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A Comprehensive Glossary for E-commerce Merchants

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What You Need to Know

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A

Accounting Software

Accounting software is used by business owners to perform various accounting and bookkeeping tasks. For example, in e-commerce, it may be used for recording transactions, following up on invoices and receipts, tracking sales taxes, viewing cash flows, managing customers, and running reports. Accounting software for small to medium-sized business owners is typically made available to them by third-party providers that ask for a fee in exchange for the service.

Examples of accounting software include Xero, MYOB, QuickBooks, and FreshBooks.

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Add-on

A software add-on, as its name suggests, can be added to a software or program to give it additional features or functions. It allows e-commerce merchants to access more advanced features or functions that can solve specialized problems.

The term can generally be used interchangeably with plug-in or extension.

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Affiliate Marketing

In affiliate marketing, a business owner pays third parties—called affiliates—to promote their product in some way. An example of affiliate marketing is when a business pays bloggers or websites to post blogs on their own sites about the business' products or services. Generally in these cases, the affiliate is paid for every customer they manage to convince to buy the product—in other words, they are paid per sale.

From an affiliate's point of view, this method of marketing involves being paid a commission for promoting another's product or service via some means.

API

API is an acronym for Application Programming Interface. It is a software intermediary that allows an application to access the data of and interact with another application. Usually, an API sends a user action to a system and delivers the system's response back to the user. An e-commerce example would be when a customer chooses to add a product to their cart. An API communicates the command to the website, which then executes it before the customer's cart is updated to show the item.

Application Programming Interface

See API in the glossary

Automation

Automation in e-commerce refers to using technology to replace manual effort and increase the efficiency of a business. By automating repetitive workflows—using technology to run them automatically—a merchant can reduce human errors, save time, grow their store, and focus on what is important.

B

BNPL

BNPL is short for buy now, pay later. As its name suggests, BNPL is a payment service or method that allows consumers to buy and receive their products but delay their payment, typically without interest. It allows people to pay in installments, usually four in total. However, different payment plans may have different numbers of installments and may vary in whether they do credit checks, implement late fees, and demand interest. BNPL services assist customers who cannot afford a large purchase all at once. It is an especially popular payment method during the holiday season and has exploded in popularity during the COVID-19 pandemic.

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Bundling

Bundling is a marketing tactic where merchants sell several of their products as a single unit, generally for a lower price than if the products were purchased individually.

Buy Now Pay Later

See BNPL in the glossary

C

CAC

CAC stands for Customer Acquisition Cost and refers to the total cost of a business to acquire one new customer. This not only counts marketing costs, but also any other expenses it would take to attract a customer—like any discount or giveaway costs. CAC can be calculated by dividing the sum of the acquisition expenses over a certain period of time by the number of customers acquired during that period.

Cart Abandonment

Cart, or shopping cart, abandonment refers to when online shoppers leave a store without purchasing, after adding items to their shopping cart. In other words, it describes a situation where an interested customer discontinues their purchase for one reason or another.

Related to this term, cart abandonment rate is the percentage of a store's customers who are abandoning their carts. If this rate is too high, it may signify an issue in the store's checkout process.

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Chargeback

A chargeback is a payment returned to a customer after they successfully dispute a transaction from your business. It is a way to protect consumers from fraudulent purchases that do not meet their expectations—by allowing them to submit a dispute to their card issuer to have the payment transaction reversed. Chargebacks can occur both on credit and debit cards. Unlike a refund, which comes directly from the merchant, a chargeback comes from a customer's card issuer.

For a merchant, a chargeback fee may be charged in addition to the returned funds.

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Churn Rate

A churn occurs when a customer stops purchasing from a business. The churn rate is essentially the percentage of customers that stop purchasing from a business every certain length of time. However, this metric is harder to determine for e-commerce stores, which generally sell one-time products.

Cloud-based

The cloud is the software and services that run on and that can be accessed through the Internet. As such, a cloud-based application is available for use via the Internet and is hosted from its provider's servers. Cloud-based services have many benefits, such as quick adoption, automatic updates, security, scalability, accessibility, etc.

CLV

CLV stands for Customer Lifetime Value, which is the total value a customer can contribute to a business over for their lifetime consuming its product and service. CLV is a good way to measure aspects like customer satisfaction and loyalty. It is often used in conjunction with CAC.

CMS

CMS stands for Content Management System. It helps business owners create, structure, design, modify, and publish websites without needing developer skills or advanced technical knowledge. Sometimes, the functions of a CMS are incorporated into a comprehensive e-commerce platform, such as in the case of Shopify.

