Video Transcript
Cost per click, fulfillment, redirection. Huh? If you've already started exploring the world of e-commerce, you've probably come across this term before. At first, it’s very confusing. You google one word. Then another term pops up. And one tag becomes 100. Before you know it, you've controlled everything and gone back to YouTube, watching your favorite drama channel.
I don’t think people are watching drama channels, just me. Then you go back to YouTube, watching fun fail videos. I hope people still watch fun fail videos. I would. We’ve all been there.
But, you’re lucky. We didn’t leave you to complete the launch process by yourself, instead, we compiled a list of some of the most common and popular e-commerce terms that you need to know in order to get started.
Today, you’ll learn two types of terms. First, you need to understand general e-commerce terms to browse online courses, tutorials, and your favorite dropshipping YouTube videos.
If you want to learn the best way to present products online to customers, you’ll also learn crucial online marketing terms. Ready to learn what they didn’t teach you in English class? Let’s get started.
General E-commerce Terms
Fulfillment
First, let’s start with some terms you will see in your admin. Your Shopify admin is your backend. This is where you run your business.
Once your business is up and running, you’ll need to fulfill some orders.
Now, what does fulfillment actually mean?
Well, it depends on the type of business you’re running. If you’re running a dropshipping business, fulfillment means going to your dropshipping app (like Oberlo) and placing an order with the supplier to have them package and ship the products to your customers.
But if you’re packaging and selling your own products, fulfillment could mean that you’re actually accepting orders online, packaging the products, and shipping them to your customers yourself.
Profit Margin
It’s very important to understand the next e-commerce term. This is margin, or your profit margin. The profit margin is an indicator of the difference between the cost of the product and what the customer paid for it.
For example, if you’re doing direct sales, the cost of the product is what you pay to the supplier. For example, a dog collar might cost $5 from the supplier. But, when you list that product on your site and sell it for $20, the $15 difference is your profit margin. It’s very important to understand this.
Average Order Value (AOV)
The next term is AOV or Average Order Value. This is the amount the customer typically spends when they visit your store. The calculation is very simple.
It’s the total sales revenue divided by the total number of orders.
Now, if you’re just starting, you may not see the benefits of Average Order Value just yet. But more experienced e-commerce owners know that once customers actually visit your site, they’re more likely to buy additional products and increase their Average Order Value.
Landing Page
The next important e-commerce term to understand is landing page. A landing page is where you send information to your customers. Now, if you’re a beginner, you might think, “Well, don’t I just send customers directly to my homepage?” No.
Typically, you want to direct customers to a specific product page.
However, there are many different e-commerce strategies. You can send them to a page with product collections or specific promotions. But a landing page is intentional and typically not your homepage.
Bounce Rate
Leaving the landing page behind, we come to the term bounce rate. The bounce rate is the percentage of people who leave the store after viewing only one page.
The average bounce rate for e-commerce is about 41% to 55%.
That’s a lot of people. So, if you see a number in this range, don’t get discouraged. The best bounce rate for your business is between 25% and 40%.
Conversion
The next e-commerce term you’ll always want to hear is conversion. Conversion is the process of turning a user into a customer.
Now, it’s important to note that this doesn’t always mean a financial transaction.
Of course, in e-commerce, you’d expect that the person converted will buy a product, and that’s ideal. But conversion might also mean someone signing up for your email newsletter. Or, if someone signs up for your eBook or course, they’re considered a conversion as well.
Conversion Funnel
The next term in the list is conversion funnel. Now, understanding the funnel is very important for you.
Generally speaking, a funnel is the path that customers will take before they reach the end.
It’s called a funnel because the top has a larger surface area, allowing a lot of customers to enter. As the funnel gets smaller, you’ll lose some of those customers, but you’ll keep working with others step by step until you reach the conversion at the bottom.
Conversion Rate
The next term you need to understand is conversion rate. Conversion rate is a simple percentage, and you can figure it out by looking at the percentage of people who actually converted into customers versus the number of people who just visited your store.
So all you need to do is divide the number of customers by the number of visitors.
Customer Lifetime Value (CLV)
The next term is customer lifetime value or CLV. This is the projected revenue a customer can generate through all their interactions with your online store.
Many dropshippers and other e-commerce store owners run one-product stores. This means they focus solely on advertising and selling one product. Therefore, unless a customer buys multiple items, the customer lifetime value is very low.
Shopping Cart Abandonment Rate
The next term that really matters for you is the shopping cart abandonment rate. What is cart abandonment? Well, I’m sure you’ve received cart abandonment emails in the past for leaving items in your cart while checking out.
The shopping cart abandonment rate is the percentage of traffic that added products to the cart, went to checkout but didn’t complete the purchase.
E-commerce Marketing Terms
These are the general e-commerce terms, and if you want to dive deeper into the e-commerce world, I suggest you familiarize yourself with these terms. Now I want to introduce some different online marketing terms that will be very helpful as you navigate the e-commerce space.
Facebook Ads
One of the most popular ads is Facebook Ads. You can use the Facebook Business Manager platform to run ads on Facebook and Instagram and try to convert customers.
Influencers
The second term is influencers. Now, this used to be mostly limited to Instagram, but it has now fully opened up to the YouTube space, especially on new social media platforms like Twitch and TikTok.
Google Ads Keywords
The third term is Google AdWords. Now, this isn’t as popular as the other two, but it’s still very effective. With Google Adwords, you can place ads below Google search results.
Search Engine Optimization (SEO)
The last important term in terms of marketing methods is SEO. Now, this is definitely a slow-rule marketing method, but it should be used by all e-commerce stores.
Facebook Pixel
The first term you need to know is Facebook Pixel. Facebook Pixel is a very, very small piece of code that you can install in your Shopify store, and it’s really easy to do.
Impressions and Reach
The next two terms often confused me. But I hope I can help you understand them very clearly and help you remember them.
CPM (Cost Per Thousand Impressions)
The next important term you need to understand is CPM. You’ll see this anywhere you watch any type of Facebook tutorial or Facebook Ads course.
CTR (Click-Through Rate)
The next term is another acronym. I’m sorry, but this one is very important as well.
CPC (Cost Per Click)
The last acronym I’ll introduce is CPC, which stands for Cost Per Click. Cost per click simply refers to the average cost required to get someone to click on your link.
Call to Action (CTA)
Now, I’ve been talking about links, but that’s not the correct term in e-commerce. I should be saying CTA instead of link, which stands for Call to Action.
Redirect
I’m going to introduce the last two terms. You might occasionally see these, but it’s important to understand them. The first is retargeting.
A/B Testing
The last term in the e-commerce terms list is one of my personal favorites because it used to confuse me a lot, and it seemed fancy and unclear, but it’s actually very simple. And that’s A/B Testing.