your AOV, all you need to do is take your total revenue and divide that by the number of orders made.
B is for…
Black Friday first started in the US, offering online shoppers attractive discounts on the day after Thanksgiving.
Now, the event typically takes place over an entire weekend (and in some cases spans the whole of November) and gives e-tailers around the world an opportunity to clear their stock and gain useful information for future seasonal sales.
Investing in paid search ads is a good idea around this time, as shoppers tend to be making quick, reactive purchases. Just make sure you have enough merchandise and people power to keep up with demand.
When someone comes to your website, ideally you’d like them to stay a while—browse your shop, read a few blog posts, and possibly even make a purchase.
But a high bounce rate means people are visiting your page and then immediately leaving—not ideal.
This can be for a variety of reasons, from site slowness to broken links.
A typical bounce rate for e-commerce stores is between 20% to 45%, according to studies, but the lowest possible bounce rate is something websites are continuously chasing. You can see the bounce rate for each page of your website by going to the “Behaviour” section of Google Analytics.
Bundling is a marketing strategy that packages complementary products together and sells them at a knocked-down price to boost sales and attract more customers.
This is a great way to win new customers and increase your average order value without racking up more transaction costs.
C is for…
Call to action (CTA)
A call to action prompts the user to take a specific action on a web page or social media post, with a view to move them down the sales funnel in the process.
Content management system (CMS)
A content management system is a type of software that allows you to create, manage and change content on your website, generally without needing help from a third party.
You can use a CMS such as WordPress or Wix to build a website using free themes and templates, store images, and create blog articles to keep your customers up to date with all your latest news and offers.
You’ll also be able to integrate your e-commerce tools into any reliable CMS today.
Conversion is the ultimate goal of every e-commerce site owner, as it means ‘converting’ a website visitor into a customer.
This doesn’t necessarily mean that they make a purchase. They might just sign up to a daily newsletter, or make an enquiry via an online form.
You will decide what kind of goal you are looking for, and set an according conversion rate. Google has a simple way of calculating your rate: just divide the number of conversions by the number of interactions.
Cyber Monday first started in the US, offering shoppers discounts on the first Monday after Thanksgiving.
It traditionally had a tech focus, hence the ‘Cyber’ in the name but you’re just as likely to find mattresses and clothes on sale as much as TVs and mobile phones.
Like Black Friday, the sales period tends to stretch across the weekend, with e-tailers making the most of both events.
D is for…
If you’ve spent more than five minutes on LinkedIn, chances are you’ve already come across the term ‘disruption’.
Signifying the upheaval of a status quo, it’s a term that is commonly applied to e-commerce, as online shopping has disrupted things like the UK high street, or the transport industry.
Individual products can also be disruptive if they change the way we typically shop for something—perhaps they look different aesthetically, are a new invention, or involve a different way of purchasing (such as a subscription model).
Dropshipping means selling a product without it ever passing through your hands. However, it has fast become a popular way of selling without needing to hold stock.
A dropshipper will identify an existing product from a site such as Oberlo or Alibaba, advertising the item over social media platforms such as Facebook Ads or their own e-commerce store.
When a customer purchases the item, the dropshipper will then enter in the customer’s shipping details and make the order with the wholesaler.
The disadvantage of dropshipping is that you have less ownership of the customer relationship; the quality of the product cannot be guaranteed, and there can be long shipping times if stock levels become an issue.
E is for Email marketing
Email marketing is a type of marketing activity that involves emailing a list of people (who have opted in to receive those emails) with content that will incentivise them to buy.
This list might be made up of pre-existing customers, or people that have signed up on your website.
E-tailers commonly offer discount codes for new shoppers, as well as reminders should they abandon their cart mid-checkout.
F is for Fulfilment
E-commerce fulfilment is the picking, packing and delivering of products that have been sold.
Sometimes small e-commerce businesses will fulfil orders themselves, but most often this is done by fulfilment centres, which can also be known as third-party-logistics (3PL) providers.
Bear in mind, a fulfilment centre is different to a manufacturer, where your products are made.