Content Management System

See CMS in the glossary

Conversion

Conversion in e-commerce refers to the action of converting a potential consumer into a paying customer. However, a conversion can also generally refer to any instance of successfully leading a potential customer or website visitor into doing whatever action is desired.

The conversion rate measures the percentage of people a business can turn into a purchasing customer out of the pool of all the people they reached. It is a useful metric for seeing the effectiveness of one's marketing strategy and shopping flow.

Another related term is the conversion funnel, which describes the various stages a consumer goes through before they can contribute to a sale—such as being exposed to an e-commerce store, finding the store's website, browsing through its offers, etc. The conversion funnel is dubbed thus as it illustrates the decrease in the number of potential customers as people go through the conversion journey.

CRM

CRM stands for customer relationship management. It is the process of acquiring, maintaining, and developing customers. It usually entails analyzing large amounts of customer-related statistics to gather important insights, such as a business' main audience, the common complaints of buyers, or the channel most new customers come through.

CRM may also refer to any tools, strategies, and software devoted to managing customer relationships. A CRM system or software helps business owners record customer information and run related analyses and reports. It allows a merchant to focus on more promising marketing leads, improve customer services, and better understand their products' strengths and weaknesses.

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Cross-Selling

Cross-selling is the practice of encouraging customers to buy more products in addition to the items they originally intended to purchase. These new products are often complementary or related to the original item in some way, in order to increase the likelihood of the customer purchasing them.

Customer Acquisition Cost

See CAC in the glossary

Customer Lifetime Value

See CLV in the glossary

D

Dashboard

Dashboards are present in many, if not most, e-commerce tools and services. They are basically a user interface that provides at-a-glance analytics and insights. Sometimes, they also include navigation pathways and action options. Dashboards often display integrated data and information from multiple sources, combining them into singular metrics for easy viewing. They allow an e-commerce merchant to see all their store's statistics in one place. Dashboards are generally designed to be visual, graphical, and intuitive, so as to be easy to understand.

Data Migration

Data migration refers to the action or process of transferring data from one location or syste to another. This may be due to the introduction of a new data storage system or method.

Developer

A developer may also be known as a programmer, coder, or software engineer. They are skilled in programming languages and are extremely useful to e-commerce merchants looking to create online resources from scratch or to modify their existing cloud services. Often, business-related software has tools and services designed especially for developers. For example, payment service providers such as PayPal and Stripe are very developer-friendly and require programming skills to have their services utilized to their full extent.

Discount Code

A discount code may also be known as a promo code, coupon code, or offer code. It is usually offered to potential customers, either as a personalized offer or a mass-released benefit, as a way to receive a discount for a purchase order. A discount code can be used during the online checkout process. It is a way to incentivize purchasing and cultivate customer loyalty.

Distribution Channel

A distribution channel is the path products pass through in order to reach the final consumer. It consists of the chain of businesses and intermediaries that products must go through during delivery. In simpler terms, in e-commerce, a distribution channel is essentially how a store delivers its products to its customers.

Dropshipping

Dropshipping is a business model where a seller purchases products from a third party after receiving orders and has them shipped to its customers directly. In other words, in dropshipping, a merchant doesn't need to stock up on the items in order to sell them—in fact, they usually never even handle the products directly—as anything ordered from a third party is directly sent to the end consumer.

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E

E-commerce Platform

An e-commerce platform is a place that connects merchants and buyers. It is a place for people to browse through and purchase products; it is also a place to set up an online merchant presence. On the merchant side of operations, e-commerce platforms like Shopify allow sellers to manage their website, marketing, sales, and products with a comprehensive provided toolkit.

Email Marketing

Email marketing is a method of customer relationship development. Through email, people on a business' contact list can be kept up-to-date on the brand's newest activities and can learn more about the background & importance of the business. Email marketing is a way to establish identity & style, promote new activities, convert potential customers, cultivate brand loyalty, and ensure customer engagement between purchases.

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Email Marketing Service Provider

An email marketing Service provider, or ESP for short, provides email marketing-related services to its users. It may provide email tools such as being able to send emails in bulk to subscribers or customers. One of the most well-known ESPs is Mailchimp.

Estimate

An estimate is sent to a customer to inform them of how much a product or service would cost, often as an approximation. It is structured like an invoice or receipt, but has neither a payment option nor a payment transaction record. The money amount on an estimate is not owed by the customer, it is merely a number to help them make an informed decision on whether to make the purchase. Estimates may also be used to help a business understand the details or approximate fees of an upcoming project.

ESP

See Email Marketing Service Provider in the glossary

Extension

See Add-on in the glossary

F

Fulfillment

In e-commerce, fulfillment, or order fulfillment, refers to the entire process that occurs after receiving an order. It encompasses everything from receiving and processing the products, to delivering them to the end customer, to receiving any post-delivery requests or feedback.

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G

Google Analytics

As its name suggests, Google Analytics is a Google service that provides business owners with insights, trends, and patterns of their websites. It is a useful tool for visualizing business data and for making rationalized decisions for growth and improvement.

Google Search Console

Google Search Console is a free Google platform service for monitoring, understanding, and optimizing a user's website's presence in Google searches. Through Google Search Console, business owners can learn about their most viewed webpages, the country most of their website visitors come from, their website traffic over a period of time, and more.

I

Impression

Impression is also known as page impressions, page views, or PI. It measures how many times a webpage or website has been loaded to be displayed in the browser to a viewer. Whether or not the viewer actually sees the page or clicks into it is another matter.

Insight

One gains business insight through combining data, analysis, and deduction to come to a logical understanding. Learning and gaining insights are important for a business in order for it to grow and become more optimized. In e-commerce, insights can often be divided into the categories of product, customer, and marketing.

Integration

Integrating two software essentially refers to connecting them with automated workflows, also called integrations. These workflows boil down to two main categories, or purposes—which are, in practice, one of the same: data synchronization and workflow automation. In e-commerce, businesses usually work to integrate their sales channels with their back-end systems. Some popular and important integrations include real-time inventory updates and order information documentation.

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Interface

An interface is a place where two independent software or systems meet to communicate with each other.

A user interface is a point where the human user interacts with a website, computer, or software.

Invoice

An invoice is a type of bill sent by a seller to a buyer, often as a way to collect payments. Information like the payment due date, payment breakdown, customer contact information, and product details are all present on the invoice. It helps both parties of the transaction record and keep track of the payment. Invoices also often have a payment option attached, making paying more convenient.

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IP

Although IP can also be an acronym for intellectual property, in e-commerce, it usually refers to "Internet Protocol." A business' IP address is basically its digital address. It is what differentiates sites from each other and is how information can be sent to intended parties. Everyone, not just e-commerce businesses, needs and has an IP address.

K

KPI

KPI stands for Key Performance Indicator. It is a quantifiable value that measures a business' progress in achieving an objective. KPIs may focus on any level, from the business as a whole to a specific section like sales or marketing. Examples of KPIs include cart abandonment rate, average order value, conversion rate, website traffic, and average user time on site.

Keyword

In e-commerce, a keyword is a chosen term or phrase that describes the topic or content of a webpage. The keywords of a piece of web content help it to be found in search results. Thus, finding suitable keywords is important for optimizing one's website or blog post's performance.

L

Logistics

E-commerce logistics encompasses all the processes related to the obtainment, storage, and shipping of products.

M

Merchant Account

A merchant account is a bank account that allows merchants to accept credit and debit card payments. It is an agreement between a merchant, their bank, and sometimes their payment processor.

Merchant ID

A merchant ID, also known as a merchant identification number, is an identification number a payment processing provider gives to a business. The ID helps the payment processing system identify a business and securely send funds to it. It also verifies the legitimacy of a business.

Metric

Metrics are quantifiable measures. Businesses often use these measures to track and analyze their progress in certain areas.

Although it is more general, metric can often be used interchangeably with KPI.

MID

See Merchant ID in the glossary.

MYOB

MYOB, or Mind Your Own Business, is a New Zealand-based bookkeeping, tax, and accounting software company. This cloud accounting software offers a range of products and has a tool for virtually every business.

For example:

  • MYOB Essentials is a browser-based software for smaller businesses looking for a simple way to manage transactions.
  • MYOB AccountRight allows users, usually small to medium-sized businesses looking for a versatile service, to manage inventory, expenses, and payroll both online and offline.
  • MYOB EXO is an enterprise solution that spans beyond accounting, allowing someone to control finance, payroll, CRM, and manufacturing and service management. This product aims to be your business's central dashboard and directly integrates with Shopify.

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N

Niche

A business niche is a more specialized market inside a broader industry or market. By becoming more "niched", businesses can work to better serve a specific group of people united by the same need, interest, or other similarities. Knowing their niche is very important for e-commerce merchants.

O

Outsource

Outsourcing is the practice of hiring third parties to manage, handle, or perform some of a business' duties. Common tasks or processes e-commerce businesses may outsource include delivery, website design, and content creation.