G is for Google Analytics
Google Analytics is often the first and last port of call for e-commerce businesses, as it offers many features that will help you understand your customer.
A free-to-use service, it tracks and sums up most of your need-to-know website stats, including bounce rate, conversion rates, site visits and referral keywords.
It helps to see how people arrive at your site, how long they stay, how many of them bought anything, and why they leave. You can also pay for a version with more advanced features, which is called Google Analytics 360.
Google Analytics is vital for SEO performance because it will help you see how well your site ranks on Google, and which keywords are bringing people to your site.
You can get to grips with it by using guides such as Google’s own academy, or Udemy, which offers courses for around £11.
H is for…
A hosting platform or a site host is somewhere you can set up your website. With names such as HostGator or Hostwinds, they often come with extras like a free domain name or SSL certificate.
You can move to a different web host without losing your domain name, and you can also change your domain name without moving to a different host.
HTML stands for Hypertext Markup Language, and it’s basically the code which tells your content how to look on your website.
HTML can do things like make your font bigger or smaller, and add images.
It’s not a must for e-commerce site owners to understand HTML as a lot of platforms will have inbuilt templates, but if you’re interested in building or customising your own site there are beginner-friendly courses on SkillShare or Udacity, many of them free.
I is for Inventory
The items or products that you intend to sell in your online store are your inventory.
After they are created by a manufacturer, goods will need to be sent either directly to the customer or stored in a fulfilment centre until they are needed.
Insight into how much stock you have (levels) and managing its supply and release comes under the umbrella of inventory management.
M is for…
Metrics are the numbers used to track performance, and can help you understand your customers, identify trends, and grow your business.
Valuable online metrics include your conversion rate (the percentage of your website’s visitors that turn into customers), customer lifetime value or CLTV (the total amount a customer will spend with you over their lifetime), and customer acquisition cost or CAC (the average amount it costs to acquire a new customer).
Your conversion rate can be measured by dividing the number of total website visitors by the number of visitors that go on to make a purchase, and you can also use this equation when calculating the success of individual adverts.
You can calculate customer lifetime value (CLTV) by figuring out the average purchase value across your products, multiplying this by the average number of purchases, then multiplying that figure by customer lifespan.
If that’s too confusing, tools such as Google Analytics can help.
Customer acquisition cost (CAC), meanwhile, can be calculated by adding up the amount you spend on sales and marketing during a certain period, and dividing that by the number of customers you acquired during that same period.
Multichannel e-commerce means selling goods and services across different channels.
This may include third-party platforms such as Amazon or Etsy or in a physical retail store, as well as through your own website.
There are more ways to engage with your customer using this method, as well as the possibility of attracting more customers.
O is for Open rate
After sending a marketing email to your customer list, a common metric to measure its success is the open rate—the percentage of people who opened your email.
Mailchimp found that the average open rate for newsletters is 21.33%, and Campaign Monitor says a good percentage to aim for is between 15% and 25%.
However, it’s not the ultimate marker of success.
An email might have a low open rate but a high conversion rate, which is the number of people that click and then go on to make a purchase after viewing the email.
Companies will often use A/B testing to see what most incentivises their customers, sending two emails out with different subject lines to see which has the best open rate.
P is for…
How important or valuable search engines find your e-commerce store can be determined by how they rank your ‘page’, or website.
The higher a website’s page rank, the more authoritative on its subject it is deemed to be, and the higher up on a Google search (or similar search engine results pages) it will appear.
Pay-Per-Click (PPC) is a popular form of online advertising used by e-commerce brands and brick-and-more businesses alike.
Sellers can place a highly targeted ad with the platform that they feel best suits their customer, from Google AdWords to Facebook and LinkedIn Ads, and set the relevant keywords they want want to target.
For example, a garden furniture seller might decide to target customers looking for ‘striped deckchairs’. Next, the seller will set the amount they want to pay per click, (the average fee for Google is about £1), and place their ad.
Point of sale (POS)
The point of sale is the moment when a transaction is executed.
In a physical shop, some type of hardware is used, such as a cashier till or a card reader. This hardware is usually combined with software in the back-end that does things such as track inventory or activate a customer loyalty programme.