Overhead Cost

The overhead cost, also known as the operating expense, includes all the expenses of a business except those associated with producing and selling a product. In other words, it is the cost for a business to remain in business—or to remain in operation, as its other name indicates. The business' level of success is not considered.

P

Payment Gateway

A payment gateway allows a merchant to collect debit or credit card payments. It can take the form of physical card-reading devices as well as online checkout forms or payment portals—it is the point where customers pay. It approves or rejects a transaction. If a transaction is approved, a payment gateway is also responsible for sending the credit card data to a payment processor.

Together, the payment gateway and payment processor allow merchants to collect and receive payments.

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Payment Processor

The payment processor is what actually processes a transaction, facilitating the transfer of information and funds between the two financial institutions involved (the customer's and the merchant's). A payment gateway handles the start and finish of an e-commerce payment, while a payment processor handles the middle procedures. A payment processor also usually provides a merchant with the necessary equipment and/or infrastructures for accepting card-based transactions—including a merchant account.

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Payment Service Provider

Payment service providers, sometimes known as merchant service providers or PSPs, are third parties that allow merchants to accept payments in the form of credit or debit card transactions. They provide merchants with both payment gateways and payment processors in order to provide a simple, direct, comprehensive solution. Examples of popular e-commerce payment service providers are PayPal and Stripe.

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Payout

A payout is simply a sum of money paid to someone, similar in definition to payment. However, to nitpick, whereas payment is used with respect to a buyer paying for a product, payout takes the perspective of a seller receiving a payment.

PayPal

PayPal is a world-leading online payment system and payment service provider, available in more than 200 countries and accepting a variety of different currencies. It allows for fast, secure money transfers from one party to another. Both businesses and individuals use PayPal, which is why new users can choose to set up either a personal or business account. For e-commerce businesses, PayPal is a viable option for collecting and recording payments.

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Plug-in

See Add-on in the glossary

Point of Sale

A point of sale, or POS, is the place in a business where customers pay for the products or services they would like to purchase. A POS transaction can take place either online or in-person. In e-commerce, a business' point of sale is usually their site's checkout page or payment gateway.

POS

See Point of Sales in the glossary

PSP

See Payment Service Provider in the glossary

Q

Quote

A quote, or quotation, is similar to an estimate in that it is sent before the purchase of a product or service is done. In other areas of business, it is sent after a more detailed examination into the customer's situation is done, and so contains a more accurate final pricing than an estimate. This is because, in other businesses, estimates and quotes are usually only sent because of larger customer projects or commissions. However, in the case of e-commerce, the terms quote and estimate—if applied at all—can often be used interchangeably.

S

SaaS

SaaS stands for Software as a Service. It is a way of delivering software over the internet for users to utilize as a service. SaaS applications run on the servers of their providers but can usually be available to anyone with an internet connection and a browser.

Sales Channel

A sales channel is the means through which a business sells its products. An e-commerce business can have multiple sales channels.

Sales Funnel

A sales funnel describes the step-by-step journey a customer goes through before making a purchase in the end. It is very similar to the conversion funnel and, as its name suggests, can also be visualized as a funnel where many of the potential customers who started at the top of the funnel don't stay to reach the bottom. E-commerce businesses can take the sales funnel into consideration as they plan out their marketing and customer service actions in order to optimize the sales conversion rate.

Sales Pipeline

Like a sales funnel, a sales pipeline is a visual way to represent the stages of the purchasing process that a consumer goes through. It is important for businesses to analyze and optimize every stage to maximize their overall sales.

However, the sales funnel is funnel-shaped, visualizing the number of customers. On the other hand, the sales pipeline is straight like a pipe, showing only the stages. Furthermore, as is shown in this difference, the sales funnel is more customer-focused while the sales pipeline acts more as a guide for business owners.

SEO

SEO is an acronym for Search Engine Optimization. In e-commerce, it is the process of optimizing a business' online store and blogs for them to be ranked higher in Google's search result pages. SEO usually involves optimizing a website or web page's headline, meta description, navigation structure, content, keywords, and internal linking. SEO will help a business to be seen and to gain more organic visitors. It is especially crucial for e-commerce, due to the online nature of its operations.

Server

A server processes and responds to the requests of clients made over the network. It also stores the data of a website and shares the information with the devices that want to access them. Servers are needed to host the functions of e-commerce websites—like the shopping cart feature—as well as to store their back-end data.