Online, there is only software involved, with a virtual shopping cart and checkout, but different e-tailers will have different point of sale (POS) systems.
These systems include things such as centralised payment processing (which means payments will be stored in one place, however customers pay), as well as cash flow management.
Sites specifically designed for online sellers such as Shopify will have in-built POS features already. But if you’ve built your own website, you’ll need to integrate third party providers that handle payments or inventory.
R is for Redirect
A redirect means a web page is available under more than one URL (the address of a webpage).
If you need to move your webpage to a different URL—or even your whole website to another domain name—having a 301 redirect will ensure your website visitors will be able to go there without encountering any broken links.
This will help preserve your SEO ranking: basically, how far up your website exists in search engine listings.
Have you ever hit a ‘404: page not found’? That’s what your visitors will see if you don’t set up redirects.
Search engines won’t be able to rank your new URL highly, and it will have a negative impact on your authority—which means fewer clicks, and fewer opportunities for new customers.
S is for…
SEO, or search engine optimisation, is the practice of inserting the best and most useful keywords into your e-commerce site so it will rank highly in a potential customer’s Google search.
For example, a graphic designer known for their pop art aesthetic might make sure that the phrases ‘pop art freelance graphic designer’ or ‘pop art logos’ appear in important bits of their website, from their first paragraph on their homepage to the alt text on their images.
There are SEO agencies who will help firms create and apply a strategy, as well as research that shows the strength of keywords across things such as demographics or geographies.
You will have seen Stock-Keeping-Units, or SKUs, while doing your weekly shop. They’re the bar codes that cashiers scan. Each bar code is unique, so that each individual item can be tracked through its lifecycle.
T is for Traffic
People who visit your website make up your web traffic.
This traffic will tend to rise and fall at certain times or periods, which may influence where you allocate marketing spend.
For instance, a business to consumer (B2C) company that receives its highest traffic in the late evening may want to promote a sale that ends at midnight.
On the other hand, a business used by other businesses that receives a high amount of mid-morning traffic may find that its most effective promotions are run in the morning.
U is for…
Upselling is a popular sales tactic in both physical and digital retail.
There are different ways to upsell products; an e-commerce store may offer free shipping for a minimum spend, incentivising customers to spend more, or a more expensive version of the product.
Cross-selling often accompanies upselling but means the offering of additional items with a purchase, such as headphones to accompany a mobile.
User Experience, or UX, is essential for e-commerce shop owners.
Good UX means your customers can navigate easily through your website until their point of purchase, and that all the information they want is easily available to them.
It also can involve less tangible elements, such as the feeling you want customers to have when they visit your website.
V is for Verticals
A vertical is a business niche—a specific product or set of products that suit a particular sector or industry.
For example, an online store that only sells rock climbing harnesses would be aimed at the vertical markets of climbers and the climbing industry.
Having a specific vertical to aim at, rather than a more general storefront, can be successful because you can hone in on a specific customer demographic and tailor your content to answer their questions, overcome their concerns, and boost your chances of making a sale.
W is for Wholesaler
A wholesaler is an individual or business that sells goods in bulk to retailers.
Typically, a wholesaler will purchase directly from the manufacturer in large quantities, to then sell the products on from warehouses to retailers.
Z is for Zero-waste
What’s zero-waste got to do with e-commerce?
After all, unless you’re trading in digital downloads, warehouses need electricity, and products need to get to customers via trucks or cargo ships.
But as consumers (especially Gen Z) keep highlighting sustainability as a major factor in their buying decisions, e-commerce brands are trying to get as close to zero-waste as possible—from using biodegradable packaging, to selling products made of recycled materials.
You’ll need to think carefully about your phrasing, as sustainable messaging can disincentivise consumers of a certain gender or political leaning. However, brands have found that using social norms (ie, what your neighbours or fellow consumers are doing) can help customers make sustainable buying decisions.
Bootstrap and build your e-commerce side hustle from your spare room
Want to launch your own e-commerce business while juggling a job but not sure where to start? Check out this guide for plenty of tips, covering product sourcing, setting up your website and dealing with HMRC, and more.
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