Shopify

Shopify is the leading subscription-based e-commerce platform designed for small and medium-sized businesses. Shopify offers online retailers a suite of services including payments, marketing, shipping, and customer engagement tools to simplify the process of running an online store for small merchants. It allows aspiring merchants to quickly create and launch a business from essentially scratch.

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Shopify Payments

Shopify Payments is Shopify's own payment gateway available to merchants in many countries. It eliminates the convoluted set-up procedures and extra fees that come with using third-party payment service providers. When it is available, Shopify Payments is the default payment gateway for Shopify merchants and accepts many of the major payment methods.

Shypyard

Shypyard is an e-commerce development company whose goal is to help merchants by providing tailored, scalable system integrations to enable any operation process or business model. Shypyard's integrations can help with accounting synchronization, error handling, and multi-channel reconciliation. Two of their pre-made integration solutions are MYOB to Shopify and Xero to Shopify connectors. Businesses can also contact Shypyard for custom solutions built with their special needs in mind.

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SKU

SKUs stand for stock-keeping units, which are unique product codes used by merchants or retailers to track their inventory. An item's SKU should provide information on its important characteristics, such as size, color, gender, price, etc. Furthermore, SKUs are unique to a business, meaning even identical products in different companies would have different SKUs.

Streamlining

To streamline a workflow, task, or process is to improve its efficiency. This is usually done by adopting new techniques or technology to simplify, connect, or eliminate tasks.

Stripe

Stripe is a popular and highly rated online payment service provider. This platform handles payments for businesses of all shapes—from online retailers to software businesses—and sizes. Furthermore, it is partners with dozens of big names, such as Shopify, MailChimp, and Freshbooks.

At its core, Stripe is a platform that, in a credit card transaction, safely and efficiently transfers money from a customer’s bank account to a business' account. Stripe handles all aspects related to card payments—including withdrawals, regular and one-time payments, invoices, and data storage.

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T

(Product) Tax Code

Product tax codes are assigned to products to indicate their tax rates and exemptions when purchased by customers.

Turnkey

A Turnkey is something ready for immediate application.

A turnkey business is ready for immediate operation.

A turnkey solution, software, or application is already built for a customer and can be easily implemented instantly.

U

UI

UI stands for User Interface, and it is anything that enables a person to interact with a digital service or product. This includes everything from mouses and keyboards, to speakers and screens, to visual elements like buttons or icons.

UI is also a term designers use when designing the style, appearance, and structure of websites or software. The goal is to make the interfaces simple, intuitive, and pleasing for customers to use.

UPC

UPC stands for Universal Product Code. Similar to SKUs, it is a product code used to identify the key characteristics of a product—brand, size, color, gender, etc. It usually consists of a bar code and a digit code beneath it. However, unlike SKUs, UPCs are external, or universal. They are standardized for use and a unique product's UPC will be the same everywhere.

Upselling

Upselling is a sales strategy where customers are encouraged to buy a more expensive and advanced product than what they originally intended to purchase.

UX

UX—or User Experience—is a user's internal experience as they interact with a digital business, product, or service. It is heavily related to UI, as a user needs to interact with something in order to have an experience.

In design, UX is used as a term when considering how some designs or features are going to reflect on the user's end. The aim is to create the best experience possible for a user or customer.

V

Virtual terminal

A Virtual Terminal is a web-based application that allows merchants to transform their computers into a payment terminal to accept card payments by phone, mail, or fax. This is a viable option for when a customer's card is not physically present in a transaction.

W

Webhook

A webhook is a tool or piece of software that allows events from one's e-commerce store to automatically trigger a corresponding notification to other applications, so that a person or an automated application can be notified and act on the event. A webhook is a way for web applications to communicate with each other and allows for the live one-way transfer of data from one place to another. It is similar to API in some aspects.

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Workflow

A workflow is a sequence of tasks that are completed in some sort of order or structure in order to reach a final outcome. Workflows can be digital or physical, simple or complex. Digital workflows can often be automated and streamlined.

X

Xero

Xero is an accounting and financial software company with a mission to provide small business owners with all the tools they need to successfully manage and improve their e-commerce store. There is a wide variety of features available to small business owners, including the ability to quickly pay bills, claim expenses, accept payments, manage a payroll, sort bank transactions, and other data storage capabilities. Furthermore, Xero’s software is equipped with a set of powerful analytics tools that allow its users to easily choose the metrics they are interested in to see the most important ones on a clean interface, and to draw valuable insights which can improve their businesses.

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Z

Zoho

Zoho is a software company that provides web-based business tools. Their range of services cover many different areas relevant to e-commerce business, such as CRM, analytics, accounting, integration, and planning.

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